HKICPA’s Awards commend the CG and ESG performances of awardees, while urging continuing efforts to uphold high-quality governance and disclosure standards in Hong Kong

The Hong Kong Institute of Certified Public Accountants (HKICPA) today announced the winners of the 25^th Best Corporate Governance and ESG Awards (Awards), with a record number of 38 listed companies and public sector organizations receiving awards this year.

Mr. Roy Leung, HKICPA President and chair of the judging panel of the Best Corporate Governance and ESG Awards 2024, said, “We are pleased to see the continuing enhancement in the quality of corporate governance (CG) and environmental, social and governance (ESG) standards in Hong Kong. In view of this, the judging panel is able to present awards to a record number of 38 companies and organizations, up from 34 in 2023 and 27 in 2022, with five first-time awardees and also three new winners of our top-level awards, the Most Sustainable Companies and Organizations (MSCO) Awards. We applaud all the winners, and commend the MSCO awardees, which are taking clear steps to integrate CG and ESG considerations into their business values, strategies and operations.”

“Committing to the adoption of CG and ESG best practices is a continuous journey; hence there is always scope for further improvement, for example, in areas such as enhancing governance and disclosure in relation to the management of emerging risks, and incorporating ESG considerations into different aspects of a business. We hope that the issuance by the HKICPA of Hong Kong sustainability disclosure standards, convergent with international standards, in the near future, will give further impetus to the process of integration. Given the growing importance of data protection and cybersecurity to companies and organizations, and their stakeholders, one of the new areas considered by the review and judging panels of the Awards this year is information technology (IT) and cybersecurity governance.” Mr. Leung added.

Corporate Governance

There have been considerable advances in CG standards over the two decades plus of the Awards. At the same time judges noted areas where more could still be done.

Risk management and internal control

While overall, disclosures in this area are more extensive than before, we encourage listed companies and public sector organizations to provide more insights and decision-useful disclosures to stakeholders. We recommend providing more information on aspects such as (i) the identification of new and emerging risks (e.g. IT and cybersecurity risks) and how these risks are being addressed; (ii) more details about the procedures for conducting regular reviews and monitoring of the effectiveness of internal control systems; and (iii) any significant areas of concern and/or material weaknesses, that have been identified during the internal control review.

Diversity disclosures

All listed companies are required to appoint at least one director of a different gender by 31 December 2024, under the Listing Rules.  As of 31 October 2024, still 11% of companies had single-gender boards. While provision of information about diversity has improved over previous years, we would suggest that companies also conduct an annual review of their board diversity policies, and consider setting diversity targets and goals. Following on from a study conducted by the HKICPA on board diversity in 2022, we would encourage more disclosure, in the CG report, on actions taken by companies to meet diversity targets/goals and timelines.

Corporate culture

Most CG reports include disclosures describing the company’s CG approach and the information on the company’s purpose, values and corporate culture.  We recommend that more extensive and comprehensive disclosures can be provided to stakeholders, for example, on how the desired corporate culture supports the company’s long-term business goals and their implementation within the company.

Ms. Loren Tang, Chair of the Awards’ Organizing Committee, said, “We welcome the clearer and more extensive disclosures on board composition and diversity, and hope to see equally good improvements in the implementation of diversity in practice. Board diversity in its various forms, including gender, age, skills and experience, ethnicity etc., can offer companies new perspectives and ways to adapt to a dynamic, changing and global business environment, as well as improving board performance and decision making.”    

“We are also pleased to see HKEX’s proposed changes to the CG Code consulted on in June 2024, with a number of the proposed changes aimed at addressing issues that have been highlighted by our Awards’ judges in the past, including strengthening board independence and effectiveness, and enhancing risk management and internal controls.” Ms. Tang added.

Information Technology and Cybersecurity Governance

Alongside the Awards this year, the HKICPA also conducted a short study on the prevalence and quality of IT and cybersecurity reporting, across the 82 Hang Seng Index-constituent companies (HSI companies). Though 83% of HSI companies made some form of disclosure specifically relating to cybersecurity, or related topics, such as information security and privacy protection, in their annual or ESG reports, much more could be done to improve the quality of these disclosures so as to give greater reassurance to investors and stakeholders, including regulators.

Based on the research findings, the HKICPA calls for companies to consider how cybersecurity-focused disclosures can be improved in their annual or ESG reports. This includes ensuring that disclosures are specific and company-focused, linked to business risks, and cover key areas, such as the company’s IT and cybersecurity strategies.

ESG

Many companies clearly put a lot of effort into the environmental and governance elements of ESG, while some give less attention to the social aspects. While this is understandable given the push for carbon-focused disclosures, the social aspects of ESG are also important, and we encourage companies to strike a balance between equally important elements.  As an example, companies should consider how to enhance employee safety and wellbeing in practice, while at the same time providing clear and focused disclosures for stakeholders about these initiatives.

The judging panel appreciates that some companies are more advanced than others in trying to address the challenges of obtaining reliable data on Scope 3 greenhouse gas emissions. With the new sustainability disclosure requirements for listed companies, under the Listing Rules, coming into effect next year, many companies will need to ensure they have the right data-gathering processes and systems in place, at least for the purposes of sustainability reporting requirements around Scope 1 and 2 emissions. Additionally, while it is common nowadays for companies to indicate a long-term target date of 2050 or 2060, and in some cases earlier, for achieving carbon-neutrality, we encourage companies to disclose practical short-term or interim targets to show progress towards achieving that goal.

Mr. Patrick Rozario, Chair of the Awards’ Review Panel, said, “ESG has become one of the most pressing topics for companies and organizations, with key developments in ESG disclosures continuing to be rolled out. Against this backdrop, we are pleased to see many companies and organizations making solid progress, including providing clear key performance indicators with measurable outcomes, conducting more extensive stakeholder engagement exercises and preparing materiality assessments, with the aim of mapping the material ESG issues impacting the company and society.”

“As Hong Kong’s sustainability disclosure standard setter, the HKICPA will continue to work closely with the Government, financial regulators and other stakeholders to support companies and organizations in Hong Kong on sustainability capacity building and enable them to maintain sustainability-related disclosures up to international standards,” Mr. Rozario added.

The HKICPA was pleased to receive certain financial sponsorship for this year’s Awards from prominent CPA and other professional consultancy firms (see Note 1). The HKICPA would like to express its appreciation for their support and that of the Awards’ media sponsors (see Note 2).

For the full judges report of the HKICPA Best Corporate Governance & ESG Awards 2024 and the full report of the short study on the IT & Cybersecurity Governance in Hong Kong, please obtain the reports by scanning the QR code below:

Note 1: list of sponsors (in alphabetical order)

1. Ace Sustainability & Risk Advisors Ltd.

2. AVISTA Group

3. BDO

4. CityLinkers Group

5. Deloitte Touche Tohmatsu

6. Ernst & Young

7. Forvis Mazars Risk Advisory Services Ltd.

8. Grant Thornton Hong Kong Ltd.

9. HLB Hodgson Impey Cheng Ltd.

10. KPMG

11. Moore CPA Ltd.

12. PwC

13. Riskory Consultancy Limited

Note 2: list of media sponsors (in alphabetical order)

1. ET Net

2. Hong Kong Economic Times

3. The Standard

Appendix: Best Corporate Governance & ESG Awards 2024 - Awardee List