The quality of environmental KPIs disclosure in ESG reporting for SMEs in Hong Kong

Yip, Angus Wing Hang (2022) The quality of environmental KPIs disclosure in ESG reporting for SMEs in Hong Kong. Doctoral thesis, University of Wales Trinity Saint David.

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Starting from 2016, all the listed companies in Hong Kong are required by Hong Kong Stock Exchange (“HKEx”) to issue Environment, Social and Governance (“ESG”) reports annually. The purpose of ESG reportsis to let stakeholders and the general public know how listed companies’ performance in ESG aspects. For big corporations, issuing ESG reports and reporting the key performance indicators (“KPIs”) are not a problem because they have been doing voluntarily for years. However, it is a challenge for the Small and Medium-sized listed companies (“SMEs”) to report properly because they may be lacking in knowledge, skills and motivation, etc. The first part of thisresearch (quantitative) adopted a scoring exercise witha five-point scale to assess the relevance and completeness of the environmental KPIs which are mandatory for disclosure. 138 SMEs were proportionately selected by stratified sampling method based on the HKEx’s 11 categories of industries. It was found that the general disclosure quality was low at score 1.98while the complete disclosure is score 3. KPI 2.3 “Energy Use Efficiency”was the best reported KPI while KPI 3.1 “The Environment and Natural Resources” was the worst reported KPI. Across the different industries, Industrial Goodswas the best reporter while TelecommunicationIndustry was the worst one. The main reason may be related to the nature of different industries, where Industrial goods sectorgenerally has moreenvironmental impact and they are used to complying with various and rigorous reporting frameworks in their daily operations.The second part of thisresearch (qualitative), based on the findings of the first part and backed up by different motivational theories, investigated a broader spectrum of the drivers, barriers and motivational factors for SMEs to enhance their reporting quality. 22 persons responsible for ESG reporting in their SMEs were interviewed. The results indicatedthat “Regulations”and “Management Support”are the most important drivers while “Lack of Management Support”and “Lack of Expertise”are the most important barriers. To overcome the barriers, various stakeholders like regulators, bankers, investors, customers, competitors, NGOs and employees have their rolesto play. Although several theories can explain the motivation issues for SMEs to raise the ESG reporting quality, among them, Stakeholder Theoryis the most influential one as stakeholders can exert effective pulling forcesby creating tangible benefits to SMEs, and hence resulting in stronger management support. In addition, theDeterrence 5Theory Concept of Avoidanceare also the powerful theories to articulate the motivation to report under the mandatory disclosure environment.To conclude, regulators should not only put effort in upgrading the reporting standards, they should also contemplate more effective ways to bridge the gap between SMEs’ cognition of the long-term benefits of ESG reporting and their real need of short-term tangible financial benefits by mobilizing relevant stakeholders to utilize ESG reports

Item Type: Thesis (Doctoral)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions: Theses and Dissertations > Doctoral Theses
Depositing User: Natalie Williams
Date Deposited: 13 Jan 2023 10:16
Last Modified: 13 Jan 2023 10:16

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