Sustainability has become one of the major policy concerns in the world; many governments have become interested in sustainability and the words “sustainable development” even appear on a number of national development plans to identify strategic directions in the aspects of economic growth, conservation and social development.
The growing social and global challenges are putting a lot of pressure on the private sector to adopt a more systematic approach to disclose how corporations utilise, develop and influence human capital and natural resources.
As the world looks at how to implement sustainable development in businesses, the pressure is on for the Hong Kong government to see how businesses here can balance continued economic development with caring for the city’s natural environment.
Corporate Social Responsibility and Sustainability Reporting
One approach often used to cope with those challenges is developing corporate social responsibility (CSR) policies. CSR is a business philosophy covering a number of ethical factors including human rights, environmental protection, payroll and the well-being of stakeholders, with an ultimate aim of enhancing sustainability of the business. In order to achieve sustainable growth, investors would urge the corporations to disclose information regarding the company’s performance and future prospects. They would also urge the corporation to disclose information concerning the three main ethical considerations involved in CSR: environmental, social and governance (ESG).
Over the past decades, many governments have promoted sustainable economy and business via the stock exchanges and regulators. Stock exchanges and regulators would? have active an role in promoting CSR and sustainable investment of the listed companies through market rules, guidelines and other initiatives in public procurement provisions, supply chains, occupation health and safety issues.
Stock exchanges and regulators have promoted responsible investment practices among investors, and enhance their understanding of the impact of sustainability issues on investment practices. Performance of the stock exchanges is also driven by the requirement of sustainability disclosure policies. According to previous studies, nine out of the top ten exchanges are located in countries having sustainability disclosure policies as mandatory, perspective and broad instruments.
The business sector can achieve significant benefits from engaging with the concept of “sustainable development” in their strategic plan as well. A tool often used by the business sector to demonstrate their goals towards sustainable development is the use of sustainability reporting (SR). SR can enhance the value of the corporations, and allow engagement with stakeholders and more accurate long-term assessment of value creation. SR can also benefit businesses by driving innovation and creating competitive advantages in the market. Advocates believe that disclosure policies will ultimately lead to improvements in company disclosure practices.
Establishing Sustainability Reporting in China and Hong Kong
Establishing SR has become a global trend because of the pressure from the local and international investment community for better transparency on environmental and social risks and in corporate governance.
The Chinese government has been paying an increasing amount of attention to SR in recent years, mostly because of the public awareness of air and water pollution, and the increasing number of Chinese companies on the international business landscape and examined by stakeholders. Between 2001 and 2011, the number of sustainability reports issued in China increased from just two to 1,001. This trend is likely to increase even further in the future.
The close relationship between China and Hong Kong means SR in Hong Kong is needed. In Hong Kong, many corporations have engaged in CSR initiatives, developed sustainability strategy and activities, and engaged in SR in recent years. Such practices become part of the solutions of the three major challenges for Hong Kong’s sustainable development listed in “A First Sustainable Development Strategy for Hong Kong” – Urban living space: Creating a sustainable built environment.
What the Hong Kong government can do
The HKSAR government should share the responsibility in shaping sustainable growth of Hong Kong. The Hong Kong Stock Exchange (HKEx) will revise the listing rules by compiling the need for SR as well as the need to disclose the ESG information of listed companies. The aim of these initiatives would be to maintain and enhance economic opportunities, and hence, to ensure a sustainable economic growth in Hong Kong.
SR is needed to consider how best to balance continued economic development with care for the natural environment in Hong Kong. Although it provides a tool for stakeholders to understand the potential future performance of the companies, not all listed companies have devised a plan for establishing SR. In order to promote SR, the concept of ESG disclosure has to be integrated into the business sector, regardless to the size of the listed companies. Both the government officials and management team of the listed companies have to be mainstreamed on the importance of ESG disclosure.
“Sustainable development” is not just a phrase on document. It should be integrated in the long-term development plan made by the corporations. And of course, it is a concept that every citizen should bear in mind and integrate into their daily lives.