Hong Kong Exchange
Environmental, Social and
Governance Reporting Guide
Agenda
• What is ESG Reporting? (5 mins)
• Why Report on CSR/Sustainability Issues? (5 mins)
• Best Practice Principles (10 mins)
• ESG Reporting Guide Subject Areas (30 mins)
• Frequently Asked Questions (20 mins)
• Questions and Answers (20 mins)
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Agenda
• What is ESG Reporting?
• Why Report on CSR/Sustainability Issues?
• Best Practice Principles
• ESG Reporting Guide Subject Areas
• Frequently Asked Questions
• Questions and Answers
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What is ESG Reporting?
• Reporting on Environmental, Social and Governance (ESG) Issues
• Also called CSR reporting, sustainability reporting
• Not PR, but performance reporting on issues that are relevant
and important to your business, to complement your financial
Annual Report and Accounts
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Agenda
• What is ESG Reporting?
• Why Report on CSR/Sustainability Issues?
• Best Practice Principles
• ESG Reporting Guide Subject Areas
• Frequently Asked Questions
• Questions and Answers
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Why Report on CSR/Sustainability Issues?
• Strengthen business
practice (part of a process)
• Encourage innovation
• Demonstrate accountability
& transparency
• Investor demands
• Standard practice
• Enhance your reputation
• Regulatory pressure
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Why Report on CSR/Sustainability Issues?
Ways that sustainability reporting provided major value
Improved reputation
Increased employee loyalty
Reduced inaccurate information about the organization’s
corporate social performance
Helped the organization refine its corporate vision or strategy
Increased consumer loyalty
Led to waste reduction within the organization
Improved relationships with regulatory bodies
Monitoring long-term risk and improving long-term risk
management
Led to other forms of cost savings within the organization
Helped the organization to take measures to increase longterm profitability
Improved access to capital
Preferred insurance rates
0%
20%
Source: Boston College Center for Corporate Citizenship and Ernst & Young 2013 survey
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40%
60%
Who Reads CSR/Sustainability Reports?
INTERNAL
Employees, owners, interns
CIVIL SOCIETY
Media, public institutions,
academics, experts, concerned
citizens and consumers
16%
48%
14%
VALUE CHAIN
Suppliers, customers, joint
venture partners, auditors,
consultants
22%
INVESTORS
Providers of capital, research and
ratings agencies, financial media,
banking, asset owners/managers
Source: GRI Readers and Reporters Survey 2010
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What Makes Your CSR/Sustainability Report Credible?
Thorough stakeholder engagement process
Link with the overall business strategy
Publication of targets and results with an
explanation
Balance between “good and bad news”
20
30
40
50
60
Percentage respondents
Source: GRI Readers’ Choice Awards 2008
‘Top 4 answers to Which aspects indicate a genuine commitment to sustainability?’
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Who is Reporting on CSR/Sustainability Issues?
• 95% of global 250 are reporting
• 85% of Hang Seng Index companies are reporting in some
form
• 45% of Hang Seng Index companies have a stand alone report
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A Report is Not a PR Brochure!
• “Greenwashing” is a reputational risk
• Increased stakeholder vigilance – they are learning to
understand the language and becoming increasingly experienced
report readers
• Information society – multiple channels for critical stakeholders
to get information and expose inconsistent information or
commitments
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Hong Kong Exchange – ESG Reporting Guide
• Recommended practice for all
listed companies
• Plan to raise the level of obligation
of some recommended disclosures
to “comply or explain” by 2015
• Issuers are encouraged to adopt a
higher level of reporting, e.g.
Global Reporting Initiative (GRI)
• May be part of annual report or
stand-alone
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Agenda
• What is ESG Reporting?
• Why Report on CSR/Sustainability Issues?
• Best Practice Principles
• ESG Reporting Guide Subject Areas
• Frequently Asked Questions
• Questions and Answers
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Best Practice Principles
Director
involvement
Stakeholder
engagement
Materiality
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Director Involvement
• ESG reporting is ultimately a director’s responsibility but the
task of compiling the report will likely be delegated
• Director involvement is important to:
− Get strategic input on which issues are relevant for the business to
report on
− Help make the internal case for CSR (to directors, and to others)
− Ensure CSR is integrated into the business (not seen as an add-on)
− Ensure buy-in for any new initiatives that result from the report
− Receive approval on public statements about your company
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Stakeholder Engagement
“Stakeholders are parties that have interests in or are affected by
the decisions and activities of an issuer.”
• Stakeholder engagement helps identify what
ESG issues are relevant for your company
• Proactively manage risk
• Examples include: shareholders, employees,
business partners, suppliers, customers and
regulators
• Ways to engage include: meetings, focus
groups, advisory committees, surveys,
interviews
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Materiality
“Materiality is determining which issues are relevant and
important to your business.”
