Three board secretaries share their experiences and views on achieving carbon reduction targets, green supply chain management and addressing climate change.
Sui Li, Board Secretary, Guangzhou Automobile Group Co Ltd
Guangzhou Automobile Group Co Ltd (GAC Group) is listed on the Shanghai Stock Exchange (Stock Code: 601238.SS) and the Stock Exchange of Hong Kong Limited (Stock Code: 2238.HK). It is a large state-controlled automobile group in the Mainland.
In 2021, in response to the Mainland’s ‘dual carbon goals’ (to reach peak carbon dioxide emissions by 2030 and become carbon neutral by 2060), and increasingly stringent ESG disclosure requirements, GAC Group released its ‘GLASS Plan’ and its ‘14th Five-Year Plan’ to accelerate its carbon emission reduction process. Related initiatives cover various areas, including production, products, technology and finance, aiming to achieve carbon neutrality throughout the product life cycle by 2045. This is achieved through building a green supply chain, strengthening the research and development of energy efficient products (such as use of hybrid, electric and hydrogen fuel cell systems), and promoting the development of new energy technologies.
Through continuous integration of ESG concepts into all aspects of its business processes, GAC Group has transformed from a traditional manufacturing company to a low carbon and green enterprise. This transformation has brought several challenges to the role of the board secretary.
‘Firstly, board secretaries need to keep track of important national publications relating to the disclosure of ESG disclosure requirements so as to be well-informed on new developments. Secondly, we need to organise regular internal compliance operational ‘drills’ to enhance the compliance capability of all staff of the Group. Thirdly, we need to accelerate the Group’s efforts to develop a new energy ecology to enhance our business growth and competitiveness,’ Ms Sui says. At the same time, she helps build a good corporate image through gaining an in-depth understanding of production technologies and planning supply chain investment strategies.
In addition to her duties as a board secretary, Ms Sui is also the Chairman of GAC Capital. She is therefore also responsible for the implementation of the company’s business strategies. ‘As the board secretary and the Chairman of GAC Capital, I have to fully utilise the resources of the capital market through investing in companies in GAC Group’s industry chain, both upstream and downstream, and facilitate the development of new technology to help to enhance the new energy ecology,’ she says.
In recent years, ESG issues have become a focus among automobile enterprises. ‘Currently, ESG ratings are gradually becoming a new standard for measuring the brand value of automobile enterprises while measuring the success of a company based on sales and profits has gradually become a thing of the past,’ she says. For example, GAC Group combined its annual social responsibility report and ESG report into one for the first time this year, reflecting the Group’s increasing focus on ESG performance.
Against this background, Ms Sui foresees that board secretaries and listed companies will encounter three major challenges in the future. ‘Although all three segments of ESG, namely environmental, social and corporate governance, are equally important, listed companies still need to make a trade-off between the lower and higher weighting of these three segments due to the differences in industry, business nature and production methods,’ she says.
Secondly, companies need to establish ESG databases to help raise their corporate governance standards from a long-term perspective. ‘However, this development is limited by the diversity of companies’ ESG database standards and poor ESG-related technology infrastructure, such as data collection, data analysis and more. There are also differences in the ESG standards adopted by listed companies in different industries,’ she says.
Finally, there is still difficulty in standardising ESG disclosures. ‘While the market anticipates ESG reports to be disclosed on a regular and quantitative basis, it seems that the quantification of non-financial indicators is difficult to achieve at this moment,’ she says.
Faced with all these challenges, board secretaries need to constantly strengthen their professional, organisational and communication skills. ‘Disclosures need to be timely and effective whilst adhering to strict compliance with regulatory requirements. Also, the disclosure content should be built on its own industrial characteristics to reflect the investment value of a company, striving to provide effective information to investors,’ she says.
Zhu Xu, Board Secretary, China Vanke Co Ltd
China Vanke Co Ltd (Vanke) is listed on the Shenzhen Stock Exchange (Stock Code: 000002.SZ) and the Stock Exchange of Hong Kong Limited (Stock Code: 2202.HK).
Vanke has been devoted to the research and promotion of green buildings since the 1990s. And since 2022, the company has been committed to the research of industrialised construction, taking the lead in driving the development of industrialised building systems in the Mainland to effectively reduce energy and material consumption during the construction process. While focusing on its own green and low-carbon operation, Vanke has also incorporated environmental principles into its supplier management system for driving green development of the real estate supply chain. Key initiatives include co-launching with suppliers the ‘China’s Real Estate Industry Green Supply Chain Action’, implementation of green supply chain management through the ‘A-UPUP’ platform, and regular release of procurement ‘white lists’ and ‘green lists’. The lists direct upstream suppliers to pay attention to energy consumption indicators, aiming at achieving energy saving and emissions reduction.
Ms Zhu not only helps the company to fulfill its ESG compliance requirements, but she also drives the company to continuously improve all aspects of green management, including green supply chain, with an aim to enhance its ESG performance. Against this background, a board secretary needs to take up more responsibility and encounter more work pressure than ever. Therefore, she points out that a competent board secretary should possess a wealth of experience and professional competence.
