ESG Standards and Practices of Chinese Companies in Critical Minerals Supply Chains

The report examines the ESG frameworks of Chinese mining and processing companies, contrasting domestic voluntary standards with international benchmarks like IRMA 2.0 and RRA 3.0. It finds that while Chinese standards are increasingly aligned with international environmental norms, significant gaps remain in social dimensions, particularly regarding Indigenous Peoples' rights and community engagement. Using Indonesia's nickel sector as a case study, the study highlights challenges such as duplicative audits, tensions between transparency and Chinese data security laws, and the transfer of ESG risks from downstream buyers to suppliers. The report recommends aligning Chinese standards with global benchmarks, introducing financial incentives for ESG performance, and establishing bilateral technical cooperation with mineral-rich countries.

• Chinese ESG standards for overseas operations are generally more aligned with international norms on environmental issues than on social aspects, though gaps persist in both.
• A benchmarking exercise against the IRMA 2.0 standard revealed that Chinese voluntary sustainability standards (VSSs) are 74% aligned overall, with the most significant gaps appearing in 'Planning for Positive Legacies' and 'Environmental Responsibility'.
• There is a critical lack of requirements in Chinese standards regarding the identification of and engagement with Indigenous Peoples, as well as the process for Free, Prior, and Informed Consent (FPIC).
• Environmental gaps in Chinese VSSs specifically include deficiencies in tailings management, water stewardship, and soil protection.
• Chinese nickel processors in Indonesia are primarily driven to enhance ESG practices by market access requirements from European and American downstream buyers, such as the EU Batteries Regulation, rather than by regulation.
• Chinese companies face a conflict between the transparency requirements of international supply chain audits and the obligations of the 2021 Chinese Data Security Law regarding cross-border data transmission.
• The limited international recognition of Chinese due diligence frameworks leads to increased compliance costs and duplicative audits for companies, as downstream partners still demand internationally recognized standards.
• Downstream manufacturers are often transferring ESG risks to suppliers through contractual clauses and 'de-risking' strategies rather than sharing responsibility for due diligence.
• China is transitioning its domestic ESG landscape from voluntary guidelines to mandatory disclosure for listed companies, with the CSRC requiring sustainability reports for specific listed companies starting in 2026.

APA

Zhou, R., Baumgarten, H., Lang, B., Huang, S., Huang, Q., Lily, H., Bernasconi-Osterwalder, N., Ramdoo, I., Bellois, G., & Zheng, Q. (2026). ESG Standards and Practices of Chinese Companies in Critical Minerals Supply Chains. International Institute for Sustainable Development. https://www.iisd.org/system/files/2026-05/esg-standards-chinese-companies-critical-minerals.pdf

Chicago

Zhou, Rachel, Hans Baumgarten, Bertram Lang, Siran Huang, Quqing Huang, Hannah Lily, Nathalie Bernasconi-Osterwalder, et al. ESG Standards and Practices of Chinese Companies in Critical Minerals Supply Chains. International Institute for Sustainable Development, 2026. https://www.iisd.org/system/files/2026-05/esg-standards-chinese-companies-critical-minerals.pdf.

Wikipedia

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BibTeX

@techreport{zhou2026esg, author = {Zhou, Rachel and Baumgarten, Hans and Lang, Bertram and Huang, Siran and Huang, Quqing and Lily, Hannah and Bernasconi-Osterwalder, Nathalie and Ramdoo, Isabelle and Bellois, Gregoire and Zheng, Qi}, title = {{ESG Standards and Practices of Chinese Companies in Critical Minerals Supply Chains}}, institution = {International Institute for Sustainable Development}, year = {2026}, month = may, url = {https://www.iisd.org/system/files/2026-05/esg-standards-chinese-companies-critical-minerals.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }