Vision Mission Values (VMV)

Transcription

1 Sustainability Report 29

2 Vision Mission Values (VMV) Vision We aim to be a globally recognised leader that connects and grows communities with caring service. Contents About this Report 1 Mission Enhance customers quality of life and anticipate their needs Actively engage in communities we serve Foster a company culture that staff can learn, grow and take pride in Provide sustainable returns to investors Set ourselves new standards through innovation and continuous improvement Grow in Hong Kong, Mainland of China and capture opportunities in Europe by extending our core competencies From the Chief Executive Officer 2 Values Excellent Service Mutual Respect Value Creation Enterprising Spirit A Global Business Sustainability is Mainstream 4 6 We are committed to proactively provide safe, efficient and caring service valued by customers. We work in an open team environment based on trust, joint commitment and respect. We listen and respect the views of the community and other stakeholders. We create profits through efficient execution, continuous improvement and innovation in delivering products and services valued by customers. We have the courage to question the status quo to seek improvement, proactively taking initiatives and having the resourcefulness to overcome obstacles and reach new horizons. Focus Issues 1 Stakeholder Engagement Climate Change Our Cover Story During their nightly walk, a maintenance crew checks the rail lines outside Tai Wo Hau Station for signs of wear and tear from the day s relentless passage of trains. Delivery of our corporate Vision starts and ends each day with frontline tasks such as these. Through work practices and programmes that are focused on continual improvement, we build the consistency of action that drives our corporate culture. Consistency inspires trust in our services and importantly, integrates the promise, policies and programmes of sustainable best practices, one step at a time. Supporting Information Independent Assurance Report 26 35

3 Scope of Report Basis of Reporting About this Report Each year the MTR Corporation strives to give our stakeholders a balanced and insightful summary of our sustainability journey. This year, we explore the bigger picture as a multigenerational community asset with increasing global presence. This involves not only the responsible longterm stewardship of the organisation, but also how more diverse stakeholders and their interests increasingly influence our journey. We set out the critical sustainability issues and how we manage the different impacts they present as our business grows. Discussions highlight stakeholder engagement and how we are harnessing the power of engagement to determine our future as a community asset in Hong Kong, mainland China and our international markets. In acknowledging our expanding global footprint and our operating responsibilities, we include a section on climate change. Our report theme, Promise, Policy, Programme reflects the aspirations, expectations and management of organisation in the context of our journey. This report covers the MTR Corporation s 29 social, economic and environmental performance in our core market of Hong Kong. Where deemed material to the reporting process, we address our operations and performance in mainland China and our principal overseas markets of Europe, Middle East, regional Asia and Australia. The data presented on these business activities outside Hong Kong is specified where applicable. This is our tenth year of reporting on sustainability performance and our second year for application of the Global Reporting Initiative s GRI G3 Sustainability Reporting Guidelines, with a selfassessed A+ level of application. We report the GRI G3 Content Index online to facilitate more detailed analysis of our performance that references a wider spectrum of information than this printed report can accommodate. In compiling this report, we apply the AA1 Accountability Principles of inclusivity, materiality and responsiveness. These represent the many principles captured in the growing body of standards against which reports are assessed and compared for performance. These three principles help guide our GRI G3 content discussions. We commissioned PricewaterhouseCoopers Hong Kong to give an independent assurance report on selected quantitative data made to support progress against selected targets and principles. Their report is on p.35. This report principally examines the corporate strategies, management thinking, and important directives that steward performance and outcomes. We include a separate section on the material social, economic and environmental data that tracks performance. Further discussions are located on our sustainability website, which details the many initiatives and daytoday practices that bring strategy and thinking to life. We strive to present data that is informative and relevant to our social, environmental and economic performance. Our approach is to provide data and information that is verifiable, comparable and useful to the reader. Events and data of material value to the Corporation after the 29 yearend and before publication of this report are specified with the 21 date. The financial and economic information covered in this report reflects the consolidated accounts of MTR Corporation Limited. The data is prepared according to and aligns with the accounting policies of the Company s financial statements. The social and environmental data is aggregated internally, from our business partners and from independent bodies to provide the reader with a relative comparability on performance. External sources of data are identified and used where applicable and verifiable. Although we are, in principle, confident in the integrity of the nonfinancial data used in the report, we acknowledge that there are limitations that can cause a degree of uncertainty, in particular, those that include different interpretations of the reporting guidelines such as for greenhouse gases; accuracy and sampling by environmental measuring equipment; and data sourced from external entities and/or business partners where the Company does not have controlling interest in projects or contracts. Our practice is to keep within a 5% range in variance and state within data tables where variance is applicable. We value your feedback. Please contact the Sustainability Development Manager, sdmngr@mtr.com.hk, for comments or any further assistance you require in relation to our annual sustainability report and our other sustainabilityrelated activities. About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information 1

