Home' A Plus Magazine : Oct 2012 Contents October 2012 21
Making a start
Here in Hong Kong, companies generally
have a mixed record on sustainability re-
porting. But Hong Kong Exchanges and
Clearing hopes to change this after publish-
ing its environmental, social and gover-
nance reporting guide this year. The guide
covers four areas -- workplace quality, envi-
ronmental protection, operating practices
and community involvement -- as well as
general disclosure and key performance in-
"Our guidelines are for the 'everyman
company,' " says Mark Dickens, head of list-
ings at HKEx. "It's a recommended practice,
not best practice," he adds, saying that the
aim is to encourage beginners to make a
start, while other companies can apply the
higher standards. HKEx encourages issuers
with a financial year ending after 31 Decem-
ber to implement the rules.
The rationale behind this is to accom-
modate the wide divergence in existing be-
haviour. Some larger companies have been
undertaking increasingly sophisticated sus-
tainability reporting for over a decade and
even dabbling with integrated reporting, yet
there are many -- indeed the majority -- who
have still to get off the starting blocks.
One of the most widely used sets of sus-
tainability standards is from the Global
Reporting Initiative, an Amsterdam-based
non-profit organization that promotes eco-
nomic, environmental and social sustain-
ability. The organization offers several
guidelines, including a comprehensive re-
porting framework for various industries.
Another set of standards is issued by the
United Nations Global Compact, headquar-
tered in New York, which held its China-Ja-
pan-Korea roundtable in Seoul last month to
discuss value chain management in the con-
text of sustainable development.
The Asia Pacific tends to be behind the
cur ve in sustainability reporting, though re-
quirements in Hong Kong are expected to be
stiffer within a few years. For example, the
HKEx guide is only a recommended prac-
tice now, but by 2015 the intent is to develop
it into "comply or explain" requirements.
"This means you have to say why you are not
doing it," says Dickens. "Peer group pressure
can be very powerful in relation to the cor-
porate governance code."
Hugh Gozzard, an enterprise risk services
principal at Deloitte Touche Tohmatsu and
an Institute member, agrees with Dickens
that peer pressure is important. “If you do
not take up environmental, social and gov-
ernance reporting, then you are going to
look progressively worse as more of your
peers adopt it."
Some Institute members question wheth-
er HKEx could do more to get locally listed
companies to change their reporting prac-
tices. "It is very mild," Wong at The General
Fiduciary Co. says of the exchange's require-
ments. "[They are saying] we encourage you
to do it, meaning... you can if you want to."
The Institute supports the HKEx efforts.
"Hong Kong needs to step up to prove it has
the same commitment to sustainability as its
competitors," says Chris Joy, the Institute's
executive director. "We are very pleased the
exchange took this initiative."
Joy points out that many areas come
under the sustainability umbrella such as
environmental, social and governance; cor-
porate social responsibility; and integrated
reporting. Whatever the terminology used,
he adds, the starting point is to get manage-
ment to understand the business benefits. "It
is not an easy first step. You need to structure
your business models around sustainability.”
Arguably, local companies are only tak-
ing their lead -- or lack of -- from the Hong
Kong government, which has a history of
dragging its feet when it comes to legislat-
ing good corporate behaviour. For instance,
Hong Kong has for years remained one of
the few international jurisdictions without
a competition law, although one is due to be
effective from next year.
"There is very little appreciation of sus-
tainability and generally less public pressure
to act, even though it's happening all over
the world," says Wong. "When it comes to
pollution most people just hold their noses,"
he adds. "People are more worried about
paying more for the buses."
One hurdle to moving ahead is the consider-
able knowledge gap over what to measure
and report. Experts say there is often confu-
sion over what should be included.
A distinguishing feature of sustainability
is it must be an activity that is directly relat-
ed to reducing risk. "It has to be seen as part
of the strategy of the business where you
identify value and not just public relations,"
says Gozzard. "If it isn't, the danger is it can
be seen as green-washing or propaganda."
Jeanne Ng, director of environmental af-
fairs at CLP, says there has to be a business
case for acts of sustainability. "It is not just
to make us feel good." She distinguishes
sustainability acts from corporate philan-
thropy, which is an act of doing good where
nothing is expected in return. "If we are, say,
building hospitals, it is because we are look-
ing at managing our commercial and social
risks." To CLP, building a hospital counts as
sustainability rather than philanthropy be-
cause it reduces social risks by developing a
strong link with the community.
Sustainability is still an area of consid-
erable experimentation, competing stan-
dards and varying degrees of sophistica-
tion. Yet the advice is that getting started
is important. "HKEx recognizes that small
companies have limited resources and are
usually stretched at senior management lev-
els, which is why we have given them three
years," says Dickens. "They can also pick and
mix on indicators, while at the same time we
are providing seminars and training to get
them up the learning curve."
The implementation of environmental,
social and governance reporting should not
daunt companies, experts say. According to
Gozzard, the key is to get buy-in from man-
agement, who need to see the long-term val-
ue. Benefits include not just risk reduction,
but also attracting better talent, a better im-
age, better funding and a more favourable
relationship with suppliers.
In the decade since CLP began working
on sustainability it has become much more
reporting for over a
decade... yet there
are many who have
still to get off the
Links Archive Nov 2012 Navigation Previous Page Next Page