Significance of ESG Reporting

ESG reporting provides an opportunity for the company to update its progress in achieving its environmental, sustainability, and corporate governance goals. Since climate change has become the biggest challenge to business operations, including climate-related risks such as physical and market transition risks, stakeholders nowadays get more sensitized to the potential climate risks of a company, thus resulting in an unprecedented desire for effective non-financial reporting.

To better prepare an ESG report, the company should include but not be limited to identify climate-related risks and opportunities; focus on engaging your stakeholders like customers, suppliers, workforce and the community; set up appropriate sustainability governance in the organization; align the business and social objectives; periodically evaluate various Key Performance Indicators; generate Corporate-Social initiatives and continuous improvement plan. By disclosing this information in a report, the company’s progress related to ESG can be examined against benchmarks and targets. A good ESG report shows a proper ESG strategy of the company as well as its sustainability, helping the company stand out from the market.

In accordance with Section 388, Schedule 5 of the Companies Ordinance (Cap.622), a directors' report for a financial year must contain a business review consisting of an analysis of using financial key performance indicators; a discussion on the company's environmental policies and performance; and the company's compliance with the relevant laws and regulations that have a significant impact on the company; and an account of the company's key relationships with its employees, customers and suppliers and others that have a significant impact on the company and on which the company's success depends.

Following the introduction of the Hong Kong Stock Exchange’s (“HKEx”) Environmental, Social and Governance Reporting Guide (“ESG Reporting Guide”) listed in Appendix 27 of the Main Board Listing Rules and Appendix 20 of the GEM Listing Rules, many organizations, listed companies in particular, are devoting more resources in complying and tackling with these disclosure requirements and concerns. A good number of Hong Kong listed companies have already adopted the relevant ESG international guidelines or standards, such as Global Reporting Initiative, Carbon Disclosure Project and United Nations Global Compact.

Why Report on Sustainability Issues?

Sustainability helps corporations not only to demonstrate their responsiveness to the environmental and social concerns, but also enhance one’s operating efficiency and impacts its core business strategy.

• Responds to regulation change
• Enhance reputation
• Increase customer and employee loyalty
• Demonstrate accountability and transparency
• Strengthen business practice and corporate strategy
• Improve long-term risk management
• Meet demands of investors and other stakeholders
• Attracts investors and financing

Ways to Increase the Credibility of ESG Report

• Show stakeholder engagement process
• Connect with overall business strategy
• Explain KPIs and results concisely
• Verify data in particular those information disclosed in the report
• Address material sustainability issue