4 From the Chief Executive Officer We live in a changed world economically, socially and environmentally. As with many corporations across the global markets, we have learned much from the events of this past year and are taking on board the shift in attitudes and expectations that are shaping corporate stewardship. Despite the impacts of the global recession, we achieved steady progress in all areas of operations during 29. Rail operations maintained its high service standards and steady patronage and we embarked on our next round of rail asset improvement under Railway Vision 22. Property development rebounded in the latter part of the year with strong uptake in residential properties adjacent to our network. And, new rail projects are taking shape with the advances in planning and design as well as construction commencement of the West Island Line. Significantly, we have taken on a larger international profile. Our business portfolio expanded to include the Stockholm Metro operating concession and the joint venture partnership for the Melbourne Metropolitan Train network franchise. In mainland China, with the opening of the Beijing Line 4, we are steadily gaining a national reputation as a preferred partner in rail development and operations. Such progress in today s world would not be possible without the firm grounding in sustainable business practices, in particular those related to social advancement and environmental protection. Amongst the milestones of the year achieved, we issued a Supplier Code of Practice that guides social and environmental best practices in our supply chain. We are, as well, in the first steps of devising a carbon footprint tracking system for rail line construction that will eventually guide emissions reductions in future projects, and we are leading the local property industry with progressive building practices that deliver to customer aspirations while establishing longterm environmental value. These efforts bring international recognition. We have maintained our inclusion in the DJSI and FTSE4Good indices for the year and, for the first time, have been given the Gold Class award within the global travel and tourism industry sector from Sustainable Asset Management (SAM). We were also named Sector Leader and Sector Mover in SAM's corporate sustainability assessment for 29. Progress, however, has its challenges. We are competing on a global scale for the material resources, technical skills and management expertise required for the surge in national infrastructure projects. Closer to home, we are experiencing more staff retirement after 3plus years of service. Proactive responses are well under way, in particular with people and needed technical skills. We are laying the ground work in leadership succession as well as mobilising technology and knowledge management platforms to enhance efficiencies. Through efforts with the local construction industry, we are promoting the needed technical training to build Hong Kong s next generation workforce. As we grow, we recognise that our stakeholders are increasingly diverse and more decisive in what we do and how we do it. This past year proved particularly poignant in this respect. The Express Rail Link and the redesign of the Nam Cheong Station property development provided us the opportunity to engage and communicate with stakeholders while constructively influencing Hong Kong s sustainable development. Stakeholder voices have guided decisions in many areas of these projects. We are increasingly perceived as a societal asset, therefore responsible in addressing the expectations of the communities we serve. Although still on the learning curve when responding to social aspirations, our established practice of early stakeholder inclusion and active engagement serves us well. I am pleased to say that our stakeholder strategy for the West Island Line is our best practice in action. We continue to build the internal skills and knowledge base to anticipate situations when navigating project issues with stakeholders and the public. In closing, I wish to note that this is our tenth year in sharing with you our sustainability journey. This demonstrates our commitment of continuous improvement in all that we do. Most importantly, it is about how sustainability has become a seamless driver to our business strategy and guides the responsible stewardship of the organisation we have been entrusted with. We look forward to yet another decade of sharing our journey with you. C K Chow 3 April 21 2 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

5 Sustainability Highlights Economic TURNOVER Recurring businesses remained resilient with a marginal revenue increase of.7%. Including contribution from the new railway franchises outside of Hong Kong, total revenue grew 6.6%. Railway franchise revenue outside of Hong Kong Rental, management and other revenue Station commercial and railrelated revenue Hong Kong fare revenue 17,628 2,712 3,449 11,467 Total 18,797 1,43 2,928 3,328 11,498 FIXED ASSETS GROWTH Fixed assets increased owing to further investment in Shenzhen Line 4 and investment property revaluation gains. Service concession assets Investment properties Other property, plant and equipment Total DEBT EQUITY RATIO Total equity attributable to equity shareholders Loans outstanding HK$ million HK$ billion HK$ billion Social Boardlevel Corporate Responsibility Committee established Corporate Responsibility Policy adopted No staff redundancies due to the global financial crisis LOHAS Park Station and Kowloon Southern Link opened Nam Cheong Station property development sets new standard in reflecting social aspirations SAFETY TRAINING PROPERTY DIVISION PASSENGER NUMBERS Intercity Buses Light Rail Airport Express Crossboundary Service Domestic Service 4, ,514 Total 4, , number of participants weekday average Environmental ISO 141 certification maintained for rail operations, rail projects and selected managed properties Eight environmental impact assessment reports undertaken for rail projects Supplier Code of Practice adopted ELECTRICITY PURCHASED Property investment and management Railway operations Corporate supporting units WATER CONSUMPTION Total Property investment and management Railway operations Corporate supporting units Total 1,792, ,65 86, ,336 percentage (%) cubic metres (m3) 9 3

6 A Global Business People s Republic of China Hong Kong SAR (Headquarters) Shenzhen Hangzhou Beijing Shenyang United Kingdom London Sweden Stockholm Australia Melbourne Organisational Sustainability Our Vision is to be a globally recognised leader that connects and grows communities with caring service. Organisational Focus Issues Economic Viability Customer Service Safety Standards Staff Development Community and Social Expectations Environmental Protection Climate Change Mitigation and Adaptation Global Highlights Funding support approval and Entrustment Agreement signed for the Hong Kong section of the GuangzhouShenzhenHong Kong Express Rail Link (Express Rail Link) Stockholm Metro operating concession awarded Melbourne Metropolitan Train network franchise awarded under joint venture Beijing Line 4 opened Concession agreements signed for Shenzhen Metro Line 4, Shenyang Metro Lines 1&2, Beijing Daxing Line and (March 21) Hangzhou Metro Line 1 TOTAL STAFF STRENGTH Station commercial and railrelated business Offshore employees Property and other business Projects Corporate management and support departments China and international business Operations 14,134 14,76 Total 2,15 7,59 8, ,242 1,365 1, Business Units Hong Kong Passenger Services Seamless and convenient rail travel connects people to their destinations across Hong Kong and into mainland China. Weighted Sustainability Issues Guiding passenger safety behaviours Managing diversity of customer expectations Resources management Continuous improvement 218.2km Total route length 84 Heavy rail stations 68 Light rail stops 1 Crossboundary passenger service 17 Feeder bus routes NP36 Cable Car See MTR Operating Network with Future Extensions and Properties on pp About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

