Lessons from the Hong Kong launch of CDP results

“View it with a risk lens, and it will make better sense”

I must have heard at least five different ways this sentence was said – and that came from a mix of first time CDP disclosers, investor groups reading ESG reports, non-profits looking out for industry issues, students and representatives from the listing board. This is my main takeaway from the 2017 CDP results launch: Towards the 2020 Tipping Point.

The highlight of the event to most attendees is of course the CDP A list and this year they came from a chosen few – 67 companies based or listed in Hong Kong and South East Asia who responded to one or more of CDP’s questionnaires (climate change, water, forest and supply chain) as requested by CDP’s investor signatories.

That is not a wide base to choose from- and this is part of the reason why perhaps the real highlight could be the insights that came from what was said by the speakers and panellists that complemented the results announcement. Both panels celebrated the increasing number of disclosures beyond climate change – with responses understandably coming from Indonesia, Malaysia and Thailand for the water and forest risks questionnaire.

However, to improve integrity of the disclosures, there is a clear need for the following:

1. Better risk management and evidence of alignment with business strategy

More companies have expressed interest in data review and verification in 2017 which has led to overall improved transparency – this is encouraged for companies for better strategic planning;
More disclosures from the construction and IT industries indicate their need to better manage indirect emissions
ESG efforts should be more closely aligned with overall business risk and not simply remain as a separate reporting exercise by a separate department;
Climate resilience should be prioritised – as it is now affecting very specific operations (various industry-specific operations that are exposed to externalities such as water scarcity, changing weather patterns, emissions, energy intensity, sourcing, etc.)

2. Greater ownership and accountability

ESG performance management should be held at the highest leadership levels with direct responsibility at the CEO level but with actions at facilities levels.
Investor relations (IR) teams would benefit from greater ESG understanding and sustainability teams should work closely with IR teams
Move away from generic descriptions of corporate commitment statements to specific actions that are industry/ business/ company specific

3. Consider more serious target-setting exercises, including science-based targets

Most of the traditional targets set by Asian disclosers are conservative, and are known to be likely achievable. There is a need for a more robust and a transparent process as to how they are set as well as how they are managed.
Responsible business growth can only happen when science-based targets are put in place to better mitigate environmental impacts that come with aggressive business expansion.
Science-based targets are not simply about negative impact reduction and mitigation – they should be used as opportunities to decrease costs and help create innovative business solutions.

To find out more about Hong Kong and South East Asia performance on CDP, download the report.