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P&G Completes Acquisition of the Consumer Health Business of Merck KGaA, Darmstadt, Germany

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Today, the Procter & Gamble Company (NYSE: PG) announced the successful completion of its acquisition of the Consumer Health business of Merck KGaA, Darmstadt, Germany. This move improves P&Gs OTC geographic scale, brand portfolio and category footprint in the vast majority of the worlds top 15 OTC markets.

With this acquisition, former Merck KGaA, Darmstadt, Germany, Consumer Health President & CEO, Uta Kemmerich-Keil, will be joining P&G as leader of P&G Personal Healthcare International, an organization encompassing the newly combined consumer (or OTC) health care businesses in Europe, Latin America, and Asia/IMEA (India, Middle East and Africa).

Today marks the beginning of an exciting new era for P&G Personal Health Care, as we now move forward to realize the great potential of our combined businesses, said Tom Finn, President, P&G Global Personal Health Care. In bringing Merck KGaA, Darmstadt, Germany, Consumer Health into P&G, we have created a new health care organization that is well-positioned to enable consumers to live longer, healthier and more vibrant lives as well as drive further sales and profit growth for P&G. We are pleased to welcome the strong leadership of Uta Kemmerich-Keil into the P&G family, along with the thousands of talented people of Merck KGaA, Darmstadt, Germany, Consumer Health who are transferring to P&G.

P&Gs global scale and strategic interest in the health and well-being of consumers provide an excellent basis for growth and expansion, and we wish our colleagues all the best for the future, said Beln Garijo, Member of the Executive Board of Merck KGaA, Darmstadt, Germany, and CEO Healthcare. This transaction marks a further step in our companys strategic focus on science and technology.

These new brands provide a broad range of OTC products to relieve muscle, joint and back pain, colds and headaches as well as products for supporting physical activity and mobility. This acquisition also provides P&G with strong health care commercial and supply capabilities, deep technical mastery and proven consumer health care leadership that will complement P&G’s existing consumer health care capabilities and brands.

As a result of the transaction, the combined entity will have an expanded position in the largest, fastest-growing segments within the consumer health market.

Forward-Looking Statements

Certain statements in this release or presentation, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words believe, project, expect, anticipate, estimate, intend, strategy, future, opportunity, plan, may, should, will, would, will be, will continue, will likely result, and similar expressions. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise.

Risks and uncertainties to which our forward-looking statements are subject include, without limitation: (1) the ability to successfully manage global financial risks, including foreign currency fluctuations, currency exchange or pricing controls and localized volatility; (2) the ability to successfully manage local, regional or global economic volatility, including reduced market growth rates, and to generate sufficient income and cash flow to allow the Company to affect the expected share repurchases and dividend payments; (3) the ability to manage disruptions in credit markets or changes to our credit rating; (4) the ability to maintain key manufacturing and supply arrangements (including execution of supply chain optimizations and sole supplier and sole manufacturing plant arrangements) and to manage disruption of business due to factors outside of our control, such as natural disasters and acts of war or terrorism; (5) the ability to successfully manage cost fluctuations and pressures, including prices of commodities and raw materials, and costs of labor, transportation, energy, pension and healthcare; (6) the ability to stay on the leading edge of innovation, obtain necessary intellectual property protections and successfully respond to changing consumer habits and technological advances attained by, and patents granted to, competitors; (7) the ability to compete with our local and global competitors in new and existing sales channels, including by successfully responding to competitive factors such as prices, promotional incentives and trade terms for products; (8) the ability to manage and maintain key customer relationships; (9) the ability to protect our reputation and brand equity by successfully managing real or perceived issues, including concerns about safety, quality, ingredients, efficacy or similar matters that may arise; (10) the ability to successfully manage the financial, legal, reputational and operational risk associated with third-party relationships, such as our suppliers, distributors, contractors and external business partners; (11) the ability to rely on and maintain key company and third party information technology systems, networks and services, and maintain the security and functionality of such systems, networks and services and the data contained therein; (12) the ability to successfully manage uncertainties related to changing political conditions (including the United Kingdoms decision to leave the European Union) and potential implications such as exchange rate fluctuations and market contraction; (13) the ability to successfully manage regulatory and legal requirements and matters (including, without limitation, those laws and regulations involving product liability, intellectual property, antitrust, data protection, tax, environmental, and accounting and financial reporting) and to resolve pending matters within current estimates; (14) the ability to manage changes in applicable tax laws and regulations including maintaining our intended tax treatment of divestiture transactions; (15) the ability to successfully manage our ongoing acquisition, divestiture and joint venture activities, in each case to achieve the Companys overall business strategy and financial objectives, without impacting the delivery of base business objectives; and (16) the ability to successfully achieve productivity improvements and cost savings and manage ongoing organizational changes, while successfully identifying, developing and retaining key employees, including in key growth markets where the availability of skilled or experienced employees may be limited. For additional information concerning factors that could cause actual results and events to differ materially from those projected herein, please refer to our most recent 10-K, 10-Q and 8-K reports.