7 Station Commercial and Railrelated Businesses We provide customer service that enhances the travel experience and reflects modern lifestyle aspirations. Weighted Sustainability Issues Innovation in service platforms Provide service that adds to the travel experience STATION COMMERCIAL AND RAILRELATED REVENUE COMPRISED 17.7% of total revenue for the year 29 1,228 Kiosks and minibanks in stations HK$7.11million Advertising revenue per station Rail Project Construction We build an enduring community asset that envisions and contributes to the longterm sustainability of our society. Weighted Sustainability Issues Local community buyin and support Effective communications with stakeholders and society Environmental management including asset lifecycle considerations, construction practices and regulatory compliance Climate change mitigation and adaptation Resiliency to serve intergenerational and diverse user groups Project delivery on time and within budget COMPLETED Kowloon Southern Link Tseung Kwan O South IN PROGRESS West Island Line Express Rail Link (Hong Kong section) PLANNING AND DESIGN Kwun Tong Line Extension South Island Line (East) Shatin to Central Link Property and Other Businesses In conjunction with professional property developers, we build and manage environments that deliver quality of life aspirations. Weighted Sustainability Issues Align built environments to rapidly changing social aspirations Use highest standards in building practices Deliver value for money INVESTMENT 274,58 m 2 lettable floor area MANAGED 79,449 residential units 742,414 m 2 commercial/office space DEVELOPMENT RIGHTS 2.56 million m 2 Mainland and Overseas Growth Our reputation in safety, reliability and quality services leverages our business growth in mainland China and overseas markets. Weighted Sustainability Issues Provide safe and reliable rail transport services Deliver value to clients and customers Foster best management practices across different cultures Build and sustain our reputation IN OPERATION London Overground Stockholm Metro Melbourne Metro Beijing Line 4 AWARDED/CONFIRMED Shenzhen Line 4 Shenyang Line 1 and 2 Beijing Daxing Line (extension of Beijing Line 4) Hangzhou Line 1 (March 21) (Concession Agreement subject to approval by relevant Chinese authorities) Photo: Janne Danielsson 5

8 Sustainability Policy Sustainability is Mainstream Why the Business Case? Promise Policy Programme We view sustainable development as a resilient process that balances business objectives and stakeholders interests within a holistic management framework. This framework, the Sustainable Competitive Advantage (SCA) business model, drives our business case. In this report and accompanying website, we illustrate sustainable development in practice. We look at our sustainability priorities captured in our corporate focus issues, exploring principally how we manage our risks. We address stakeholder engagement the interests and perceptions, and how we manage the engagement process itself. Promise, policy and programme are the underlying corporate dynamics that frame our discussions. Through these we capture and demonstrate sustainable development in real time. The Corporation is committed to the sustainable development of Hong Kong and will explore and ensure the responsible management of the social, economic and environmental aspects of sustainable business opportunities. We will be in compliance with the relevant laws regarding sustainability issues. We will conduct appropriate assessments including environmental impact assessments and stakeholder engagement programmes for new projects required by law and suggested by best practice, and implement recommendations. Internally, we will review our business activities to identify issues, set goals and continuously monitor, improve and report performance. We will devise, implement and monitor organisational management systems for implementing sustainability strategy. We will also educate and train staff in sustainability to raise awareness of sustainable development. To influence the broader community, we will train and encourage our supply chain to implement our recommendations to achieve sustainability and adopt acceptable sustainable practices in products and services. We will strive to increase appreciation amongst all our stakeholders of the sustainable benefits of railways. Sustainable Competitive Advantage (SCA) Business Model Framework for Sustainable Business Decisions This graph represents the interaction of stakeholder engagement, risk management and corporate strategy that are used to identify and guide management of the many sustainability issues. RISK MANAGEMENT Corporate Strategy/ VMV STAKEHOLDER ENGAGEMENT The model is resilient to the changes that impact the framework s processes over short periods of time while guiding the longerterm organisational development. However, the various process outcomes evolve by design. More detailed discussions of the individual processes are found in the Focus Issues and Stakeholder Engagement sections of this report. An interactive presentation of the SCA model's processes in practice is available on our sustainability website. For full explanation of the Sustainable Competitive Advantage business model as a management decisionmaking process and framework for materiality assessment, refer to the webcast of the Materiality Map on our sustainability website. 6 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

9 Promise The promise to deliver our corporate Vision is about living that Vision, one step at a time. It is about maintaining our licence to operate and keeping our social contract with the stakeholders and communities we serve. We recognise that stakeholders are changing in priority, as are their attitudes and expectations of our promise. We are more involved with governments and communities, we increasingly operate in foreign cultures, and we are tasked with fulfilling our social contract to a more diverse universe of customers. Understanding the many perceptions and expectations of our corporate promise is the foundation of our engagement process. Developing a Community Presence This year, in particular, we have forged better relationships with local communities and governments in aligning expectations in rail services and property development. These activities are covered in the Focus Issues and Stakeholder Engagement sections of this report. From results, we can see that perceptions are progressively converging to realise our corporate promise. We aim to be a globally recognised leader that connects and grows communities with caring service. The Corporate Vision The Community Liaison Group holds regular town hall meetings with the local communities affected by the West Island Line project development. Originally established to identify approval risks in the design and planning of the rail line, this engagement strategy has evolved into an effective communication channel to implement sustainable best practices. With input from the community, we have preserved local cultural icons and protected heritage sites, we will build a series of elevated passageways and bridges to integrate community and rail, and we will significantly upgrade the area s social amenities and leisure parks. As we move into the construction phase, community engagement focuses on cooperation. We are communicating and soliciting feedback on how to best manage the noise, traffic, dust and general inconveniences that will be part of neighbourhood life over the next five years. Policy Policy aligns our Vision to corporate stewardship. It directs decision processes and resource allocation while guiding the systems that measure, monitor and report. It provides transparency of actions and gives weight to stakeholders interests. Continuity Policy and governance necessarily evolve us as a sustainable organisation. We recently formalised organisational corporate responsibility under direct supervision of the Board of Directors. We are mapping out biodiversity management as our possible next step in climate change risk mitigation and adaptation. Policy establishes the corporate promise within the supply chain, encouraging best practices under the Supplier Code of Practice. And, across all our markets, policy continues to guide business practices under the Code of Conduct. Our Board of Directors comprises a majority of nonexecutive directors that ensure policy is balanced through their broad spectrum of expertise in business and society. The Corporation s 29 Annual Report discusses corporate policy and governance indepth. Leadership Policy serves as a powerful leadership tool. We foster international best practices and benchmarking through participation in influential initiatives under organisations such as CoMET and the UITP. We are in progressive dialogue with mainland China cities in planning sustainable urban development underpinned by mass transit. In Hong Kong, we lead change by implementing environmental best practices in procurement and contract standards and by incorporating social aspirations into built environments. 7

