Companies in Hong Kong have registered the worst performances in environmental, social, and governance (ESG) and sustainability, with a new report by the Sandpiper Global Reputation Capital Index 2024. The research shows that only 2 percent of the Hong Kong companies are performing well in this significant performance area, while 9 percent of the global companies are doing so. This is a pathetic trend whereby both global and Hong Kong-based companies are not delivering well in the management of their reputation concerning ESG and sustainability.
ESG and Reputation Management Categories
There were four categories that the study classified organizations regarding their ESG and sustainability reputation management performance:
Aspirants (54%): The organisations acknowledge that ESG and sustainability are crucial but are only at the nascent stages of ensuring full implementation within their operations.
New entrants: Companies started recently to focus on ESG and sustainability and have done little up to this point.
Laggards: Such companies are responding to ESG measures but, up to this date, are not leading.
Innovators: These organizations have made significant strides in ESG and sustainability practices and set industry standards.
Accordingly, where 9 percent of the world’s organizations are said to be doing well in ESG and sustainability, the number in Hong Kong can only stand at 2 percent. This calls to order that most organizations in Hong Kong are behind the international benchmark whereas there has been a strong focus globally and also demands from stakeholders going up.
The Scenario in Hong Kong
This is a big gap because in Hong Kong, there is an understanding of ESG and sustainability by itself but very little actual implementation. The study revealed that 86 per cent of Hong Kong organisations consider ESG and sustainability to be critical for their reputations. However, it is only 31 per cent who say they are confident or strong about the said areas.
The gap also raises questions about the divergent intent and ability of organizations in Hong Kong to implement meaningful outcomes in sustainability. While many are aware of the reputational risks of not taking ESG and sustainability challenges seriously, very few have succeeded in implementing strategies comprehensively addressing these issues.
Reporting and Dedicated Teams
Only 43 percent of Hong Kong organisations produce regular ESG or sustainability reports. This lack of transparency and reporting would not help foster confidence with the stakeholders; on the contrary, it would take away since the organisations fail to demonstrate their trend of achievement or challenge in pursuing the sustainability goal.
Only 13 per cent of the organisations in Hong Kong have a specific team that manages their sustainability effort. A low figure of this kind hints that most of these organizations are not taking ESG and sustainability seriously enough. In the absence of dedicated teams and proper strategies, it is less likely that these organizations will be able to meet the increasing expectations of stakeholders and regulators in the forthcoming years.
Communication Challenges
One of the critical problems points identified in the study is a failure to communicate effectively on ESG and sustainability efforts. What is somewhat surprising is the degree to which people around the world have questioned their organizations’ initiatives related to ESG and sustainability. Such pervasive skepticism can harm the reputations of companies and intensify the scrutiny received by not only stakeholders but also regulators.
Only 20 per cent said they had specific strategies to communicate about sustainability issues, including climate change. In the absence of a strategy around communication, organisations are vulnerable to accusations of greenwashing themselves: they’ll appear to support initiatives without having made any actual progress in that area.
Further, only 34 percent of organizations say that their ESG plans are compatible with the UN Sustainable Development Goals. SDGs present a clear framework for sustainability; if an organization’s alignment is not up to par, it may suggest that these organizations are still not fully committed to achieving measurable sustainability outcomes.
Greenwashing and Reputational Risks
And with ever more stringent regulations for greenwashing, in addition to proactively being held accountable by companies, lack of preparation to face an ESG challenge will expose organizations to significant threats relating to reputation. Organizations with whom sustainability is not seriously taken or the efforts made haven’t been communicated convincingly well might lose the trust of their stakeholders-a deadly blow to the very core of a brand and reputation.
This is a critically pressing matter in Hong Kong, given the low ESG and sustainability performance of this organization compared to others, indicating the amount of work to be done. Companies that do not put these issues at the forefront will likely face ever-growing pressure from investors, customers, and regulators.
Conclusion
Overall, organizations from Hong Kong need to do much better to take more decisive action on their ESG and sustainability performance. This would also mean increased transparency through regular reporting, putting more resources towards building its sustainability teams, and ensuring well-rounded communication strategies for stakeholder concerns.
Rebuilding trust and stature in their reputations will be accomplished only if Hong Kong organisations begin to align their ESG strategies with global frameworks such as UN Sustainable Development Goals and ensure the effective flow of communication about their efforts. Yet for many organizations, major shifts will not come without an effort to top both their global peers as well as stakeholder expectations.
Source : FutureCIO