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2024 Hong Kong Industries’ ESG Initiatives, Trends and Related Policy Suggestions

With the sustainable development becoming an international trend, an increasing number of Hong Kong enterprises are paying attention to Environmental, Social, and Governance (ESG). The Hong Kong Brand Development Council in April 2024 conducted a study on selected participating companies (212 valid samples) under the CMA “ESG Pledge” Scheme, supplemented by a “Survey on ESG Aspiration of Hong Kong Enterprises” through a built-in questionnaire (with 144 companies responding), with an aim to reveal the current status and trends of ESG development among Hong Kong enterprises. The main findings are as follows:

 

  1. The study found that most companies did not solely focus on one aspect when determining their key work directions for ESG implementation in the coming year. Instead, they tended to adopt a multifaceted approach, with an average of 8 to 10 improvement or enhancement measures being implemented simultaneously in each of the three areas of E, S, and G. However, the current hotspots of ESG implementation tend to concentrate on the S and G areas. Among the “Top Ten” popular measures adopted by nearly two-thirds of the enterprises, five belong to S and three belong to G.
  2. Among the 144 companies responding to the “Survey on ESG Aspiration of Hong Kong Enterprises”, 88.2% indicated that their concern over ESG had “increased” or “significantly increased” compared with the previous year, and 75.7% reported increased investment in the ESG field.
  3. The distribution of ESG resource investment planned by the responding companies in the coming year shows a barbell-shaped pattern with the lion share (averaging 41%) going to E, whereas S accounts for 24.5% and G takes up 34%. This allocation pattern might suggest that improvement measures in the S area tend to be more cost-effective.
  4. The respondents strongly agreed that implementing ESG can bring multiple positive effects to the company. Along with “Benefit Dimension” factors (such as expanding business opportunities, bringing economic benefits, and saving operating costs), ESG would add value to a company’s business philosophy and brand image, resulting in more significant “Value Dimension” benefits.
  5. The responding companies generally hope that the Government and social organisations can provide comprehensive support measures to facilitate the implementation of ESG in the industries. Apart from general favourable policies and financial incentives, support measures related to “standard & rules” and “skills & education” are of essential importance. The former includes setting ESG standards, organising recognition schemes, developing professional support services, and accelerating relevant legislation, while the latter includes ESG training and information distribution, public education, and talent cultivation.

 

As pointed out by the research team, with various sectors of society having enthusiastically pursued ESG, a favourable atmosphere has been created to urge local companies especially SMEs to embrace ESG. Drawing on local experiences, companies should approach ESG from multiple aspects, striving to make efforts in all three areas of E, S, and G. But given that that S and G are “emerging” areas with pressing need for improvement, SMEs with limited resources may focus their efforts on these two arenas, especially social responsibility. At the same time, the industry may consider an “ESG + Hong Kong Brand” strategy, leveraging the positive spillover effects of ESG activities to enhance their brand values.

 

Currently, the development of ESG in Hong Kong is still in its early stage, and government’s guidance and support are crucial. Apart from providing fiscal and tax incentives, the Hong Kong SAR Government should also press ahead with both ESG “standard-building” and “capacity-building”. From another perspective, Hong Kong should strive to establish a regional leading position in ESG standards and capabilities, thereby unleashing “new-quality productive forces” through “ESG × Hong Kong services” and opening up new dimensions for the high-quality development in Mainland China with “Hong Kong standards”.

 

Table 1: Suggestion on the Strategies and Policies for Promoting Hong Kong Enterprises’ ESG Development

 

Strategy/Policy Recommendations

For Enterprise
  • With various industries and sectors of society having enthusiastically pursued ESG, a favourable atmosphere has been created for the adoption of this new business concept in Hong Kong. This also plays the role of “push factor” to urge local companies especially SMEs to embrace ESG as a “soft power” that helps them gain an edge in market competition.
  • Implementing ESG can enhance business efficiency and strengthen brand value and image. The industry may consider an “ESG + Hong Kong Brand” strategy, promoting “profitability” through “heartfelt” efforts and leveraging the positive spillover effects and natural affinity of ESG activities to enhance their brand values and stimulate stronger “new-quality brand power”.
  • Companies should adopt a multi-faceted and strategic approach to implementing ESG; in addition to exerting efforts in the three areas of E, S, and G, it is also important to view ESG as a new set of values and a benchmark for corporate culture, integrating it thoroughly into every aspect of business strategies and operations.
  • Small and medium-sized enterprises, limited by resources, can currently focus their efforts particularly on S and G, especially on S. They can also consider caring for employees and strengthening internal systems as a quick and effective starting point to enhance their ESG performance.

For Government
  • When promoting environmental policies, the Government can elevate the promotional exercise to the level of ESG, which would help to achieve consensus and gain support from both the industry and the public, thereby increasing the social acceptance of these policies.
  • Government’s guidance and support are essential to the ESG development in Hong Kong. A dedicated government unit should be appointed to coordinate ESG development and carry out cross-departmental policy coordination.
  • The Government should consider providing financial incentive to stimulate the industries’ ESG initiatives, especially through tax deductions and subsidies. For example, it can provide funding support to SMEs in the form of matching funds for ESG performance enhancement projects through the Environment and Conservation Fund (ECF) or by establishing a dedicated funding scheme similar to the Cleaner Production Partnership Programme (CPPP).
  • Apart from providing fiscal incentives, the Government should also press ahead with both ESG “standard-building” and “capacity-building”:
  • Supporting organisations like chambers of commerce to conduct ESG research, training, and promotion activities.
  • Promoting synergy and co-operation among the government, business, academia and research institutes, and as to take the lead in establishing ESG-related auditing, certification mechanism, and service systems in Hong Kong, especially carbon audit and green labels at the product level.
  • Striving to establish a regional leading position in ESG standards and capabilities, thereby unleashing “new-quality productive forces” through the combination of “ESG × Hong Kong services”. This would help foster new business models for Hong Kong’s professional service industry on the one hand, while opening up new dimensions for the high-quality development in the Greater Bay Area and Mainland China with “Hong Kong standards” on the other hand.


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