10 In December, PricewaterhouseCoopers Hong Kong conducted an independent stakeholder panel session, "Is MTR delivering on its Corporate Promise?". As the first such session held, we elected observer status to discussions. Of the many topics touched on, of particular interest were the perceptions and questions on organisational leadership opportunities. Discussions posed thoughtprovoking questions on society s future sustainability and how we, as an organisation, can contribute to this. Positioned as the sole rail operator in Hong Kong, how can we positively assist in broader government policy on sustainable urban development? As owner of one of the largest property portfolios in Hong Kong, how we can effectively promote sustainable building practices? How we respond to these questions and the many other community expectations will shape our legacy as a societal asset. Further highlights of this stakeholder panel are discussed in the Stakeholder Engagement section of this report. Programme Programme is stewardship in action. It encompasses the many systems, initiatives and workplace actions that put promise and policy into practice, one step at a time. Programme grows out of the constant interface of the risk management and stakeholder engagement processes within the SCA business model. Through such reiterative interaction, resiliency in programme evolves. The overall objective is to advance and embed sustainable actions at a pace that can be easily managed and absorbed by internal systems and at the workplace, using appropriate resources to achieve timely value outcomes. Environmental Heritage As an example, electricity consumed by our rail operations is managed through a system of performance improvement that targets reduction in electricity use while balancing service standards and customer expectations. Improvement is supervised by the dedicated Energy Management Committee. This Committee identifies the risks and service impacts and initiates mitigating actions with consideration to operational constraints and customer expectations. Resources are allocated and programmes enacted to achieve set targets. Results are monitored for effectiveness and necessarily reviewed for further action. While we actively engage our rail customers to ensure we achieve performance expectations, we recognise that not all expectations can be accommodated, but work to best solution. The conservation of tree walls, old and valuable trees has been an environmental priority since early planning of the West Island Line. In the case of tree walls, we moved an entire station to preserve the 1plusyearold tree walls at Forbes Street and have made further design changes to preserve those in a nearby public park. Modification to selected station entrances has been made to avoid damage to existing large trees. Extensive protection measures supervised by a certified arborist will ensure minimal damage to these environmental treasures as the rail line takes shape. For detailed information on our tree conservation programme, refer to our corporate website: Independent Stakeholder Panel Christine Loh CEO, Civic Exchange on Climate Change The MTR Corporation is internationally recognised for its sustainability leadership in rail transportation. The challenge is to bring visibility to this leadership in Hong Kong, its home and biggest market. The same dedication it has brought to sustainable rail operations can translate to its property design and management business as well. The ability to do this will have a positive impact to guide climate change mitigation and adaptation in the two most carbonintensive sectors in Hong Kong. What better way to establish a base line than to look at the best practices from our own community? 8 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

11 Priority Sustainability Business Risks and 29 Priority Business Risk Key Stakeholder Indicator (1) 27(2) Economic Social Environmental Financial stability Maintaining passenger numbers Maintaining rail and retail patronage Developing and retaining staff Ensuring the health and safety of passengers, staff and contractors Breaches of statutory environmental requirements Longterm energy supply without renewables (GHG emissions) Climate change (Response to pandemics and other climate change risks) Government Shareholders Business partners Shareholders Staff Passengers Operating profit from railway and related business before depreciation and amortisation (HK$ million) Passenger trips (weekday average in million) Customer Service Pledge items achieved: (a) Train service delivery (%) Island, Kwun Tong, Tseung Kwan O, Tsuen Wan, Tung Chung and Disneyland Resort lines and Airport Express East Rail Line (including Ma On Shan Line) West Rail Line Light Rail (b) Passenger journeys on time (%) Island, Kwun Tong, Tseung Kwan O, Tsuen Wan, Tung Chung and Disneyland Resort lines Airport Express East Rail Line (including Ma On Shan Line) West Rail Line (c) Train punctuality (%) Island, Kwun Tong, Tseung Kwan O, Tsuen Wan, Tung Chung and Disneyland Resort lines Airport Express East Rail Line (including Ma On Shan Line) West Rail Line Light Rail (d) Train reliability (revenue carkm/incident) Island, Kwun Tong, Tseung Kwan O, Tsuen Wan, Tung Chung and Disneyland Resort lines and Airport Express East Rail Line (including Ma On Shan Line) and West Rail Line 5,912 9,325 9, ,88, ,296,511 1,96, ,926,928 2,636,479 Staff Staff turnover rate (%) (Expanded divisional targets and data presented on p.27) Government Legal compliance (MTR Corporation) number of successful prosecutions Government Contractors Shareholders Passengers Customers Suppliers Community Staff Passengers Customers Community Suppliers Contractors Legal compliance (project contractors) number of successful prosecutions 1 2 (3) Greenhouse gas emissions 675,56 1,97,151 1,161,431 (tonnes CO2e) (4) Annual review of risk the annual review comprises a risk assessment and a continuous process of risk management actions Review completed (1) Refer to p.37 for definitions. (2) Excludes KCRC data post rail merger. (3) Contractor breach of Noise Ordinance fine HK$12, and contractor illegal construction work in a conservation area fine HK$75,. (4) Refer to p.25 for detailed breakdown. Review completed Review completed 9

