Hong Kong Exchanges and Clearing Ltd. (HKEx, 00388.HK) should use a consultation opportunity on corporate social responsibility (CSR) to upgrade the recommended guidelines for listed companies and put in place “comply-or-explain” standards, an industry expert said.
Richard Welford, founder and chairman of CSR Asia, an agency that provides advisory services on sustainable business practices, said although many top firms have complied with the existing CSR guidelines, some are still struggling to find their way.
That is the reason why the local stock exchange has set lower requirements based on suggested guidelines three years ago and allowed companies some leeway, he said, according to the Hong Kong Economic Journal.
Authorities should now seek to tighten the requirements progressively, Welford was quoted as saying.
According to the report, about 80 percent of the constituent firms of the Hang Seng Index have fully complied with or have even outdone the guidelines that govern the whole management process of corporate social responsibility activities.
Many of the remaining companies, however, still find it difficult to launch their initiatives.
The guidelines were focused on four areas, namely the quality of working environment, environmental protection, operational practices and community involvement.
Each area was sub-categorized into three levels, dealing with different aspects, general disclosure recommendations and key performance indicators.
Since the early 1990s, Welford has been calling for auditing and reporting methods that are based on social impact.
According to Welford’s observation, there are three main misconceptions about how listed companies should comply with CSR reporting requirements. The misconceptions are that only big companies need to do it, and that firms should report all categories in detail. And the last one: mixing up philanthropy and corporate social responsibility.
In fact, smaller firms ought to report their activities on the corporate social responsibility front, as institutional investors are increasingly looking for such disclosures, said Welford, adding that companies can report such activities according to their circumstances. Companies can actually make profits by strategically formulating policies for corporate social responsibility, he said.
Welford suggested the incorporation of ‘diversion and inclusion elements’ into the consultation on the reform of existing corporate social responsibility frameworks, bringing in aspects such as the number of women directors on the board.
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