About Procter & Gamble

P&G serves consumers around the world with one of the strongest portfolios of trusted, quality, leadership brands, including Always, Ambi Pur, Ariel, Bounty, Charmin, Crest, Dawn, Downy, Fairy, Febreze, Gain, Gillette, Head & Shoulders, Lenor, Olay, Oral-B, Pampers, Pantene, SK-II, Tide, Vicks, and Whisper. The P&G community includes operations in approximately 70 countries worldwide. Please visit https://www.pg.com/ for the latest news and information about P&G and its brands.

P&G Media Contacts:
Heather
Huff, [email protected], +1-513-622-1810
Damon
Jones, [email protected],
+1-513-983-0190

P&G Investor Relations Contact:
John
Chevalier, +1-513-983-9974

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Marine Stewardship Council: Assortment of top chefs combine for sustainable seafood cookbook

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The collaboration aims to encourage shoppers to make the best environmental choice when buying the seafood they love

 

SINGAPORE – Media OutReach – 14 January 2021 – The Marine Stewardship Council (MSC) — an environmental not-for-profit — is launching its first sustainable seafood cookbook in collaboration with top sensational chefs from across the globe. It is part of an initiative to encourage and inspire shoppers to commit to making the best environmental choice when buying the seafood they love this year, and beyond.

 

The Blue Cookbook is a digital collection of delicious recipes featuring a variety of species and styles which appeal to a range of preferences and tastes. Options include seared king prawns, haddock and broccoli bake, hake with cantonese glaze and steamed halibut with rice wine. Also contained within its pages is the environmental story behind the fish we eat, showing consumers how their actions can have a big ripple effect on ocean health.

 

Some of the contributors to the project are culinary director Lucas Glanville from Grand Hyatt Singapore and Executive chef Otto Goh from the Shangri-La Hotel Group in China.  All those involved are strong advocates for sustainable fishing and responsible sourcing.

 

Anne Gabriel, Programme Director for Oceania and Singapore at the Marine Stewardship Council said: “A new year has arrived, and with it a chance to make better choices for ourselves, our planet and our oceans. We’ve teamed up with incredible chefs to launch a unique sustainable seafood cookbook which features delicious, healthy and future-friendly recipes from across the globe. By choosing to buy from sustainable sources, everyone can help make sure the seafood we love can be enjoyed for years to come.”

 

Chef Lucas Glanville, who has contributed a Seared King Prawns said: Singapore diners and consumers are ready to embrace sustainable seafood as a way of life. The people are savvy, and the market is articulate about what is good for the environment. Our hotel has seen amazing growth in business due to our sustainable philosophy. This is all thanks to the support of our diners. We are all accountable for the future, we should do our part to protect the oceans for our future generation.”

 

The ocean is a vital part of human life on our planet. It provides a major source of protein to more than 3 billion people1, and millions rely on fisheries for their livelihood2. However, the oceans are under threat – 34% of global fisheries have been fished beyond sustainable limits, with this trend continuing to worsen slightly3.