12 Economic Viability Focus Issues What Keeps Us on 36 Alert? Economic Viability Customer Service Safety Staff Development Community Expectations Environment In the two years since we have merged our rail operations with the KowloonCanton Railway Corporation, we have grown in competencies, head count and business opportunities. The commitment to sustainable development has supported and guided business decisions during these times and continues to shape activities as we expand our global footprint. Our core competencies of rail transport and related services and, property development and management drive our organic growth. Within this growth pattern, a set of prioritised sustainability risks has evolved. While this portfolio of risks has remained relatively constant over time, the dynamics around them are in constant flux, resulting in different and varying degrees of impact. We label these dynamics "weighted sustainability issues". Governance, liquidity, risk management and trust are amongst the hard lessons learned from the global financial crisis. They are poignant reminders to our own economic sustainability and how we must steward the Corporation in the years to come. With the launch of an ambitious territorywide infrastructure programme announced in 27 by HKSAR Government, the Corporation takes up four new rail projects of the proposed ten mega projects and will substantially extend the existing network. This rampup of activity requires continuous and innovative allocation of resources, skills and management across the organisation as we initiate each new project. OPERATING PROFIT CONTRIBUTIONS Reduction in property development profit due to the timing of profit booking was partially compensated by profit growths in recurring businesses and the new railway franchises outside of Hong Kong. Railway franchises outside of Hong Kong Property development Property ownership, management and other business Railway operations and related businesses HK$ million 14,216 8,34 1,294 4,618 13,995 4,67 1,927 7,398 SHARE PRICE PERFORMANCE MTR share price relative to HSI MTR share price 13,56 3,554 2,62 7, This year, a number of these issues have emerged or intensified that pose significant challenges to our organisational development Relative Index HK$ Jan June Dec 9 1 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

13 Our Rail and Property model serves as the principal mechanism to provide funding support to the construction costs of new rail lines. While selected new lines contain property development rights, meeting the financial commitments for the ambitious expansion programme requires flexibility. Alternatives for projects now include the concession approach and cash grant models. Similarly, in our mainland China and overseas markets, diversity in business models has served us well, with significant growth seen in 29. The current portfolio includes investment projects and operating concessions through whollyowned subsidiaries or joint ventures. When assessing all potential projects and financing alternatives, we adhere to the principle of commercial return commensurate with the risks taken. Risk Management The Enterprise Risk Management (ERM) framework establishes strong multilevel risk profiling and serves as an integral part of broader governance in managing activities across the organisation. Specified risk owners drive the framework process through a series of risk registers and related reporting system that tightly monitor progress. The process effectively identifies emerging issues and assesses potential impacts on a timely basis. Provide sustainable returns to investors Corporate Mission Statement A number of newly prioritised communitybased stakeholder risks have emerged in the runup to the commencement of the new rail lines construction. Potential exposure lies in how well we gain local communities trust and build consensus on delivering aspirations to secure formal project approvals. The Community Liaison programme, established for the West Island Line to seek buyin and support from local communities, now serves as the broader platform to engage communities on both risks and social expectations, such as those identified for South Island Line (East) and Shatin to Central Link. Sustainable Competitive Advantage Risk Management Process Actions Monitor and Report RISK MANAGEMENT Identify and Prioritise Corporate Strategy/ VMV STAKEHOLDER ENGAGEMENT The risk management process used in our Sustainable Competitive Advantage business model is driven by the Enterprise Risk Management framework. The risk management process functions through a series of risk registers and related reporting system that initially identify, prioritise and allocate ownership of risks. Appropriate actions are then taken to mitigate risk or leverage management opportunity. All actions are subsequently monitored for progress and reported to appropriate managers on outcome. The process, being iterative, identifies and addresses emerging risks as they become relevant to business. Pivotal to these risk management exercises is the growing engagement with the HKSAR Government, in particular the District Councillors. As elected district representatives, their work has been invaluable when explaining our development plans and in building the critical ground support for new rail line construction. Councillors also serve as conduits to senior government decision makers and legislators when dealing with community issues in general. They have played important roles in brokering the difficult and, at times, protracted negotiations undertaken for the planning and approval of the Express Rail Link that connects Hong Kong to the highspeed network of mainland China. Urban Landscapes Our "Rail and Property" business model is internationally recognised as a leading strategy for 21st century urban development. The 29 Annual Report gives full details on our economic performance for the year. View the report at hk/eng/publications/ index.html 11

14 Customer Service Tasked to serve intergenerational customers, we constantly explore social behaviour trends, demographic changes and the evolution of new technologies and social media platforms. These point to longterm social trends that influence how we design and build for future generations while continually improving on existing services. Hong Kong s growing aging population segment, as an example, requires barrierfree access to stations and services and more intelligent passenger communications, while the upcoming Generation Z and the Oneder generation push the envelop in social networking capabilities and the latest in mobility support tools. Marrying such diverse aspirations and future scenarios to the hard assets of our system within a resilient framework to allow for continual improvement is how we approach sustainable development. Railway Vision 22 spearheads our rail asset enhancement. Covering a spectrum from leadingedge infotainment delivery systems to railcar travel efficiency and comfort, we emphasise quality of life. In 29, the first of the new light rail system trains were introduced that are quieter and more comfortable. 3G capability now runs across all our rail lines enabling streaming audio, video and highspeed internet services. We are in progress to upgrade customer service counters that provide more personalised customer interaction. MARKET SHARES OF FRANCHISED PUBLIC TRANSPORT IN HONG KONG MTR Trams & Ferries percentage (%) 39.7 Minibuses Buses Engagement, feedback and daytoday experience with customers pointedly guide refinement of the service culture. To cope with the need for better passenger information, the Stakeholder Management Working Group was established in 29 to manage public communication and the passenger impacts due to recent upgrades in rail network services. Taking the approach of thinking from the passenger s perspective, changes have proceeded smoothly with minimum passenger disruption. Enhance customers quality of life and anticipate their needs Corporate Mission Statement Property Management Caring service extends to our shopping malls and managed properties. The recent consolidation of our brand commits our service teams to new standards and customer service goals. Importantly, it creates a pool of knowledge for best practices that is shared by all service staff on a regular basis. Managing the Now in Customer Service Expectations Response to passenger surveys and other communication efforts have brought about immediate and visible improvements across the network. As examples, overcrowding at peak travel times and the uneven temperatures in stations and trains have required continual innovation to manage expectations. Progress has been made in station technical and mechanical areas to mitigate problems where feasible, while extra customer service personnel are posted to manage instation traffic flows and platform crowding. Connectivity Our kilometres of rail lines extend across Hong Kong to connect communities in a seamless travel experience. New Vision in Customer Service Jordan Station on the Tsuen Wan Line brings Railway Vision 22 to life. A new level in customer service promotes more visible and interactive information displays, optimises efficiency and, through an iconbased IT platform, automates transactions. These enhancements give staff more time for personalised customer attention. The Customer Service Pledge sets annual targets for train safety, reliability and travel comfort. Quarterly performance is available at all MTR stations and published on our corporate website, hk/eng/publications 12 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