• “Material topics [are those] that have a direct or
indirect impact on an organisation’s ability to
create, preserve or erode economic,
environmental and social value for itself, its
stakeholders and society at large” (GRI)
• Take into account views of external and internal
stakeholders
• Need to define a ‘threshold’ for what to include
• Share the process you used to determine which
issues are material
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Crucial
5
4
Little importance
Importance to stakeholders
Materiality Matrix
ESG subject areas,
aspects and KPIs
identified as relevant
for disclosure
ESG subject areas,
aspects and KPIs
identified as critical for
disclosure
Not material for
external
communication
ESG subject areas,
aspects and KPIs
identified as relevant
for disclosure
3
2
1
1
2
3
Little importance
4
5
Crucial
Significance to business
Source: HKEx ESG Reporting Guide - A toolkit
http://www.hkex.com.hk/eng/rulesreg/listrules/listsptop/esg/documents/toolkit.xls
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What Should be Included in the Report?
•
•
•
•
•
•
•
•
State which entities are included
State the reporting period
Report on prioritised issues
Select relevant Key Performance Indicators
(KPIs)/disclosure
Explain how KPIs are calculated
Compare year-on-year data
Provide context
Consider:
− ESG risk, opportunities and challenges
− ESG management, strategies, priorities, objectives –
and how they relate to the business
− Monitoring system to implement ESG strategies
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Agenda
• What is ESG Reporting?
• Why Report on CSR/Sustainability Issues?
• Best Practice Principles
• ESG Reporting Guide Subject Areas
• Frequently Asked Questions
• Questions and Answers
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What are the Subject Areas of ESG Reporting?
A
Workplace
quality
B
Environmental
protection
C
Operating
practices
D
Community
involvement
A1 Working conditions
A2 Health and safety
A3 Development and training
A4 Labour standards
B1 Emissions
B2 Use of resources
B3 The environment and natural resources
C1 Supply chain management
C2 Product responsibility
C3 Anti-corruption
D1 Community investment
Governance is covered in Appendix 14 of the Main Board Listing Rules
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What are the Subject Areas of ESG Reporting?
A
Workplace
quality
B
Environmental
protection
C
Operating
practices
D
Community
involvement
Subject area
A1 Working conditions
A2 Health and safety
A3 Development and training
A4 Labour standards
B1 Emissions
B2 Use of resources
B3 The environment and natural resources
C1 Supply chain management
C2 Product responsibility
C3 Anti-corruption
D1 Community investment
Aspect
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Workplace Quality: Working Conditions (A1)
General
disclosure
Information on:
a) The policies; and
b) Compliance and material non-compliance with relevant
rules, standards and regulations on compensation and
dismissal, recruitment and promotion, working hours, rest
periods, equal opportunity, diversity and other benefits and
welfare
KPI A1.1
Total workforce employment type, age group and geographical
region
KPI A1.2
Employee turnover rate by age group and geographical region
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Workplace Quality: Working Conditions (A1)
General
disclosure
Information on:
a) The policies; and
b) Compliance and material non-compliance with relevant
rules, standards and regulations on compensation and
dismissal, recruitment and promotion, working hours, rest
periods, equal opportunity, diversity and other benefits and
welfare
KPI A1.1
Total workforce employment type, age group and geographical
region
KPI A1.2
Employee turnover rate by age group and geographical region
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Workplace Quality: Working Conditions (A1)
Source: MTR 2012 Sustainability Report
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Environmental Protection: Emissions (B1)
General
disclosure
Information on: (a) the policies; and (b) compliance and material noncompliance with relevant standards, rules and regulations on air and
greenhouse gas emissions, discharges into water and land, generation
of hazardous and non-hazardous wastes, etc.
KPI B1.1
The types of emissions and respective emissions data.
KPI B1.2
Greenhouse gas emissions in total (in tonnes) and where appropriate,
intensity (e.g. per unit of production volume, per facility).
KPI B1.3
Total hazardous waste produced (in tonnes) and where appropriate,
intensity (e.g. per unit of production volume, per facility).
KPI B1.4
Total non-hazardous waste produced (in tonnes) and where
appropriate, intensity (e.g. per unit of production volume, per facility).
KPI B1.5
Description of measures to mitigate emissions and results achieved.
KPI B1.6
Description of how hazardous and non-hazardous wastes are handled,
reduction initiatives and results achieved.
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Environmental Protection: Emissions (B1)
General
disclosure
Information on: (a) the policies; and (b) compliance and material noncompliance with relevant standards, rules and regulations on air and
greenhouse gas emissions, discharges into water and land, generation
of hazardous and non-hazardous wastes, etc.
KPI B1.1
The types of emissions and respective emissions data.