 

For more than 20 years, the MSC has been tackling the problem of overfishing by incentivizing people to change their behaviour when buying seafood, through its certification and labelling program. Its international collaborative of partners including scientists, NGOs, fisheries, seafood companies, retailers, and restaurants work hand in hand to ensure seafood is wild, delicious, and above all else, sustainable.

 

NOTES TO EDITORS

Assets:

References:

1 UN FAO — State of the World’s Fisheries and Agriculture Report 2020 page 67

2 UN FAO — State of the World’s Fisheries and Agriculture Report 2020 page 95

3 UN FAO — State of the World’s Fisheries and Agriculture Report 2020 page 7

About the Marine Stewardship Council:

The MSC ecolabel on a seafood product means it is fully traceable to a wild-catch fishery which has been independently certified to the MSC’s science-based standard for sustainable fishing. Fisheries representing more than 17% of the world’s wild marine catch are engaged in its certification programme and more than 18,000 different MSC labelled products are available on shelves across the globe*. (*figures correct as of 31 March 2020). For more information visit msc.org or visit our social media pages:

Twitter: [View Image]https://twitter.com/MSCecolabel?lang=en

Instagram: https://www.instagram.com/mscecolabel_sg/

Facebook: [View Image]https://www.facebook.com/MSCinSingapore

LinkedIn: https://www.linkedin.com/company/361644/admin/

YouTube: [View Image]https://www.youtube.com/channel/UCOyikbSTLVihdPaJ1CxeqRQ?view_as=subscriber

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CUHK Business School Research Finds People Adapt and Grow More Conscientious When Promoted to Supervisory Roles at Work

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HONG KONG SAR – Media OutReach – 14 January 2021 – “It’s not who I am underneath, it’s what I do that defines me,” so says the titular hero from the 2005 blockbuster, Batman Begins, starring Christian Bale as the billionaire caped crusader. Instead of the hero Batman, a group of academics were inspired by what is probably one of the more profound lines in modern cinema and sought to find out whether people, as the quote suggests, do shape fundamentally who they are.

 

Specifically, it led Wendong Li, Associate Professor at the Department of Management at The Chinese University of Hong Kong (CUHK) Business School, to team up with seven other academics to examine whether taking on a leadership role — along with the added job responsibilities — can actually change people’s personality traits.

 

Prof. Li and the other researchers involved in the study, Can Becoming a Leader Change Your Personality? An Investigation With Two Longitudinal Studies From a Role-Based Perspective, hoped to find evidence that, rather than personality traits remaining relatively stable as traditionally assumed, they could change and develop during a person’s adult years.

 

“One of the crucial factors in driving adult personality development is taking on new roles at work,” he says. “As they take on wider responsibilities and play more important roles in organisations, novice leaders are expected to be more conscientious than when they were employees — more efficient, organised, vigilant, achievement-oriented, and dependable to subordinates.”

 

“Fulfilling the expectations and responsibilities required by leadership roles also means leaders must deal effectively with uncertainties and changes. Therefore, leaders need to be able to remain calm, and handle negative emotions in response to stress.”

 

The Big Five

The academics looked for changes in two of the so-called “Big Five” personality traits: conscientiousness, the tendency to be dependable, achievement oriented, reliable, organized, and to carry out one’s job or duty well and thoroughly — one of the best predictors of both leadership and job performance — and emotional stability, another desirable trait among leaders, which means a person can remain calm and deal with stressful situations and handle adversity effectively. The other traits in the Big Five are openness to experience, extroversion and agreeableness.

Prof. Li carried out the research alongside Prof. Shuping Li of Hong Kong Polytechnic University, Prof. Jie Feng of Rutgers University, Prof. Mo Wang of University of Florida, Prof. Michael Frese of the Asia School of Business and Leuphana University of Lueneburg, Prof. Chia-Huei Wu of the University of Leeds, as well as CUHK Business School PhD candidate Hong Zhang.

 

They tested their ideas in two studies using publicly available U.S. and Australian databases, which compared the personality development of individuals at different stages over lengthy periods. People were split into a “becoming leaders group”, for employees who were promoted into leadership roles, and a “non-leaders group” for those staff who remained as employee across time.