15 Safety With millions of people using our network daily, the absolute safety of our passengers, staff and services is a nonnegotiable priority. The Corporate Safety Management Committee, supported by four divisional committees, implements policy and guides safety management across operations and business functions. Even with this stringent governance system and the best of management efforts in place, we are on constant alert. MTR Operations In rail operations, where the safety of passengers and public is a focus, we continuously exert efforts to improve both our human and technical capacities in operations and engineering systems. Safety incidents arising from system faults have generally remained at a very low level. Our attention, therefore, increasingly focuses on managing passenger behaviour. Behavioural experts have been engaged to give advice on appropriate actions to avoid unsafe behaviour patterns on escalators, in crowding and jamming train doors and running in the stations. Independent Stakeholder Panel Shirlee Algire Sustainability and CSR Manager, Gammon Construction Limited On Contractor Safety The MTR Corporation s practice of early engagement on expectations and standards in safety allows us, as a contractor, to identify upfront risks and set safety as a priority within our own supply chain. The coordinated safety mindset established through this cooperation provides a best practice model for safety management across the local industry. Safety First There is no compromise on safety when it comes to our service. Continuous education and innovative communications to foster behavioural change have been implemented to keep the message alive and visible to passengers. This effort is complemented by equipment trials and modifications to reduce the number of accidents. We recognise the constant challenge to change group habits and continue to innovate and monitor for best solutions. Another challenge in 29 was the public health threat posed by the Human Swine Flu pandemic. In response, the Company implemented an extensive programme to educate both customers and staff about taking precautions and an Influenza Pandemic Command Team was established to implement a series of risk mitigation initiatives. Projects Safety management within the supply chain presents substantial challenges to future projects delivery. The shortage of local expertise needed for specialised construction works such as blasting and tunnel excavation stresses the already difficult safety environment we encounter. Our response is to work for longterm solutions by taking the steps to ensure safety improvement across the industry through specialised training and to motivate onsite practice through financial reward. Structuring financial reward incentivises target achievement. However, to ensure embedded practices, we require stringent verification and the robust onsite safety audit and programme administration. We use our partnering system to foster this safety mindset and to achieve best practice targets. By setting new standards in monitoring and reporting, we are substantially improving current industry practices. Property Development Similarly with our property development business, safety issues are controlled and monitored through a Development Agreement (DA) tailored for each development. The Control Document in the DA specifies targets set out under the directive of our Property Division s safety committee and closely aligns to OHSAS 181 certification. Like rail projects, achieving best practice requires continuous engagement, education and collaboration with our development partners and, more importantly, across their supply chain. The developer s contractor is responsible for the daytoday management and performance, while we only monitor compliance and onsite progress. China and International Business For overseas and mainland China projects, we work with our partners and contractors to ensure strict observance to local safety regulations and contractual obligations. We also undertake partnering and safety experience sharing to develop and implement the fitforpurpose safety management systems needed for the individual projects. Safety management, target setting, performance monitoring and accident reporting in these markets are subject to the same rigorous processes applied to our Hong Kong operations. Fatalities We regret to report a rise in fatalities during 29. Two passengers, two members of the public and a member of contractor staff died from accidents on our Hong Kong transportation network. A further seven contractor workers were killed in two separate industrial accidents on development sites under the control of the contractors to our partner property developers. The loss of life is unacceptable. Each of these accidents was investigated and followup actions were taken to mitigate the associated risks and prevent future recurrences. 13

16 Staff Development The manpower needs arising from the development of new railway extensions and corporate succession planning are a significant challenge to our human resource planning. In parallel are the construction industrywide issues of an aging labour force and the shortage in the next generation of skilled tradesmen, engineers and technical experts. The collective impact of these circumstances will intensify as the economy picks up and general employment activity commences in earnest across Hong Kong and the region. Mobilising the resources to fill the projected 2,plus vacancies by 212 on our railway projects and operations is a formidable task. The Integrated Staff Development Programme has been established to nurture staff with potential for further advancement, in addition to a steppedup recruitment drive to attract new talent. We are also collaborating at the industry level with official organisations and associations to promote the needed specialist training and to nurture future industry leaders. Internationally, we stage road shows inviting the major representative bodies of specialist contractors to engage their industry and members on our plans for the next phases in largescale rail construction. Our objective is to build competent teams combining local knowledge with the identified needed international specialist expertise. We facilitate introductions and often share information to encourage collaboration amongst professionals and our Hong Kong project contractors. STAFF PRODUCTIVITY Turnover per operating railway employee STAFF TRAINING DAYS (excludes offshore employees) Management training Operations man days 84,46 1,821 73,225 Total 86,942 16,895 7, With the development of new rail lines and extensions, we are providing significant employment opportunities and economic activity to the territory from 21 onwards. Foster a company culture that staff can learn, grow and take pride in Corporate Mission Statement Building Competencies The management tools to leverage competency and efficiency are taking on larger roles. The immediate goal is to foster efficiency in time and effort to deliver on tasks and, in the longer term, transform us to a learning organisation. The findings from Projects Division s AA1 stakeholder engagement gap assessment undertaken during the year, as an example, points to the need for intensified use of our knowledge management systems as engagement platforms and an improved approach to stakeholder engagement for the new rail lines. Work is in progress to realise this gain. As well, IT continues to innovate, facilitating better communications amongst the many offices, sites and technical exchanges across the organisation. We are also constructively responding to the results of our Staff Attitude Survey undertaken in late 28. A series of corporatewide programmes is in progress to address the key issues of job environment, change management and workload, departmental management skills, and the need to encourage innovation and communication. Equal Opportunity Employer We hire on the basis of a potential candidate s ability and suitability to meet specified job requirements irrespective of seniority, age, gender, race, family status, religion, disability or educational background. As an example, by yearend 29, we employed 65 Persons with Disabilities, accounting for 4.8% of our Hong Kong workforce (excluding subsidiaries). Blasting In early recognition of the shortfall in explosives experts (shot firers and blasting supervisors) needed for future tunnelling of rail lines, the Corporation advocated through the Construction Industry Council, in cooperation with the Government s Mines Division and the Hong Kong Construction Association, an intensive training course that fasttracks competencies and licensing for this specialised field. For the first training course, we enrolled 2 inhouse engineers to supplement existing competencies and accumulate the necessary experience for the anticipated uptake in HK$ million About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

