PolyU announces the 2nd Hong Kong Business Sustainability Index

The Sustainability Management Research Centre (SMRC) in the Department of Management and Marketing at The Hong Kong Polytechnic University (PolyU) has announced the results of the 2nd Hong Kong Business Sustainability Index (HKBSI) 29 December 2016. Overall average score is up 9.5% and top 20 companies up 20.2%

With the support of their strategic partners of The Hong Kong Council of Social Service (HKCSS) and the Hong Kong Productivity Council (HKPC), SMRC of PolyU announces the result of the 2nd HKBSI. The overall average score of the 50constituent companies of the Hang Seng Index (HSI) in the 2nd HKBSI was 45.73 (out of 100 points), an increase of 9.53% compared to that of the 1st HKBSI launched in December 2015. The average score of the top 20 Index companies has recorded 68.82 points, up 20.21% from that of the last year.

HKBSI aims at encouraging listed companies in the Hong Kong Stock Exchange to adopt corporate social responsibility (CSR) as a progressive business model for them to achieve business sustainability. Fifty HSI constituent companies as at 6 June 2016 were invited to complete an online assessment questionnaire concerning their CSR performance for the year ended in 2014/15, based on publicly available information. SMRC assessed the performance of each company in three major areas, namely CSR values, CSR process (comprising CSR management and practices) and CSR impact, as well as the company's contributions to economic, social and environmental sustainability. As the Technical Partner of the project, SGS conducted sample check and verification of the information provided by individual companies.

Professor Carlos Lo, Director of SMRC, explained that HKBSI is using the unique "Values - Process - Impact" (VPI) assessment model, which was developed by SMRC and launched last year. While the overall average score of the fifty HSI constituents in this round was 45.73 (out of 100 points), the standard deviation was 22.3, reflecting a huge gap between the top and bottom performers.

For the top 20 HKBSI companies, the mean score is 68.82 points in this compilation, a significant improvement of 20.21% in comparison with that of the 1st HKBSI, which was compiled based on the companies' 2013 data. In particular, there are 2 companies standing out, which have achieved over 80 points this year, comparable to international standard. In additional, a total of 15 companies have scored over 60 points, whereas only 8 companies achieved this similar rank last year.

Professor Lo added that the overall average scores for "Values" and "Process-management" remain stable compared to last year. In the "Process-practice" aspect which reported 51.71 points, there was a significant improvement of 38.5%, in comparison with that of the last year (37.34 points). Similar to the last year, "Impact" was still the weakest aspect, with an average score of 28.51 points only.

The results of the 2nd HKBSI assessed under the VPI model reflects that more companies have been increasingly concerned about business sustainability and hence have committed diligent effort in implementing CSR practices in this round of assessment. Professor Lo attributed the increased efforts in CSR practices among the HKBSI companies to the growing local and international institutional pressure, including the new ESG reporting requirements announced by Hong Kong Stock Exchange. The increase in the CSR awareness in society and among consumers have also posed additional pressure to these listed companies, which have been increasingly open to public scrutiny. The growing popularity of corporate sustainability indexes and related CSR awards in the market, such as the Hang Seng Corporate Sustainability Index and the Hong Kong Corporate Citizenship Program, may have made leading companies realize that CSR is no longer a public relations activity, instead, it is strategically important to the company's long-term business sustainability. In addition, the survey questionnaire of HKBSI has been refined and enriched this year with specific additional questions aiming at capturing companies' CSR performance and hence the level of business sustainability more accurately.

Commenting on the weakest area under the "Impact" of the VPI model, Professor Lo pointed out that many companies have yet to effectively measure the impact of their CSR practices and activities. He hopes that through the HKBSI's online reporting platform, individual companies can conduct a comprehensive and holistic assessment of their CSR performance with a view to seek for continuous improvement in their CSR practices and impacts.

SMRC will compile the HKBSI and announce the results on an annual basis in order to inform timely both the local and the international business communities the on-going development and performance of the Heng Seng Index's constituent companies on business sustainability.