KPI B1.2
Greenhouse gas emissions in total (in tonnes) and where appropriate,
intensity (e.g. per unit of production volume, per facility).
KPI B1.3
Total hazardous waste produced (in tonnes) and where appropriate,
intensity (e.g. per unit of production volume, per facility).
KPI B1.4
Total non-hazardous waste produced (in tonnes) and where
appropriate, intensity (e.g. per unit of production volume, per facility).
KPI B1.5
Description of measures to mitigate emissions and results achieved.
KPI B1.6
Description of how hazardous and non-hazardous wastes are handled,
reduction initiatives and results achieved.
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Environmental Protection: Emissions (B1)
iv. Metric tonne carbon dioxide equivalent denoted as “MtCO2e
v. Emissions of hydroflourocarbons (HFCs), sulphur hexaflouride (SF6) and perflourocarbons ((PFCs) are considered negligible and
not quantified
Vi. TEU stands for Twenty-Foot Equivalent Unit
“In addition to the adoption of clean technology in our operations, the best way to reduce emissions in the
shipping industry is to save fuel and we have been focusing on our bunker saving programs for many years.
By taking these initiatives, OOCL has cut carbon dioxide emissions by more than 30% since 2004. In addition
to reducing our emission, we are able to help our customers achieve a lower carbon footprint in their supply
chains.”
Source: Orient Overseas Int. Ltd. Sustainability report 2012
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Environmental Protection: Use of Resources (B2)
General
disclosure
Policies on efficient use of resources including energy, water and
other raw materials
Resources may be used in production, storage, transportation,
buildings, electronic equipment etc.
KPI B2.1
Direct and/or indirect energy consumption by type (e.g. electricity,
gas, oil) in total (kwh in 000s) and intensity (e.g. per unit
production volume)
KPI B2.2
Water consumption in total and intensity (e.g. per unit of
production volume, per facility)
KPI B2.3
Description of energy use efficiency initiatives and results achieved
KPI B2.4
Description of whether there is any issue in sourcing water that is
fit for purpose, water efficiency initiatives and results achieved
KPI B2.5
Total packaging material used for finished products (in tonnes) and
if applicable with reference to per unit produced
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Environmental Protection: Use of Resources (B2)
General
disclosure
Policies on efficient use of resources including energy, water and
other raw materials
Resources may be used in production, storage, transportation,
buildings, electronic equipment etc.
KPI B2.1
Direct and/or indirect energy consumption by type (e.g. electricity,
gas, oil) in total (kwh in 000s) and intensity (e.g. per unit
production volume)
KPI B2.2
Water consumption in total and intensity (e.g. per unit of
production volume, per facility)
KPI B2.3
Description of energy use efficiency initiatives and results achieved
KPI B2.4
Description of whether there is any issue in sourcing water that is
fit for purpose, water efficiency initiatives and results achieved
KPI B2.5
Total packaging material used for finished products (in tonnes) and
if applicable with reference to per unit produced
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Environmental Protection: Use of Resources (B2)
Group Water Consumption
“What about HSH in water-stressed regions?
Beijing and Shanghai, where our hotels are
located, are among China’s most waterstressed cities. In 2011, our hotels in Beijing
and Shanghai saw a year-on-year reduction of
10% in their water intensity. Their annual water
consumption reduced by 2.6% and 18.2%
respectively when compared to 2010.”
Hotel Division Water Intensity
“We are pleased to make headway in reducing our water
use. Across the Group, we used 1.82 million m3 of water,
down 2% on 2010. Out water savings initiatives in 2011
notched up 171,270 m3 of water saved (equivalent to just
over 850,000 bathtubs). The water intensity of our hotels
in 2011 was 1,320 litres per guest night, a 6.5% reduction
on the 2006-08 baseline. We therefore met our hotels
water intensity reduction target of 6%.”
Source: The Hongkong and Shanghai Hotels, Ltd. Sustainability Report 2011
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Operating Practices: Supply Chain Management (C1)
General
Policies on managing environmental and social risks of supply
disclosure chain
KPI C1.1
Number of suppliers by geographical region
KPI C1.2
Description of practices relating to engaging suppliers, number
of suppliers where the practices are being implemented, how
they are implemented and monitored
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Operating Practices: Supply Chain Management (C1)
General
Policies on managing environmental and social risks of supply
disclosure chain
KPI C1.1
Number of suppliers by geographical region
KPI C1.2
Description of practices relating to engaging suppliers, number
of suppliers where the practices are being implemented, how
they are implemented and monitored
“We are one of the few banks with a procurement policy and Code of Conduct for suppliers. The Group
formulated its Sustainable Procurement Policy and a Supply Chain Code of Conduct in 2011 and has
already begun implementation.”