 

The research found that moving into leadership roles led to an increase in a person’s conscientiousness, and found no significant changes in people’s emotional stability in either study.

 

“The results of the two studies supported our hypotheses regarding the relationship between becoming a leader and the subsequent small, but substantial increases in levels of conscientiousness over time and the mediating effect of changes of job demands,” Prof. Li says.

 

They shed light on what, how and why personality traits change over time after a person takes on a supervisory role, and why the characteristics develop after people take on jobs where they face increased demands.

 

Prof. Li said insights gained from this research will help businesses better manage career development and plan leadership succession — a crucial issue for the sustainability of organisations.

 

“We suggest organisations consider assigning staff with informal leadership roles as a way to encourage them to develop management capabilities,” he says. “This may help them to develop the types of behaviour and traits associated with conscientiousness and prepare them for their future tasks.”

 

“We also encourage organisations to broaden the scope and content of training to include personality development and also focus on more holistic forms of leadership development.”

 

Personality Shifts

One study consisted of 61 people in the becoming leaders group and 128 in the non-leaders group and used U.S. data selected from three different time periods — firstly between 1995 and 1996, then after 10 years and finally after 20 years. The other study comprised 342 people in the leaders group and 675 in the non-leaders group, and used Australian data selected at four-year intervals from 2005, 2009 and 2012.

 

“Consistently, results from both of the studies showed that after becoming leaders, individuals enhanced their levels of conscientiousness and became more dependable, organised and efficient,” Prof. Li says. “For them to carry out these leadership roles successfully over time may lead them to become so used to adopting such behaviours that they become a habit and then ingrained as personality traits.”

 

He says the study could stimulate further research into the idea that “people are both producers and products of social systems”.

 

Earlier studies had examined influences of major life events, such as nailing a first job, marriage, and unemployment on personality development, and the influences of job satisfaction, characteristics, insecurity, income and occupational status. But the latest study extends this line of research by examining personality development after becoming a leader and, more importantly, a change in job demands, Prof. Li says. “Although personality traits are relatively stable, they were also prone to change — even if the transformation is not always dramatic.

 

“Not all people react to a change in the same way and what we discovered in this paper was a general trend. Future research can examine individual differences in the speed, timing, and magnitude of personality changes.”

 

The researchers highlighted two concerns. Firstly, previous research suggests that highly conscientious staff may not be able to adapt well to new environments and will lack the necessary creativity. Secondly, companies may need to provide training to leaders to help them balance the benefits and possible disadvantages — such as a more volatile working environment and reduced flexibility — associated with increases of conscientiousness.

 

The latest research, therefore, has important implications for employees when managing their future careers. “People need to weigh up the benefits and costs of taking on a management role,” Prof. Li says.

 

“Although promotion will lead to them developing greater levels of conscientiousness at work over time, it can also see them become less adaptable and creative. Taking on extra job demands may also increase the levels of stress they face and have a detrimental effect on their wellbeing.”

 

Reference:

Li, W.-D., Li, S., Feng, J. (J.), Wang, M., Zhang, H., Frese, M., & Wu, C.-H. (2020). Can becoming a leader change your personality? An investigation with two longitudinal studies from a role-based perspective. Journal of Applied Psychology. Advance online publication. https://doi.org/10.1037/apl0000808

 

This article was first published in the China Business Knowledge (CBK) website by CUHK Business School: https://bit.ly/38zsriM.

About CUHK Business School

CUHK Business School comprises two schools — Accountancy and Hotel and Tourism Management — and four departments — Decision Sciences and Managerial Economics, Finance, Management and Marketing. Established in Hong Kong in 1963, it is the first business school to offer BBA, MBA and Executive MBA programmes in the region. Today, the School offers 10 undergraduate programmes and 18 graduate programmes including MBA, EMBA, Master, MSc, MPhil and Ph.D.

