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Hong Kong English:
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How to draft an ESG (Environmental, Social and Governance) Report

21/4/2015

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The Hong Kong Stock Exchange is now asking Hong Kong listed companies to issue annual Environmental, Social and Governance Reports (ESG Reports) as part of their reporting responsibilities. These new reports are in addition to the standard Annual Report and Corporate Governance Reports that listed companies are required to issue annually.
We have handled a number of these ESG Reports for clients recently, and find there is widespread uncertainty about the scope and purpose of an ESG Report among listed companies and agencies. In particular, companies who are used to focusing on financial performance and financial controls are often at a loss to understand what exactly they should be writing about in their ESG Report. 
The Hong Kong Stock Exchange has issued an document outlining what should be included in an ESG Report; it is Appendix 27 of the Listing Rules and can be downloaded here: https://www.hkex.com.hk/eng/rulesreg/listrules/mbrules/documents/appendix_27.pdf. However the document is not that easy to take in at a glance, and includes more information than is relevant for many companies. The important thing to note about it is that it requires reporting on four main aspects of a company’s operations, which can be summarised as follows;
i) how it treats its staff
ii) how it treats the environment
iii) how it ensures that it operates responsibly and ethically (especially towards its customers)
iv) how it engages with the wider community.

Here are three key tips to remember when getting started on drafting an ESG Report. In our experience, many companies get these things wrong right at the start, making the drafting process long, complex and painful.
TIP 1: Don’t be misled by the word ‘Governance’ in the name of this report (i.e. the ‘G’ in ESG). An ESG report is NOT a Corporate Governance Report. The Stock Exchange guidelines clearly state (paragraph 7), “Corporate Governance is not included as it is dealt with separately in Appendix 14 of the Main Board Listing Rules.” The word “governance” in the ESG expression refers to matters other than those covered in the Corporate Governance report. Do not repeat material from your Corporate Governance report in your ESG Report.
TIP 2: Remember that an ESG Report is a *report* on things done, not a statement of values. Readers want hard, concrete data in addition to mission and value statements. By all means write  “We are fully committed to operating in an environmentally friendly manner”, but be aware that a statement like this is NOT GOOD ENOUGH because it says nothing about what your company is actually doing or has done to ensure its operations are environmentally friendly. When talking about environmental matters, ESG Reports should include detailed mention of specific initiatives, activities, upgrades, and events during the year that had a bearing on the company’s relationship with the environment. Similarly, the part of the report on community involvement should include specific examples of charities supported, donations given, volunteer activities organised, and so forth.
TIP 3: Develop — or get an outside provider to develop for you — a comprehensive ESG questionnaire, based on Appendix 27, that will enable you to gather all the information you need for the report quickly and easily. The questionnaire should be tailored so that it asks questions appropriate specifically to your company and its business. Here for example is an extract from an ESG questionnaire covering community involvement: 
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Finally, if you are a company or agency looking for extra help in drafting an ESG Report, remember that at Cygnet we have plenty of expertise in this field. We can help by preparing an ESG questionnaire tailored for your company, offering advice on your draft report, or even writing the entire report on your behalf. Contact us for a free, no obligation quote.
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    This blog arises from keeping an eye on English in Hong Kong. I often use signs, notices and advertisements that I see as starting points to write about English issues that commonly challenge Hong Kong writers. 

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