“In 2011, Self-Assessment Questionnaire was
sent to 42 companies supplying a specified level
of goods and services to the Group in the
financial year of 2011. The assessed suppliers
were in compliance with the Code of Conduct.”
“To facilitate the implementation of the Code for
suppliers, in the first quarter of 2011 we formulated
a communication strategy, where we trained
procurement staff to communicate our standard and
requirements to our suppliers. Any non-compliance
with the Code may lead to contract termination if a
remedial action plan to come into compliance is not
put into place by the supplier.”
Source: Bank of China Hong Kong CSR Report 2011
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Community Involvement: Community Investment (D1)
General
Policies on community engagement to understand the
disclosure community’s needs where it operates and to ensure its
activities take into consideration communities’ interests.
KPI D1.1
Focus areas of contribution (e.g. education, environmental
concerns, labour needs, health, culture, sport)
KPI D1.2
Resources contributed (e.g. money or time) to the focus area
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Community Involvement: Community Investment (D1)
General
Policies on community engagement to understand the
disclosure community’s needs where it operates and to ensure its
activities take into consideration communities’ interests.
KPI D1.1
Focus areas of contribution (e.g. education, environmental
concerns, labour needs, health, culture, sport)
KPI D1.2
Resources contributed (e.g. money or time) to the focus area
Source: HSBC Sustainability Report 2012
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Agenda
• What is ESG Reporting?
• Why Report on CSR/Sustainability Issues?
• Best Practice Principles
• ESG Reporting Guide Subject Areas
• Frequently Asked Questions
• Questions and Answers
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FAQ’s: General
• Is it really necessary?
− You will need to do something
− It makes business sense: Benefits to the business process and demands
from investors and other stakeholders
− Strong likelihood is that you will need to “comply or explain” by 2015
− Do you want to be the last one to report, and lag behind your
competitors?
• How do I know which subsidiaries to include?
− Consider
a) Where your income comes from and
b) Where your major impacts are
− If any subsidiaries are not able to comply, state this and declare when
you plan to report by
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FAQ’s: General
• When should we publish our report?
− At the same time as your annual report, or even as part of your annual
report
− As soon as possible after the reporting period ends, and ideally within
3-4 months, so that the information does not become obsolete
− Use the same reporting cycle as your annual report if possible
• How much will producing a report cost?
− Depends on what type of report you choose to do (10 vs 40 pages; only
HKEx or full GRI)
− Whether you choose to do the report in-house or engage an external
contractor
− Expect to at least use 50% of an full time equivalent for a 2-3 month
period. A single point of contact will also be needed if you outsource to
a contractor
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FAQ’s: Resources and Personnel
• What other resources do I need?
− Communicating your report – website, print
− Data collection system
− Carbon audit
• Who needs to be involved?
− Senior management at critical stages (materiality and the sign-off of the
final report)
− Representatives of the various departments who will provide data and
information
− Corporate communications, legal department, investor relations should
also be involved
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FAQ’s: Resources and Personnel / Materiality and Data
• How do I engage senior management?
− A briefing from an external party to explain the drivers and rationale for
doing this
− Share how ESG issues can be critical to business success (risk and
opportunity)
− Senior management champion to give credibility
• How do I assess materiality?
− Rank the significance of each issues to both internal and external
stakeholders, and then plot this on a materiality matrix
− Internal ranking can be decided by way of an internal workshop or
discussion. External ranking can be assessed via interviews, survey or
another technique
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FAQ’s: Materiality and Data
• How do I manage the data collection process?
− Explain to all individuals providing data the rationale for reporting, their
role, what will be asked of them and the timeline for completion
− Produce a spreadsheet for data collection
• What if we don’t have the right data?
− You can explain this and when you will access this data in the future
(estimations)
− No one expects your company to be perfect the first time you report
• Does the report need to be assured?
− Not necessarily - it’s up to you. It provides a better level of credibility if
you choose to do this, and may help highlight areas of improvement for
the next reporting cycle
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Next Steps
• What level of disclosure will you aim for?
− How will you determine materiality?
• What sort of report will you produce?
− GRI / HKEx / Other
− Short / long / printed / online
• What capacity do you have to deliver this?
− Will you need external support?
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Agenda
• What is ESG Reporting?
• Why Report on CSR/Sustainability Issues?
• Best Practice Principles
• ESG Reporting Guide Subject Areas
• Frequently Asked Questions
• Questions and Answers
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Any questions?
44
Get in Touch
Richard Welford I Chairman, CSR Asia
rwelford@csr-asia.com I +852 35798079
Mara Chiorean I Director – Hong Kong
mara.chiorean@csr-asia.com I +852 35798079
Jemima Jewell I Partnerships Director
jemima.jewell@csr-asia.com I +852 35798079
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