In the Financial Times Global MBA Ranking 2020, CUHK MBA is ranked 50th. In FT‘s 2020 Executive MBA ranking, CUHK EMBA is ranked 15th in the world. CUHK Business School has the largest number of business alumni (40,000+) among universities/business schools in Hong Kong — many of whom are key business leaders. The School currently has more than 4,800 undergraduate and postgraduate students and Professor Lin Zhou is the Dean of CUHK Business School.

More information is available at http://www.bschool.cuhk.edu.hk or by connecting with CUHK Business School on:

Facebook: [View Image]www.facebook.com/cuhkbschool

Instagram: www.instagram.com/cuhkbusinessschool

LinkedIn: [View Image]http://www.linkedin.com/school/cuhkbusinessschool

WeChat: CUHKBusinessSchool

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BDO Survey: Fourth-year ESG reporting performance survey shows the evolvement in overall ESG involvement of majority listed companies but which remain inadequate to meet the requirements of the Revised Guide

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Listed companies should increase their awareness and take significant steps to enhance their ESG reporting framework to meet the new disclosure requirements and achieve long-term sustainability

 

HONG KONG SAR – Media OutReach – 12 January 2021 – During the fourth year of environmental, social and governance (ESG) reporting survey, improvements have emerged in ESG disclosure in some areas and these are reflected in the fact that the boards of listed companies are increasingly aware of the importance of ESG management. However, the survey results are still far from satisfactory in terms of compliance and quality. In particular, the results of certain areas, such as ESG risk management and materiality assessment, are reduced. In this survey, 7 key findings and 12 recommendations are made which can serve as reference for listed companies to intensify efforts in ESG reporting and practices, as well as achieve long-term sustainability. 

[View Image]

(From Left to Right) Mr. Ricky Cheng, Director and Head of Risk Advisory of BDO, Mr. Clement Chan, Managing Director of Assurance of BDO and Mr. Johnson Kong, Managing Director of Non Assurance of BDO today announced the Fourth-year survey results of “The ESG Reporting Performance of Hong Kong Listed Companies”

Nowadays, ESG continue to gain traction in corporate reporting regimes and in the financial institutions sector from the standpoints of long-term sustainability and responsible investment. Users and investors are demanding an increasingly high quality of ESG information disclosures from listed companies so as to facilitate decisions on investment, interests and values alignment, business partnerships, and joint efforts to overcome global challenges. In particular, with the continuing adverse effects of COVID-19 and the revised HKEx ESG Reporting Guide (“the Revised Guide”) which came into effect on 1 July 2020, priorities have changed and reinforced public commitment to ESG. The ESG reporting regime has been evolving in fulfilling users’ increasing expectations and it is more important to improve ESG disclosure and become aware of the importance of ESG management, which will enable listed companies to prepare better to address ESG issues and risks and meet the disclosure requirements of the Revised Guide. As the world’s fifth largest accountancy network, BDO has always spared no efforts to conduct comprehensive ESG studies to provide useful findings for use by listed companies.

This year, BDO’s Survey entitled “The ESG Reporting Performance of Hong Kong Listed Companies (the Survey) randomly sampled 400 of the most-recent ESG reports published by both Main Board and GEM-listed companies on or before 31 July 2020. Most of the surveyed companies come from the Consumer Discretionary sector (20%), followed by Industrials (17%), Financials (15%), Properties and Construction (11%), Materials (8%), Information Technology (8%), Consumer Staples (5%), Healthcare (5%), Energy (4%), Utilities (3%), Telecommunications (2%), Conglomerates (1%) and Others (1%).