17 Community Expectations Planning, building and revitalising Hong Kong s urban landscape changes communities. We are altering local lifestyles, introducing an infrastructure that lasts generations and creating community transport hubs that bring local social and economic development. Taking the timely and appropriate actions to balance the social and environmental expectations within these changes against our business objectives fosters intense dialogue on how we deliver our corporate promise. We recognise that we operate within an empowered society in which social aspirations are clearly maturing. As we improve, aspirations become more demanding, creating a continuous cycle for expectations delivery. Engagement with communities has significantly increased in scope and intensity as a result. We have expanded our Community Liaison Groups across all new projects to bring local communities into the planning and design stages of new stations, encouraging their input and buyin. This gives rise to the needed groundswell of popular support to facilitate government backing and timely delivery of projects. The West Island Line and South Island Line (East) are successful works in progress using this engagement strategy. The Government, as well, now takes a front row seat in many of our community engagement exercises, in particular, those projects in which we act as their agent such as the Express Rail Link and selected West Rail property developments. We have intensified relationships with District Councillors as source of reflection of community views and as adept facilitators in balancing various political, social and business agendas. Stakeholder engagement on property development is on a productive but challenging path, especially in town planning. The development scheme changes at the Nam Cheong Station set a precedent in the engagement process and a model for building consensus on property development. Similarly, in rail projects, early engagement with the communities affected by the West Island Line and South Island Line (East) has led to changes in our rail facilities that gives consideration to existing neighbourhood environments and ambience. Actively engage in communities we serve Corporate Mission Statement Within the framework of our Roadmap to Sustainability, we anticipate continuous and escalating community engagement over the next three to five years as construction intensifies. Each successive phase of the rail line delivery process brings new dynamics in community engagement requiring the refinement of process and scope. The West Island Line leads this with dialogue turning to the community disruption and mitigation of impacts over the next five years of living with construction. Roadmap to Sustainability In 28, we predicted how sustainable development was reflected in the Corporation post rail merger with KCRC. Using our risk management/stakeholder engagement approach inherent to the Sustainable Competitive Advantage business model, we are currently, as anticipated, in the phase of increasing stakeholder engagement. Read more about this Roadmap to Sustainability on our sustainability website. Communityfocused Property Development The West Rail Nam Cheong Station property development demonstrates a new model in property development planning with community involvement. Approved in 24, the original development scheme created a series of sidebyside towers that effectively blocked air flows and views to the immediate surrounding area. In response to the community s aspiration for a better living environment, the Government undertook the scheme s review in 27 with the intention of lowering the density and improving air ventilation. The Corporation spearheaded this, acting as the Government s agent and worked together with the District Councillors, who represented the affected communities. Active engagement resulted in a new development scheme that reduces gross floor area by 18% and decreases plot ratio from 8. to 6.6. An office tower and one residential highrise were eliminated, with the adoption of modified tower design and building repositioning. These changes introduced three generous breezeways, allowing for improved air ventilation and visual permeability. The commercial podium was also reduced and resized to offer a groundlevel plaza for public use. This new scheme and the engagement process involved provide an industry model for future developments by which a reasonable balance can be reached between social aspirations and the business viability of property development. History Alive! The campaign for local shutterbugs to display their historical photographs of Hong Kong attracts wide attention across our network. Nam Cheong Station property development before and after scheme review 15

18 Environment The Environmental Management System (EMS) drives the management and mitigation of our railway operations and project impacts. This centralised system coordinates the consistent and robust programmes and actions that identify, address, monitor and report on performance. The year was testing in successfully embedding the EMS as a fully functional system while maintaining ISO 141 certification to manage air quality, noise, water and waste across the Operations and Projects divisions and in selected properties managed by the Corporation. With the system now providing the set of procedures to define the baseline for measurement, we are positioned to address improvement in environmentally critical areas more actively. Importantly, it has been a year of extensive environmental impact assessments on the construction and operations of the future rail lines. While working to set compliance in regulations for submissions, the complexities of working with parallel projects have given rise to new issues when coordinating and developing these assessments. We are working to establish and maintain consistency in the methodologies used by different assessments and consultancies for the accurate prediction of impacts, in particular where impacts overlap. With government, we continue to foster the strong interface with and amongst various departments to build trust and a sense of partnership in working towards successful and timely approvals. And, due to the increased scrutiny by the public and vested interests on projects, we are taking the further step in translating quite technical documents into layman s language to openly engage such groups on our activities. This provides a strategic transparency and fosters the trust from the community in our approach to how we are altering their living environment. Responsible Procurement Sustainability in building, operations and maintenance starts at the procurement stage. The Supplier Code of Practice, adopted in 29, and our membership to the Hong Kong Green Purchasing Charter guide best practices at the early stages of the procurement process for supply and services planning with weighted reference to social and environmental performance. Commitment to these sets higher standards and expectations for materials choice and use. They encourage more sustainable design and building methods that promote 65 words responsible enduse resources consumption and the optimisation of an asset s lifecycle. Our goal is to promote the sustainability mindset from the procurement stage forward. By fostering partnerships and the active information sharing, education and capacity building, we seek to build a confidence in the capabilities of our contractors and suppliers. Our approach is to reward and encourage the steady improvement in contractual expectations and the systematic adoption of best practices. This confidence building process parallels our own organisational journey safety, quality, environment and, now, sustainability. It reflects our ethos of continual improvement through conscious and gradual introduction of best practices that eventually become the fabric of corporate culture. Water Recycling Space Challenge Rail construction within the dense urban space of Western District has raised the bar in applying innovative environmental practices. LOHAS Park is taking the lead in green living with the installation of a water recycling plant to serve the Park s community. The plant collects and treats greywater for use in cleaning and watering the extensive grounds of the estate. An estimated 1 cubic metres per day of recycled water will be produced once the plant is fully operational in 21. Statistics on our 29 water and electricity consumption by business units and our fiveyear environmental performance are located on pp.3, 32 respectively in this report. 16 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information

