On April 27, 2025, China took another major step in its ecological transition. The Standing Committee of the National People’s Congress presented a first draft of an ambitious Environmental and Ecology Code, which is now open for public consultation.
Circular economy, waste traceability, extended producer responsibility, mandatory ESG clauses, civil, administrative, and criminal sanctions – everything is included.
The Code, expected to come into force in 2026, pending final approval, aims to unify all of China’s environmental legislation into a single, structured legal framework.
Environmental protection obligations in China are not new. Companies already face extensive regulations, which in past years led to an industrial upgrade and even the shutdown of some operations to clean up major urban areas.
This article breaks down the main impacts of the Code for companies operating in China or sourcing from Chinese supply chains.
A 1,188-Article Code with National – and beyond – Reach
The draft is not just a simplification of the legal framework: it imposes a strict regime on all companies active in the Chinese market, including those operating through subcontractors (OEM / ODM) or local service providers. There are no exemptions based on company size or sector, reflecting a clear intent: to hold all economic actors, domestic and foreign, accountable.
Prevention, Traceability, Responsibility
The new obligations focus on three major areas:
- Emission reduction and clean production: Companies will be required to cut pollutant emissions across their entire value chain and implement rigorous monitoring of consumption and waste.
- Circular economy: The text promotes reduced use of virgin raw materials, the integration of eco-design, and sets strict collection and recycling obligations for key sectors such as electronics, automotive, and construction.
- Extended producer responsibility (EPR): Producers will be legally required to ensure or fund the end-of-life management of products sold in China, even when handled by third parties.
Sanctions Matching the Ambition
The Code introduces strong deterrents: fines of up to 5 times the damages caused and up to 30% of the cost of damage caused to water or marine ecosystems, daily penalties, and criminal liability for executives – including prison sentences. The Public Prosecutor’s Office will also be able to initiate legal actions in the absence of local authority enforcement. These are tools already present in existing laws but now reinforced.
A Tangible Impact for Foreign and Chinese Companies
Sustainability becomes a market access criterion, a contractual requirement, and a competitiveness factor. This draft law necessitates a rethinking of contract practices, especially with suppliers and subcontractors. Environmental compliance clauses, pre-contract audits, and traceability mechanisms must be integrated into business relationships. Management and relevant staff must also be sensitized to these new realities.
Get Ready Now
Starting in the second half of 2025, it will be essential to:
- Conduct awareness-raising initiatives,
- Identify high-risk suppliers,
- Review commercial contracts,
- Audit environmental service providers,
- Align ESG practices with the upcoming Chinese framework.
Our Support
Our firm is already assisting French and international stakeholders as follows:
- Integrate the future Code’s requirements into their ESG policies,
- Draft contract clauses compliant with Chinese law,
- Develop risk maps and targeted due diligence,
- Train legal, procurement, and CSR teams on the new obligations.
For more information, contact Marion Cambounet (m.cambounet@leaf-legal.com), the author, or Bruno Grangier (b.grangier@leaf-legal.com).
This publication is for informational purposes only and does not constitute legal advice. It is based on the draft Code published in April 2025.