Of the 400 companies surveyed:

  • 60% were small size, 23% were medium size and large companies comprised 17%
  • The boards of listed companies were increasingly aware of the importance of ESG management, with 54% (2019: 34%) of the surveyed companies disclosing information about the board’s oversight over ESG issues and 74% of the Board’s review of companies’ ESG performance against ESG goals and targets

Below is a summary of the key findings of the 2020 Survey compared to the 2019 Survey results:

Survey Area

Key Data Points

2019 Survey

2020 Survey

Increase / Decrease / Maintained

ESG governance

Top level commitment and management

34%

54%

Increase

ESG Committee or personnel

24%

32%

Increase

ESG risk management

28%

26%

Decrease

ESG strategy

36%

48%

Increase

Stakeholder engagement

72%

76%

Increase

Materiality assessment

66%

60%

Decrease

Report assurance by independent third party

3%

5%

Increase

Goals on ESG management

15%

13%

Decrease

Staff career development programme

61%

60%

Maintained

Occupational health and safety training

69%

64%

Decrease

Customer support and services

67%

63%

Decrease

Whistle-blowing system

67%

65%

Decrease

Independent committee on anti-corruption management

23%

16%

Decrease

Adoption of reporting standards/guidelines other than HKEx ESG Reporting Guide

9%

10%

Maintained

Anti-corruption training

37%

17%

Decrease

Table 1: Summary of Key Findings of the Survey on “The Performance of ESG Reporting of Hong Kong Listed Companies 2020”


Boards are increasingly involved in ESG governance

The Survey results showed that 54% (2019: 34%) of the companies disclosed information about the board’s oversight of ESG issues. At the same time, among all the surveyed companies, the boards had gained momentum in disclosing their involvement in monitoring ESG performance and ESG risk management approaches in their preparations to meet the mandatory disclosure requirements of the Revised Guide. Meanwhile, the Survey also found that boards of large companies (76%) tended to put the most effort into overseeing ESG issues. On the disclosure of other ESG governance information in ESG reports, the Survey showed that there was slight improvement in the allocation of dedicated resources to manage ESG issues and formulate ESG strategy, such as disclosing a vision, ESG framework and ESG policy.

Reporting quality does not allow for meaningful comparisons

The Survey found that the information disclosed according to the four reporting principles of the Revised Guide, namely materiality, quantitative, balance and consistency, was inadequate. On disclosure on the quantitative, only 48% of surveyed companies disclosed standards, methodologies, assumptions, calculation tools used, and conversion factors used for reporting data on emissions or energy consumption. Less than 29% of the companies cited any changes made to the calculation methods or key performance indicators (KPIs) that they had used or any other factors that may affect the comparison of information in the report. Furthermore, only 64% of the companies disclosed their reporting boundaries in the report. Among companies that disclosed their reporting boundaries, only 30% explained the method that they used to determine them.

 

Quality of materiality assessment disclosure is reduced

The Survey results showed that 60% (2019: 66%) of the companies disclosed that they had conducted a materiality assessment, while the rest or the remaining 40% did not provide any information about materiality in their ESG reports. Of the 40%, small listed companies were the most likely not to have mentioned a materiality assessment. Among companies that conducted a materiality assessment, disclosed information was often inadequate. Only just over 50% of those companies provided comprehensive descriptions on how the ESG issues had been prioritised and they presented the results through visual aids, such as a materiality map. It is observed that when companies do not disclose adequate information about their materiality assessments, investors may find it difficult to ascertain whether the data being reported are relevant to their investment decisions.

Disclosure of issues related to climate change is limited

Climate change is a new addition to the Revised Guide. Listed companies are now required to disclose their policies on identifying and mitigating any significant climate-related issues that have impacted, or may impact, and the action taken to manage them. The Survey showed that only 12% of companies cited issues related to climate change. Among these companies, it is noted that over half (54%) disclosed the climate-related risks and opportunities that applied to them; and most (83%) reported on measures that they had adopted to mitigate their climate-related risks. The Survey also found that larger companies were more likely to consider climate risks and ways to mitigate them. Among companies that reported on climate change, only 15% referred to The Task Force on Climate-related Financial Disclosure (TCFD) when disclosing information related to climate change. Most of these were large listed companies from the healthcare, financial and telecommunications industries.

Target-setting for environment KPIs is limited

Only 15% of companies set targets for environmental KPIs, and these targets were mainly set by large listed companies. Among these companies, the most common targets set for environmental KPIs were to reduce waste, energy consumption and greenhouse gases (GHGs). The companies adopted a variety of approaches to setting the targets for their environmental KPIs while the most common ones were to align KPI targets either with the company’s visions and goals (33%) or with national or regional laws and regulations (40%).


