ACCOUNTING

BDO: 54% of surveyed Hong Kong-Listed Firms Won't Raise ESG Reporting Budget Next Year

Accountancy Network BDO has released survey findings of its "Review on ESG Report Compilation by Hong Kong-Listed Companies" following its "ESG Reporting Performance Survey" announced in July 2017.

The main purpose of the latest survey is to understand the challenges that Hong Kong-listed firms encounter when compiling their FY2016/2017 ESG reports, which is now a regulatory requirement, BDO said. The findings are to be used to determine and analyze the challenges firms face and to facilitate improvements and develop recommendations for future initiatives.

The BDO ESG Survey covers both Main Board- and GEM-listed companies based in Hong Kong. A total of 68 Hong Kong listed firms across different industries have completed phone interview surveys or written multiple choice surveys between August and October 2017. Their market capitalization ranges from small (below HK$5 billion) to large (larger than HK$30 billion).

"While our survey findings in July 2017 revealed that the majority of Hong Kong-listed firms went beyond meeting the minimum disclosure requirement in their first report after the introduction of the new ESG reporting regulation, the latest survey revealed that more than half of responding firms have no plans to increase their ESG reporting budget in the coming year,” said Ricky Cheng, Director and Head of Risk Advisory of BDO.

Key findings of the surevey

- 80% of respondents believe that the ESG report enables better internal control and risk management, or enhances the investment value of the company

- Among the 60% of companies who invested additional resources, 88% hired an external consultant

- Although all respondents see benefits from issuing an ESG report, 54% have no plans to increase budget for ESG reporting in the coming year

- Most small-and mid-cap companies spent HK$100,000 or less when preparing for the ESG report

- Collection of data and analysis from subsidiaries is the most difficult challenge when preparing this year's ESG Report, according to 62% of respondents; lack of resources is the second most difficult challenge according to 32% of respondents

- 70% of respondents expressed that collection and analysis of new compulsory data disclosure is their largest concern in preparing for next year's ESG report

- Although 46% of respondents think that issuing an ESG report can facilitate better internal control and risk management, 56% of respondents disagreed that meeting minimum ESG reporting requirement could mitigate the negative impact of malicious market rumors or attacks on the company.

Recommendations

1. Data collection made easy

While some of the listed companies are entities within the same group, they can establish a centralized ESG function/team to optimize resources in handling ESG data collection of different group entities in a consistent and efficient manner. Besides, listed firms can seek assistance from consultants in establishing a data collection model for future consistent application unless there are significant changes in operation.

2. Derive ESG value from reducing carbon footprint

According to BDO’s earlier ESG survey results, some listed firms achieved cost-savings from reducing carbon footprint such as adoption of energy-efficient equipment. Small- and mid-cap companies can start with small pilot projects such as replacing energy-efficient lighting system, streamlining logistics and transportation practices, evaluating equipment utilization patterns, implementing paperless operations when it comes to ESG practices

3. Enhance operational efficiency through engagement of suppliers

Listed firms can conduct comprehensive supply chain risk assessments and identify possible events that could trigger a supply chain breakdown. Management should then engage with relevant vendors in formulating strategies to mitigate possible risk factors, streamlining supply chain procedures, identifying alternatives, and routinely obtaining feedback from suppliers.

4. Constantly revisit ESG practice and strategy

Companies need to learn from their first year ESG reporting identify directions and goals relevant to their ESG practices and constantly be aware of the latest ESG best-practices and energy-saving technologies as well as options to enhance or refine their ESG strategy.

 

 

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