China: reporting on the rise?

We will publish a short story in our newsletter this week about a new trend in China - sustainability reporting is on the rise. The G3 Guidelines will soon be made available in Mandarin thanks to our partners ACCA-China and CBCSD. This seems to bode well for those of us hoping that a more transparent business culture may help lead to stronger environmental and human rights conditions there.

In a lead story in the Economist magazine this week (Jan 13-19th edition) the authors review the situation in China regarding financial accounting. They state "For years Chinese companies have diligently accounted for transactions in a way that was baffling to outsiders - and quite possibly to their own managers too." This has led to confused price signals and resource allocation. Apparently the country is now mandating the move toward "something approaching" the International Financial Reporting Standards.

The Economist applauds this move because "...it is a formal endorsement of greater transparency. Transparency should lead not to just better economic management, but also a freer society." Proponents of sustainability reporting couldn't agree more, and are certainly hoping that single-bottom line reporting is not the only type of transparency the country will embrace.

The authors note that any sort of reporting in China is a challenge, namely due to the inevitable unearthing of not-so-nice news, and a culture that does not allow for open dialogue about what the standards should entail in the first place.

So this leaves us all wondering.... With a history of not promoting multi-stakeholder dialogue, nor transparency, can sustainability reporting be meaningful in China? On the surface it seems like true transparency could equate to Mission: Impossible. On the other hand, the Chinese government has slated less than 1 year for financial reporting reform, which is break-neck speed in the accounting community. A committment to participation and leadership in the global economy may necessitate transparency on other material issues as well, including economic, environmental and social.

What do you think?