Recognition of UN SDGs on climate action is stronger

According to the survey results, there is a growing trend of listed companies recognising the United Nations’ Sustainable Development Goals (UN SDGs). This year, more of the listed companies (2020: 8% vs 2019: 6%) identified SDGs that were relevant to their business operations and strategic goals.


Independent assurance on ESG reporting remains steady

The Revised Guide recommends that listed companies may seek independent assurance on their ESG reports. However, the Survey pointed out that independent assurance was obtained for only 5% of the ESG reports published by the companies. There were no significant changes in these results when compared with the results in the previous two years. Among the companies that sought independent assurance for their ESG reports, 56% obtained assurance for the whole report.

BDO recommendations:

Integrate ESG into the enterprise risk-management framework

In the context of risk management, ESG risks should not be dealt with separately but must be integrated into a company’s enterprise risk management (ERM) framework by referring to widely recognised best practice. The ERM framework should include robust mechanisms to identify and assess the impact of ESG risks that may influence the company’s strategy and objectives. At the same time, by considering the challenges and response, the company may identify new opportunities from predicted trends.

Build capacity on climate change

Given that climate change may affect a company through physical and transition risks, companies may need to understand the implications of these risks on financial performance. Climate change is associated with specialist knowledge and complex technical terms. Therefore, the company’s board or management may need to rely on the insights, knowledge or external expertise of sustainability professionals in order to assess the impact of climate risks during the process of identifying, assessing, prioritising and mitigating climate risks and other issues. Companies may set up a dedicated committee or working group to steer climate-change management. A climate change committee aims to secure board-level oversight of strategic climate-related risk and opportunity management. A climate change working group can build the company’s capability relating to climate risk and accelerate the integration of climate considerations into the ERM framework.

Enhance reporting quality

To increase the reliability and accuracy of the content, any changes should be explicitly explained in the ESG report. In addition to the Revised Guide, companies may refer to the Global Reporting Initiative standards for the relevant reporting principles to enhance the quality of their reporting. It is also important for companies to have a consistent and well-defined approach to considering the scope and including appropriate material operations or entities in the ESG report. Companies with a more complex structure may apply their own judgment criteria to define the reporting boundaries.

Consider industry factors

Disclosing factors that are related to a particular industry could show investors that these industry-specific ESG concerns have been adequately considered and addressed by the company. Listed companies may refer to some global reporting frameworks such as Global Reporting Initiative Standards (GRI) and Sustainability Accounting Standards Board Standards (SASB). These frameworks provide industry-specific guidelines on reporting a full range of economic and ESG impacts of operation within a particular industry.

Linking stakeholder engagement feedback with materiality assessment

It is recommended that companies’ response should be disclosed alongside stakeholder engagement results so readers may know whether the concerns raised by stakeholders are material to the company and whether strategies or measures have been formulated to address them.

Elaborate the impact of climate change on the business model

Companies are recommended to provide specific details on how climate change may affect various business model components from a strategic point of view, in order to enhance their development of a governance structure to manage climate change risks and to make changes to their business model as well as their strategic goals and objectives with a view to achieve long-term sustainability.

Specify the nature of climate risks that may impact the business

Listed companies should disclose, for example, the kinds of extreme climate events that would be highly likely to impact the business and what critical business processes or assets would be affected by these events. Listed companies should also disclose whether stakeholders that they rely heavily on, such as customers or suppliers, would also be affected by certain climate risks.

Alignment with the goals of the Paris Agreement

While the presence of environmental targets enables companies to gauge their environmental performance and reduce their impact on operations at an expected level, companies are recommended to align their strategic goals with the goals of the Paris Agreement so they can achieve net-zero carbon emission. Companies may refer to some international methodologies when setting targets for their environmental KPIs such as Science Based Targets.