‘The board secretary needs to have excellent professional knowledge and be not only familiar with laws and regulations, but also to understand financial, capital market and corporate management developments. A board secretary’s work experience gained working for corporates, accounting firms, law firms and investment banks can benefit the smooth operation of the board secretaries’ office,’ she says. She also states that when working for a domestic and overseas listed company, a board secretary or company secretary needs to acquire all of the corresponding qualifications.
In addition, board secretaries must possess strong communication and coordination skills, as stakeholder relationship management is one of their key daily responsibilities. ‘The board secretary is a bridge between regulators, shareholders and the company’s management. This is a significant role with important responsibility that requires a high level of emotional intelligence and great social skills when dealing with people,’ she says.
‘At the same time, as ESG-related requirements have recently rapidly become popular internationally and domestically, the rules and requirements as well as required skills are changing day by day. This requires board secretaries to always keep learning about new rules and keep abreast of the latest trends in international and Mainland practice, and the cutting-edge developments in the industry. In this way, board secretaries can better assist companies in driving their green transformations,’ she says.
She expects regulatory requirements for ESG disclosure will be gradually enhanced in the future and her company is responding. ‘In the future, Vanke will continuously strengthen all aspects of its ESG management. For example, the company will improve its use of scenario analysis for the management of climate risk based on the ESG Reporting Guide issued by Hong Kong Exchanges and Clearing Ltd to identify the climate risks and potential opportunities relevant to different aspects of the business under different scenarios. This will help us manage the risk of climate change effectively and grasp climate-related opportunities,’ she says.
These developments will present board secretaries with more challenges. She encourages board secretaries to participate in ESG-related training and forums to continuously enrich their ESG knowledge and stay abreast of the latest development trends. ‘We need to have sufficient knowledge in order to efficiently fulfill our duties and ensure our company’s compliance,’ she says.
Kenny Luo FCG HKFCG(PE), Board Secretary & Company Secretary, BOC Hong Kong (Holdings) Ltd
BOC Hong Kong (Holdings) Ltd (BOCHK, Stock Code: 2388.HK) is one of the largest listed companies on the Stock Exchange of Hong Kong Limited. It is also one of the three note-issuing banks and the sole clearing bank for Renminbi business in Hong Kong.
Mr Luo, who joined Bank of China 26 years ago after graduating from university, has more than 18 years of experience in the area of corporate governance. He shares that BOCHK is effectively managing climate-related risks and opportunities through continuous improvement of its corporate governance. ‘Corporate governance plays a crucial role in driving the bank’s timely and effective action, providing a framework and strategy for it to seize the opportunities, and to address the challenges, presented by the transformation,’ he says.
BOCHK has established a three-tier continuous governance structure to identify the respective responsibilities of directors and management on sustainability issues. BOCHK has also formulated its 2021-2025 Sustainability Plan and carbon neutrality targets to develop its ESG-related work via a top-down approach. In addition, the company has become a signatory of the Task Force on Climate-related Financial Disclosures (TCFD) so as to actively disclose climate-related information. Other initiatives include integrating climate risk management into its overall risk management system, achieving carbon neutrality in its operations and developing green finance.
Acting as the board secretary and company secretary, Mr Luo has played a key role in the company’s transformation process. ‘I have assisted the board of directors to fulfil their leadership and oversight role in the company’s sustainability efforts, while raising our disclosure standards leading to enhanced communication with its shareholders and other external stakeholders,’ he says.
He shares that the board secretaries and company secretaries are currently facing three major challenges in response to the increasing market scrutiny of companies’ ESG performance. ‘We have to provide quality ESG-related training to directors to enable them to better supervise management in the development and implementation of sustainable development strategies. This is the first challenge that I have encountered,’ he says.
‘But another major challenge comes from the growing investor expectations relating to ESG. Firstly, an increasing number of institutional investors have asked for regular updates on companies’ ESG developments, and their questions are getting more professional and in-depth. Secondly, the voting practices of institutional investors at shareholder meetings reflect their higher expectations of companies’ handling of ESG issues, especially governance aspects. These developments have put pressure on companies to improve their ESG performance,’ he says.
He further points out that the board secretaries and company secretaries will face greater compliance risks as regulators are tightening regulations regarding ESG disclosures. ‘As the definition and understanding of disclosure standards still lack uniformity, the reliability and comparability of the disclosed information is an issue. This can mislead regulators, investors and companies, while exposing governance professionals, particularly board secretaries and company secretaries, to greater compliance risks,’ he says.
Against this backdrop, he suggests that governance professionals such as board secretaries and company secretaries need to strengthen their ESG knowledge and skills. ‘A board secretary should be able to facilitate effective communication and two-way interaction between directors and management, as well as between management and investors on ESG-related topics. Thus, a deep understanding of ESG-related professional knowledge is essential,’ he says.
‘The ability to understand and capitalise on ESG will become a basic requirement for a board secretary. The board secretary should become a “walking sustainability report” and an ESG all-rounder’, he emphasises.
解析ESG挑战 – 从董秘角度看合规实务