As large enterprises integrate environmental protection, social responsibility and corporate governance (ESG) into businesses, SMEs upstream in the supply chain need to follow suit and fully implement ESG.
The Hong Kong Trade Development Council (HKTDC) and Business Environment Council (BEC) recently held an ESG workshop to discuss ESG implementation by HR and administrative management.
Vivian Yeung, BEC’s Director of Environmental, Social and Governance, said the Taskforce on Climate-related Financial Disclosure recommendation (TCFD) was an ESG performance disclosure standard, which included climate-related risks.
She gave power utility CLP as an example of human-resource related ESG policies. The firm disclosed information, such as the number of employees, hiring routes, gender, age distribution and turnover rate.
CLP also disclosed the group’s safety performance, such as fatalities and work-related injuries, including data disclosed by contractors. She suggested SMEs should establish and maintain relevant databases in the same way as large enterprises did, and be prepared to provide relevant information at any time to respond to inquiries from large enterprises.
Human resources and administrative departments could deepen ESG practices. As an example, a company donated 50 computers to those in need. In addition to releasing ESG reports, a firm could instil the circular economy concept in employees, such as organising a one-day guided tour of the Eco Park or send staff on courses related to circular economy.
Human resources and administrative departments could also draw up a shared value statement for the company. Ms Yeung said such tasks used to be described as “corporate social responsibility” (CSR) and included donating mooncakes to the elderly.
During the COVID-19 pandemic in 2020, New World Group invested in setting up a mask production line in Tuen Mun, providing employment and bringing business to raw-material suppliers. Some of the masks produced were given to employees and the elderly, ensuring employees could go to work safely.
Turning to diversity, inclusion and equity, HKEX requires company boards to be filled by people of different gender, and companies must also take race and gender into account when recruiting, including trying to balance the men to women ratio when selecting interview applicants and ensuring equal opportunities for people with disabilities.
Human resources and administrative departments could also look at making offices sustainable, such as by using renewable energy, district air-conditioning, LED lighting, high-efficiency water taps, recyclable and low-carbon emission materials.
Facing the uncertain external economy, many large enterprises had postponed ESG implementation to preserve funds, so SMEs had room to make better preparations. Investor, client and regulatory pressure meant enterprises had to move ahead, however. Firms should set up ESG committees and appoint an ESG team leader and draw up achievable goals and formulate ESG-related policies.
Supply chain tips
The BEC said companies could do sustainability audit of their supply chain and set goals to rectify shortcomings. They could also address product design, adopting lifetime-sustainable materials, waste reduction and ethical sourcing. Enterprises needed to pay attention to compliance requirements in destination countries, possibly applying for globally recognised carbon footprint certification. Green logistics with environmentally friendly warehousing and electric vehicles, consolidated shipping container space and using alternative transport methods also needed attention.
Exporters should also reduce packaging and use sustainable materials.