Hong Kong brands show continuous improvement in business sustainability

Leading companies in Hong Kong have shown increasing concerns for corporate social responsibility (CSR) and business sustainability, according to a latest research conducted by the Chinese University of Hong Kong (CUHK).

CUHK Business School's Centre for Business Sustainability (CBS) has announced the results of the 3rd Hong Kong Business Sustainability Index (HKBSI). Compared to the results of the 2nd HKBSI released in 2016, the overall average score of the 50 constituent companies of the Hang Seng Index (HSI) as at 6 June 2017 in the 3rd HKBSI was 50.82 (out of 100 points), an increase of 11.13%, whereas the average score of the top 20 Index companies has recorded 72.46 (out of 100 points), up by 5.29%.

Both the overall average score and that of the top 20 Index companies have shown an increase for two consecutive rounds of HKBSI. In comparison with that of the 1st HKBSI, which was launched in December 2015, the overall average score of the 3rd HKBSI registered an increase of 21.72% (from 41.75 points in the 1st HKBSI). For the top 20 HKBSI Index companies, the mean score of this round has recorded a significant improvement of 26.57%(from 57.25 points in the 1st HKBSI).

Prof. Carlos Lo, director of CBS, explained that the assessment of HKBSI is based on the unique "V alues -- P rocess -- I mpact" (VPI) model, which was developed by Sustainability Management Research Centre (SMRC) and launched in 2015.

He highlighted the progressive advancement in the performance of business sustainability over the past three rounds of HKBSI. However, he pointed out that in this latest round, despite an increase in the overall average score, the standard deviation was also visibly large (21.5 points), reflecting a huge performance gap between the top and bottom companies.

For the top companies with over 80 points, their overall performance in sustainability attained the level of "pace-setter" and was comparable to international standard. But for those companies scored below the overall average score, they were still in the stage of "explorer" and have yet to set a clear CSR orientation and a proper management framework.

Among the assessment aspects of VPI , in comparison with the results of the 2nd HKBSI, "Values" has registered the highest score of 62.40 points and the highest growth of 16.57% in the 3rd round. "Process-Management" (58.48 points) and "Process-Practice" (56.22 points) have also performed well, recording 6.72% and 8.72 per cent rise respectively. The average score of "I mpact" (32.59 points) has chalked up an impressive increase of 14.33%; yet, "I mpact" has remained as the weakest area across the board.

Prof. Lo attributed the high score in "V alues" to the companies' increasing adoption of conceptual frameworks related to business sustainability and CSR, as well as their greater concern for various stakeholders. It shows that companies have increasingly approached their CSR activities in a strategic manner, with defined priorities aligned with their business drivers, thus enabling the companies to leverage their strengths for achieving better impact on the beneficiaries.

On "I mpact" of the VPI model, the weakest area that companies performed, Prof. Lo said many companies are still implementing CSR on project-driven basis. Although many have begun to take "Impact" more seriously, they still lack the ability to measure, both qualitatively and quantitatively, the results and impacts of their CSR practices and activities.

He said evaluation and review of these practices are still relatively less developed in many companies, and it will be important for them to apply measurable Key Impact Indicators and comparable data related to CSR management. Such evaluations are useful for companies in not only improving their internal governance, but also strengthening their external accountability.

Currently, more than half (52%) of the HSI constituent companies are non-Hong Kong based companies, comprising of H-shares, red chips and other mainland Chinese firms listed in Hong Kong. The overall average score of these companies in the 3rd HKBSI recorded a 20.36% rise to 42.33 (out of 100 points) when compared to that of the 1st HKBSI, showing a continuous improvement in the performance of business sustainability.

"This is an encouraging trend, indeed", expressed by Prof. Lo, given that most of these non-local companies are Chinese firms, which are late comers of CSR with limited knowledge on business sustainability. It is expected that this group of companies will continue to make noticeable improvement in their CSR management and performance as their learning curve steadily progresses.

On the whole, the rising trend of their CSR performance indicates a lift of the quality of corporate management, which in return, will positively impact their competitive advantage and hence investment value.