As
the United Nations Climate Change Conference in Warsaw turned into a big
disappointment last month, the role of Hong Kong business in this global
challenge now comes into the limelight. A survey announced this month reveals
that local companies are lacking behind in their preparations for climate
change.
The
worrying findings came from the ‘Hong Kong Carbon Performance Report’, the
first comprehensive survey on carbon disclosure in Hong Kong’s business sector.
It found that only one-tenth of the 357 companies listed in the Hang Seng Composite
Index (HSCI), produced formal reports on greenhouse gas emission – the first
step in preparing themselves for a climate change strategy.
It also found that large
companies in Hong Kong flared better in carbon reporting. One out of four
companies in the Hang Seng Large Cap Index had formal carbon reporting, while
none of the 1,221 listed companies outside HSCI had any form of carbon
disclosure. This indicated that smaller firms are largely unaware of their own
carbon footprints, which makes it impossible for them to develop a proper
strategy to face the uncertain future.
In terms of sectoral
performance, utilities companies stand out the best: two thirds of such
LargeCap companies produced formal carbon reporting. Intriguingly, the worst
performing sectors are also the most important sectors in the local economy:
Consumer Goods, Properties & Construction, and Financials. In each of these
sectors less than 20% produced formal carbon reports. For instance, among 18
large property companies only three of them disclosed their carbon emissions
properly. Their poor showing has dragged down the overall performance of Hong
Kong business.
If we take a look at the
overall performance of all companies listed on the main board, less than 1% of
Hong Kong companies reported their carbon emissions in accordance with
international guidelines such as the Global Reporting Initiatives, compared
with over 3% in Singapore.
This is no small matter if
we look deeper into how Hong Kong performs in its competitiveness ranking on a
global scale. In the latest Global Competitiveness Report compiled by the World
Economic Forum, Hong Kong ranks 7th
whilst Singapore remains the second most competitive economy in the world.
Yet in terms of ‘innovation and business sophistication’, Hong Kong ranks 19th
which is the main reason dragging down its overall ranking. In fact the report
highlights ‘lack of innovation capacity’ as the factor requiring most urgent
attention if Hong Kong is to remain competitive.
As innovation can only
succeed when it responds promptly and effectively to upcoming challenges, it is
widely recognised that the one big driver for business innovation comes from
sustainability concerns - with climate change being the single most important
issue. For Hong Kong companies which have not even started to measure its own
carbon footprint, sustainability innovation is simply out of the question.
There are many inspiring
examples of major companies develop successful strategies to reduce risk and
increase revenue through sustainability innovation. For instance, the UK group
Marks & Spencer has implemented a low carbon strategy called ‘Plan A’ over
the years. By cutting costs and developing environmentally friendly products
with lower carbon footprint to suit the changing values of its customer groups,
it has been rewarded with a net benefit of £135 million as well as becoming
carbon neutral. Unfortunately we have not heard a single case of local business
approaching this level of success.
Despite the current
lacklustre performance among local business, one encouraging news is the
decision by Hong Kong Stock Exchange to upgrade its listing guidelines on
‘Environmental, Social and Governance Reporting’ from ’voluntary’ to a ‘comply
or explain’ status for company reports issued starting 2015. This will surely
encourage companies to report on its carbon emissions, thus enabling more of
them to develop successful sustainability strategies.
As carbon reporting is now
recognised as a matter of public interest, regulatory controls are becoming an
international norm. In the UK, carbon reporting has already become mandatory
for listed companies since October 2013, placing responsibility for compliance
squarely on company board directors.
Hong Kong needs bold action
to tackle the climate change challenge. If the business sector is slow to act,
everyone in Hong Kong will suffer. Carbon reporting is not only the first step
towards a low-carbon economy, but also a wake-up call for company executives
who have more influence and responsibilities than most of them would realize.
A full version of the Hong Kong Carbon Performance Report can be
downloaded from Carbon Care Asia website, www.carboncareasia.com .
Albert Kwong-tak Lai is the CEO of Carbon Care Asia.
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