MTR Corporation - Hong Kong's Sustainability Pioneer

The MTR Corporation Limited is Hong Kong's pioneer in establishing sustainable business practice and corporate sustainability reporting. It published the first Corporate Sustainability Report from a Hong Kong corporate on 22 April 2002.

The purpose of this case study is to give a brief introduction into how the sustainability culture has evolved at MTR Corporation, the achievements and goals in this regard and the drivers behind the release of the 2002 Corporate Sustainability Report. Perhaps the most insightful comments on these issues are through the eyes of Dr. Glenn Frommer, MTR's Environmental Manager. At the end of this case study there is a brief interview with Dr. Frommer.

To read the full MTR Corporation Corporate Sustainability Report, click here.

MTR Corporation's Operations

MTR Corporation became a public company listed on the Hong Kong Stock Exchange on 5 October 2000, having first been established as a statutory Corporation in 1975. As a mass transit railway company it operates in one of the important industries of the future. Its daily patronage of 2.3 million passengers makes it one of the world's most intensively utilized railway systems. It operates around 87.7km of railway, comprising 6 railway lines with 49 stations, 14 of which are interchanges to provide convenient transfer between the lines.

In conjunction with railway development, MTR Corporation plays an important role in establishing new property complexes above and adjacent to their stations and depots. At present a total of 3.5 million square metres of residential and commercial floorspace is being or has been constructed along the Airport Railway at Hong Kong, Kowloon, Olympic, Tsing Yi and Tung Chung Stations. This is in addition to another 2.3 million square metres of development potential along the Tseung Kwan O Line.

MTR Corporation's Sustainability Matrix

MTR Corporation has integrated sustainability as part of its core business strategy. Environmental and social considerations and business ethics are integrated with the business, the service and the company's core values.

MTR Corporation uses a rugby ball analogy to explain and raise awareness of the three independent components of its vision of sustainability: environmental matters, social issues and economic gains. For MTR Corporation, given it is a private company with shareholders, the economic component forms the main axis of the ball. The social and environmental factors form the girth of the ball. As a company becomes more sustainable in its strategy and achievements, the ball inflates. As the overall volume of the ball increases, so do the shareholder returns.

MTR Corporation has adopted this sustainability strategy as an integral part of its core business strategy. MTR Corporation recognizes the value of its non-financial assets in addition to and as a complement to its physical assets. Non-financial assets are recognized as a critical component of shareholder value.

MTR Corporation's Immediate Corporate Targets for Sustainability

MTR Corporation has integrated corporate sustainability into its business culture for several years now. Because of this integration, creating evolving targets each year is a relatively straightforward process and is part of MTR Corporation's continual improvement and continual effort to add shareholder value. MTR Corporation's aim is to operate with social and environmental targets at the core of all business functions and to continue to raise awareness to this effect both inside MTR Corporation through training and education to employees and externally to other stakeholders through reporting, news articles and seminars. Specific social and environmental future targets are summarized as follows (please see the sustainability report for more detail):

The Corporate Sustainability Report

Because the MTR Corporation's environmental and social responsibilities are already engrained in its corporate culture, producing the sustainability report was a natural progression. It did not require a whole host of new systems and procedures to be established because much of the critical processes were already in place. It just required reporting in a different manner. UNEP's GRI Guidelines were used to allow comparison of MTR Corporation's achievements with those from other industries and reports. MTR Corporation managed to report partially or fully against 70% of the GRI's core indicators. The decision to produce the report was driven by a number of compelling reasons:

• Produce a tool that would act as a visible reflection of the corporate culture on environmental and social matters
  
• Have a document that can be used for internal and external education and awareness - a document to encourage staff to implement best practice
  
• Develop a medium through which to engage in increased stakeholder dialogue and therefore assess the wider impact of MTR Corporation's business and operations
  
• Attract long term investors who value good corporate governance and transparency
  
• Attract SRI funds through comprehensive reporting on environmental, social and economic factors
  
• Act as a leader on critical sustainability issues in the Hong Kong market
  

An Interview with:
Glenn Frommer, MTR Corporation's Environmental Manager

Q: How difficult was the process of data gathering for the report?

A: The MTR Corporation's approach to sustainability has been inbred into our corporate culture for many years now, so it was not a case of imposing headings and gathering new data. The data existed but was now reported in different manner.

Sustainability is a complex and evolving process and precise indicators are at times elusive. MTR Corporation's approach has been to identify the critical dynamic relationships between the corporate Core Values and our stakeholders and be attentive to the interpretation of those relationships. Our current understanding is summarized in our sustainability matrix (above).

There are a number of pathways towards sustainability and due to historical reasons, the MTR Corporation has chosen an environment-based pathway. The values for this pathway are already inherent in the work ethic and as a result staff can report on their achievements and work rather than first having to learn 'how to'. We have evolved our environmental reporting to incorporate more social and economic factors in recent years. Given our understanding of the importance of incorporating non-financial assets into our business, this has been relatively straightforward. Actually reporting on these issues was simply the next step for us.

Q: What do you consider to be the costs and benefits of producing the report?

A: The financial costs of producing the report include the costs of verification, translation and engaging an independent consultant. So overall, costs were kept very low. Again, this is a result of the fact that it was not difficult for us to report on issues that we had already incorporated into our business practices. We did not need to set up new policies, procedures, infrastructure or employ additional staff. Those already undertaking environmental and social audits simply needed to report through a different filter. The infrastructure for reporting was already in place because sustainability practices were already in place. The overall costs were also minimized by the fact that the report was not printed but is only available online. So in terms of specific costs, there was some staff time in terms of the actual reporting and the staff also translated the report into Chinese. The direct costs were hiring ERM as an independent consultant and obtaining verification for the report. This was not a huge expense for us given the benefits and it was completed within three months and without impacting business efficiency and productivity.

In terms of the benefits, the report includes more information about the MTR Corporation, resulting in increased transparency into the business. This has its pros and cons - by generating this report the company opens itself up to criticism but also sets an example of a sustainable business. We recognize that we still have additional measures to meet on the environmental and social side, but this report is the first of many to come and acts as a comprehensive starting point. The comprehensive reporting has helped with our inclusion into the Dow Jones Sustainability Index and we hope it will help us to attract more long-term SRI investors. In addition we now have an easily accessible document to use for educating our employees at our 'sustainability days' and for educating the public. The report is set up on a roving display at selected MTR Corporation stations and is moved every 10 days onto another station. The MTR Corporation has always been serious about maintaining a high quality product and the education and development of the staff and customers has always been a priority.

Q: How was the report verified?

A: The report was verified by an independent consultant, ERM (Environmental Resources Management Hong Kong LTD). They worked directly with us to develop the structure and content of the report but were not involved in the development or collection of information. Sample representative data was then chosen by ERM for verification and a set of recommendations was than made. Finally, the report was reviewed by an external sustainability expert. This was Derek Osborne who is a member of the UK Commission on Sustainable Development. His comments are included in the online Sustainability Report.

Q: What is the next step in MTR Corporation's sustainability strategy?

A: Our sustainability strategy is ever evolving and there will always be improvements to make in this area. In terms of specific issues we aim to look at next, that would be procurement issues directly affecting the bottom line. At the moment, we engage a large number of suppliers. We are trying to streamline this to a core group for best suppliers so that we can maximize efficiency and minimize costs, plus better understand the critical issues with each supplier. We will consider auditing of suppliers, and perhaps manufacturers at a later stage.