With a long history of trade, rapid urbanisation, dramatic economic growth, transformative social upheaval, earthshaking alteration of people’s perceived value, and certainly the implementation of the Belt and Road Initiative and development of green finance framework, China has an increasingly pivotal role to play in impacting the whole world nowadays. As the private sector has entered the market and gradually become a dominant force influencing the financial market of China, it goes without saying that Corporate Social Responsibility (CSR) has taken the centre stage and is inherently linked to the sustainable development of the country. It has been 11 years since the ‘State-owned Assets Supervision and Administration Commission of the State Council’ (SASAC) of China published the ‘Guidelines to Chinese state-owned enterprises on fulfilling corporate social responsibilities’. During the past decade, not only did Chinese state-own enterprises proactively fulfill their commitment to social responsibility, more and more organisations have put efforts into the exploration of localised tools, approaches, systems and platforms to promote a broad implementation of CSR policies in Chinese enterprises. Mounting evidence and research suggested that the development of CSR in China has embarked upon a full responsibility management era. With relevant laws, regulations, and guides being mature, enterprises have paid more attention to their internal management and fulfillment of CSR.
In line with globally recognised and locally developed standards concerning sustainability reporting (such as ISO 26000, Global Reporting Initiative (GRI), UN Global Compact and GB/T 36000-2015), CASS-CSR4.0 arises at the critical moment, serving as a powerful tool allowing enterprises to follow strict procedures in fulfilling their corporate social responsibilities, and compiling a standard and purpose-driven CSR report that helps investors and other stakeholders to make informed decisions together with corporate financial outcome. As one of the most popular guides adopted by most listed companies in China for CSR reporting, CASS-CSR4.0 per se, has raised a host of brilliant ideas, innovative models and effective management approaches upon which its counterparts in Hong Kong including ESG Guide and reports can draw. The whole discussion would be split into several parts, delving into the most advisable and desirable concepts in CASS-CSR4.0, and its feasibility in plugging the loophole of the ESG Guide in Hong Kong.
PART A – Reporting Process Management
‘As listing venues, we must always serve the needs of our companies. Overregulation may curtail entrepreneurialism; make companies less willing or able to capitalize on opportunities. The constant churn of filings, disclosures, statements, applications, and surveys tends to steal focus from long-term goals, and a fear of expensive litigation paralyzes growth.’, as stated in the ESG Reporting Guide 2.0 released by Nasdaq in the US. Indeed, a high-level regulation on what to report and how to report seems to be a type of suppression constraining enterprises’ flexibility for practicing and reporting. The ESG Guide in Hong Kong, on contrary, has selected a mild way that requires companies either choose to reveal non-financial information against criteria or expound in terms of why certain topics are not being covered, which is called the ‘comply or explain’ provision. Notwithstanding that, neither of these two guides did introduce a science-based and efficient way that enterprises can stick to for their sustainability reporting with confidence from the beginning of the project all the way to the preparation for the next reporting period. Despite relevant recommendations for reporting process and aspects regarded as the cornerstone that must be laid for the ESG report being provided successively, the lack of an instruction on the complete lifecycle for reporting management can still be disastrous to issuers who are not conversant with this sophisticated work that has evolved from centuries ago in China, which can be traced back to the essential idea of Chinese Confucianism.
One of the valuable insights mentioned in CASS-CSR4.0 is reporting process management, which covers the stage of organisation, planning, boundary setting, kick-off meeting, research, compilation, publication, and summing-up.
Organisation: A stable and efficient organisational system is required to be built to uphold the reporting work. Specifically, the task force comprised of both internal and external parties needs to establish an operational mechanism based on the accountability system, making sure that various meetings can be held successfully, information and technology can be communicated smoothly, and incentive mechanisms can be implemented efficiently.
Planning: A great ESG/Sustainability/CSR report necessitates a clear positioning of its functionality. The basic elements of content, framework, and objective of a report should be defined and discussed in advance, ensuring that a report is themed and has its unique mission and characteristics. It is also worth noting that systemic planning on quality enhancement, establishment of the reporting system, an inheritance of style and consolidation of management approach are conducive to embedding the DNA of sustainability into the enterprise’s strategic business development.
Boundary setting: Boundary setting is a critically important aspect in the ESG Guide of Hong Kong, which can be reflected in the principle of Materiality underpinning the entire reporting process. As an indispensable part of the ESG report, boundary setting deserves to be given more emphasis not only at a level of the prioritisation of topics, but from a holistic perspective.
Kick-off meeting: It is a vital segment and ceremony of the reporting process, aiming to provide the Toolkit and technical training to staff, while to detail the responsibility of each participant of the project.
Research: CASS-CSR4.0 encourages an in-depth analysis of the company’s index system including the alignment with global indicators, the distinction of short-term and long-term, qualitative and quantitative indicators, and synthesis of the existing index within the company. Meanwhile, benchmarking peers’ performance and best practice in the market is of paramount importance to the improvement of companies’ CSR management.
Compilation: Preparing a sustainability report does not merely depend on writing skills. Rather, selecting the writing approach that is suitable for the enterprise (written by the core team or separately by divisions), determining an unequivocal writing procedure, and gathering useful materials in diverse forms from a variety of sources are of exceptional value to the report as well.
Publication: In addition to the date and means for publication, a well-designed press conference would be of great merit to the management of report value.
Summing-up: An organised wrapping-up or summarisation should be put at the end of the reporting cycle. It is also believed to be an effective way to improve the report quality in the future. The summing-up does not refer to brainstorming on what needs to be incorporated in terms of information disclosure next year. A thorough review of both the report content and reporting process is required, followed by a summing-up meeting and communication on review results through different channels with all material stakeholders involved in the reporting process.
The standardisation of Reporting Process Management can prompt enterprises to shift its focus from yearly performance derived from report content back to the management of reporting process, which I believe, is the premise to the balance, consistency, and accuracy of the information disclosed in the report. Besides, with such an efficient working flow, the continuous optimisation of the reporting process and adaptation to changes of the market can be realised more efficiently.
To be continued……
Reference:
[1] 中国企业社会责任报告指南基础框架 CASS-CSR 4.0
[2] Corporate Social Responsibility and Sustainable Development in China: Current Status and Future Perspectives
