Opinion | Hong Kong companies must wield double-edged sword of ESG reporting with care

Putting more pressure on organisations in Hong Kong to deliver on their climate pledges is critical if the city is to achieve its net-zero goal

Using reporting standards to create greater transparency is a smart way to apply some of that pressure, but it also comes with reputational and business risks for firms

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Fog obscures the tops of some of the skyscrapers on Hong Kong Island on March 11. Companies listed on the city’s stock exchange will soon have to make mandatory climate disclosures. Photo: Jelly Tse

Published: 4:30pm, 10 Apr 2024Updated: 8:04pm, 10 Apr 2024

At last month’s One Earth Summit, the Hong Kong government ratcheted up plans to require Hong Kong Exchanges and Clearing-listed firms to disclose more detail on their progress against sustainability metrics. The city’s authorities will join New Zealand, Australia, Singapore, the Philippines, Japan and now Malaysia in enacting mandatory climate-related disclosures based around the International Sustainability Standards Board disclosure framework.

It will mean more than 32,000 companies in Asia alone will need to be more transparent in their environmental, social and governance (ESG) reporting, creating more openness around how – or perhaps if – they are meeting their climate goals.

Hong Kong has yet to finalise a start date but a working timeline of January 1, 2025, has been suggested. However, the move cannot come quickly enough. Carbon emissions in the city have largely been steady since 2020, putting Hong Kong’s ability to meet its 2050 climate obligations in jeopardy.

Rising levels of private car usage, mountains of plastic waste and falling biodiversity are just some of the challenges facing Hong Kong. The new reporting standards will help make clear how businesses are contributing to solutions or making the problems worse.

The new reporting framework will standardise data, allowing all stakeholders to make informed decisions about which businesses they engage with. At its simplest level, the new standards will create greater accountability and allow investors to funnel money towards more sustainable businesses.

There are a host of other benefits, too, including in the competition for talent. A 2023 survey of more than 22,000 Gen Z and millennials across 44 countries found that more than half research a brand’s environmental impact and policies before accepting a job. While it’s still too early to tell, there is a growing sense that Gen Alpha – those born between 2010 and 2025 – will be even more fastidious with their choice of employer when the time comes for them to enter the workforce.