Enhancing the quality of environmental impact disclosure

To give investors a comprehensive overview of the company’s environmental footprint, companies should disclose more background information about the environmental KPIs in their ESG report and how KPIs are related to their business operations. Companies may consider disclosing information, such as the sources of each environmental KPI, environmental policies and a roadmap to reduce the impact and long-term and short-term reduction initiatives and action plans to achieve the targets.

Expanding disclosure to include Scope 3 emissions

The Revised Guide requires listed companies to disclose direct and energy-indirect GHGs, for the purpose of transparency and completeness in presenting the carbon footprint for investors’ understanding. It is recommended that listed companies may also consider disclosing Scope 3 emissions. There are up to 15 types of Scope 3 emissions listed in the Greenhouse Gas Protocol. Listed companies may disclose information about the types of emissions that are relevant to their individual situation.

Integrating UN SDGs to create more positive outcomes

There is a view that companies may benefit from integrating UN SDGs into their business strategy and operations. Thus, when undertaking SDG reporting, companies may consider strategies such as identifying and understanding the impact of all the SDGs and targets on the business portfolio, aligning SDGs with the strategic targets that may have a critical impact on business operations and may require significant changes to be made and prioritising the SDGs and targets.

Ensuring Report Credibility by External Assurance

To ensure the credibility and transparency of disclosed ESG data, listed companies should start by obtaining independent assurance on certain key ESG information, such as their environmental or social KPIs, instead of the content of the whole ESG report. Companies may choose to have the whole ESG report assured when comfortable and accumulating adequate experience in ESG reporting.

Clement Chan, Managing Director of Assurance of BDO, said, “An ESG report is a useful tool to communicate to its stakeholders on organisation’s ESG performance and progress in addressing operating challenges including climate change. Also, since the COVID-19 pandemic has caused unprecedented disruption to economies and financial systems, we believe that green finance is the key to rebuild the economy on a more equitable foundation as recovery is urgently needed. In this report, we see that companies have made noticeable improvements in involving ESG strategy. But still, our Survey has found that there were limited information disclosed to the public which discourage investors and users with concerns of late over companies’ sustainability development. Listed companies should now intensify efforts to enhance the disclosure of ESG information to meet stakeholders’ information and investment needs, as well as to meet the requirements of the Revised Guide by HKEx.”

Johnson Kong, Managing Director of Non Assurance of BDO, remarked, “There is no doubt that green finance is getting more prominent amid the increasing awareness in the investment community, and ESG are rising on the rise across the world, especially in the healthcare and information technology realms since the outbreak of Covid-19. Thus, the transparency and accuracy of ESG report are increasingly important to Investors and capital markets institutions while they factor ESG performance into investment decisions as they often consider ESG-related information to determine whether a company is adequately managing risks, not only to derive reputational benefits. However, our Survey has showed that only a limited number of companies has reported climate-related issues with restricted information disclosed. For effective management of ESG issues, we are eager to see a higher engagement from companies on ESG reporting by elaborating the topics on the business model”.

Ricky Cheng, Director and Head of Risk Advisory of BDO, said, “We are pleased to see that there was improvement in ESG reporting for most listed companies. However, the results are still not satisfactory. Since the HKEx launched the Revised Guide and effect on 1 July 2020, listed companies are required to meet higher standards of ESG reporting to fulfil the integrated ESG component. Users of ESG reports are focusing on relevant and material ESG issues affecting the business operations of an organisation. They would also like to see the board of an organisation play a vital role in driving its ESG strategy and in ensuring the integration of ESG issues into the enterprise risk management framework, as well as the functions across an organisation. We hope our suggestions can provide more specific guidelines and directions for companies to improve their ESG reporting, with the ultimate aim to boost their investment value and inspire investor confidence”.

About BDO

BDO’s global organisation extends across 167 countries and territories, with more than 91,000 professionals working out of over 1,600 offices — and they’re towards one goal: to provide our clients with exceptional service. BDO was established in Hong Kong in 1981 and is committed to facilitating the growth of businesses by advising the people behind them. BDO in Hong Kong provides an extensive range of professional services including assurance services, business services and outsourcing, risk advisory services, specialist advisory services and tax services. For more details, visit www.bdo.com.hk.

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