ESG Consultation Conclusions: Comply or Explain for Environmental and Social KPIs Disclosure

Preparation for TCFD Recommended Disclosure

Under the requirements of latest listing rule of the Stock Exchange of Hong Kong Limited (HKEx), an issuer must publish its ESG report on an annual basis and regarding the same period covered in its annual report. An ESG report may be presented as information in the issuer’s annual report or in a separate report. Regardless of the format adopted, the ESG report must be published on the Exchange’s website and the issuer’s website.

On 18 December 2019, the HKEx published the conclusions to its consultation on the ‘Review of the Environmental, Social and Governance (ESG) Reporting Guide (ESG Guide) and Related Listing Rules’ (ESG Consultation Conclusions), making revisions on the content of existing ‘Listing Rules’ and the ‘ESG Guide’. The amendments will apply to issuers’ ESG reports for financial years commencing on or after 1 July 2020.

The focuses of this revision by the Exchange were mainly on building the corporate ESG framework, mandating the disclosure of the role the Board plays in its engagement in ESG risks management, encouraging the exploration of the links between climate change and corporate sustainable development, and furthering the application of the principle of Materiality in the disclosure of ESG performance and report preparation.

We have years of experience in providing corporate and consultancy services. With the solid practical experience in advising on the latest sustainability trends and developments, we had already provided a range of services on ESG Reporting to Hong Kong and Singapore listed companies, including:

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Stakeholder Engagement in a Closer Look

Companies need to remain relevant to survive in a challenging business environment and to be relevant requires regular interaction with important stakeholder groups. A robust stakeholder engagement model is vital for companies to be able to understand and respond to legitimate stakeholder concerns. Business leaders and managers will normally be able to list their key stakeholders and concerns, but not furnish the structure and process of engagement as easily.

  • Define the scope of the policy. The background, logic and aim of the policy should be included to set the scene for the policy

  • Define the ownership and decision-making process
  • Define the governance process such as internal or external review

  • Develop an engagement action plan, including method and frequency
  • Develop post stakeholder engagement action plan
  • Facilitate the stakeholder engagement process
  • Identify the legitimate concerns and interest of key stakeholders by materiality matrix
  • Design a process for dealing with conflicts between stakeholder concerns Matters of interest and concerns can typically be grouped into the following categories:

economic/financial (profitability, cash flow, dividend policy, pricing, growth rate, exchange control); environment (carbon footprint, water, waste management, recycling, compliance) and social (health and safety, skills retention, ethics, transformation, training).

  • Define a mechanism to feed stakeholder concerns into strategic planning to ensure alignment. Stakeholder engagement results or insights are valuable that should be well organized and be presented to the management.
  • Provide feedback to stakeholder groups.
  • Prepare an integrated report of stakeholder engagement in ESG report, incorporating relevant aspects of the policy and process. The Integrated Report should be addressed to key stakeholders.

We help you engage the stakeholders, conduct materiality assessment, review the sustainability status and conclude their expectation on environmental issues and social development of the enterprise in order to help you make modification accordingly and gain long-term profits.

ESG Reporting and Disclosure

We provide guidance on ESG-related data collection, identify ways of improvement on data reporting, advise on the development of reporting framework, assist in drafting the content of ESG report in compliance with HKEx ESG Reporting Guide and with reference to the GRI Sustainability Reporting Guidelines to ensure that the expectations of stakeholders are addressed.

Misunderstanding of stakeholder engagement

Usually a company takes the stakeholder engagement as part of the activities of public relations or communications. When a company comes to map stakeholders, they focus only to those they know well or to those who speak loudest, not mentioning the difficulties they are facing when transforming the gathered information into business intelligence.

Stakeholders Influence on Organization and Organization Impact on Stakeholders

  stakeholders influence on Organization
 Organization impact on stakeholders
 No Influence Low Influence Some Influence Formal power/High Influence
Stakeholder support’s for the
business has little or no impact it’s success
Stakeholder support’s for the
business can highly impact the business success
 Stakeholder is highly dependent on organisation- no choice Treat fairly – honour commitments to these stakeholders in line with policy. regulations and industry norms Otherwise endeavour to keep stakeholders satisfied insofar as balance of costs and benefits allow. Strategic threat or opportunity – invest in engagement process to understand concerns and develop solutions.
 No direct impacts -stakeholders have broad range of choice Low priority – provide access to general channels of information and feedback. Keep involved and informed, but ensure balance between concerns of high influence stakeholders and those people actually impacted by decisions.
Materiality Matrix
External assessment
(impact on business)
General Disclosures and KPIs
identified as relevant for disclosure
Gneral Disclosures and KPIs
identified as critical for disclosure
General Disclosures and KPIs
identified as not relevant for disclosure
General Disclosures and KPIs
identified as relevant for disclosure
                                                                                      0         1          2          3          4          5
                                                                           Not Relevant Crucial
Internal assessment (impact on business)