19 By involving the supply chain in our sustainability journey, we are addressing the growing issue of how to manage our spheres of influence and the impact we have as an urban infrastructure planner and builder. We recognise the need to resolve the supply chain disconnect of shared responsibility when planning and building intergenerational community assets. Through such practices as green procurement, we are bridging that divide and collectively promote society s broader sustainable development. HBLED Lighting Choi Hung Station leads the pilot programme for green lighting in our rail stations. The recent installation of HBLED lighting throughout the public areas of the station is expected to reduce station lighting electricity consumption by some 4%. Each HBLED light has an estimated life cycle of 5, hours and is replaced by a chip, therefore saving on the traditional fluorescent light tube waste. An attractive benefit to its use is the close resemblance to natural daylight, which enhances the travel environment. The networkwide adoption of the programme is expected to commence in 21, once the pilot programme is completed and assessed. Sustainable Building Practices Applying environmental best practices to our development properties is also a process of continuous improvement and education using global industry standards and practices as our benchmarks. Where technologies show promise, we internally test for local feasibility and share proven practices with our development partners. This encourages immediate industry adoption and the replication of best practices within our partners supply chains. To fulfil our social contract to deliver quality housing while working within development constraints, we apply innovation that can be adopted, controlled and facilitated by us. As an example, all new developments since 29 are contractually obliged to adhere to the voluntary BEAM Platinum certification and we are currently studying how to follow the BEAM Plus standard for future. We have developed inhouse standards such as an energyefficient electrical and mechanical building management system that is structured to adopt new technologies on a continuous basis. As a major participant in the local property industry, we take an active interest in promoting best practices and evolving standards and codes. In 29, we helped sponsor the inaugural conference of the Hong Kong Green Building Council and signed on as an institutional member of the Council. We wish to learn and share best practices for the industry and look forward to contributing to the Council s working committees as this industry body develops. EIA Reports Environmental Impact Assessment (EIA) reports are strategic to our environmental management strategy. They shift our focus beyond compliance towards the opportunities in using them to apply alternative methodologies or test new targets to control impacts. EIAs are increasingly used to support communication of environmental management on site and to the community. We are in the early stages of transforming statements technically complex information into interactive geographic maps of impacts and the related management methodologies to be easily understood by the public. This innovative approach will be a feature of the forthcoming dedicated South Island Line (East) website. Independent Stakeholder Panel Max Connop Executive Director, Aedas On Sustainability and Design Worldclass design is only achieved by true collaboration, embracing new ideas and innovation in architecture, engineering and construction. The origins of a visionary design are founded by a forwardlooking client and within a wellconsidered brief. With the growing global consciousness to climate change, the MTR Corporation has a pivotal role in creating a platform from which we, as consultants, can create a sustainable legacy for today s and the future generations. 17

20 Internal Mapping and Perceptions Stakeholder Engagement Do Perceptions Align? Internal Mapping and Perceptions Mainland China and Overseas Growth External Perceptions Gaps Outcomes With corporations worldwide increasingly questioned by empowered societies and operating under a paradigm shift in business ethics, we ask ourselves, Are we engaging stakeholders effectively? In 29, we undertook a series of initiatives that examined our stakeholder engagement processes. The purpose was to understand changes in the perceptions and expectations of our major stakeholders, compare them to internal perceptions, assess any gaps found, and identify future appropriate actions and opportunities. An internal stakeholder review was undertaken during the year to reassess the various stakeholder engagement programmes and their efficacy. The Corporate Responsibility Steering Committee, representing all divisions and major business units, reviewed, reprioritised and, in some cases, introduced new candidates to our universe of major stakeholders. The exercise used the accepted sustainability matrix of importance to business against ability to influence. The review has revealed where and when repositioning is taking place and identified current stakeholders of importance. While not wholly unexpected, the results reflect the changes in our corporate growth scenario and those groups closely involved with the related business risks. As an example, within government as regulatory stakeholder, the constituent bureaux that license and approve new rail and property projects have moved as a group into a more critical stakeholder positioning. Our joint venture partners in property development have also increased in importance to our business. This is due, in part, to the increased regulatory parameters in town planning and the need for continued profitable participation of developers in light of such changes. Independent Stakeholder Panel Christine Loh Chief Executive Officer, Civic Exchange Clarence Ng Project Director, Sun Hung Kai Real Estate Agency Ltd Stephen Fong General Manager, John Swire & Sons (H.K.) Ltd David Eldon Senior Independent NonExecutive Director, Noble Group Max Connop Executive Director, Aedas Marieke van Raaij Group Leader, Greater China, Towers Perrin Shirlee Algire Sustainability and CSR Manager, Gammon Construction Limited Bill Barron Professor, The Hong Kong University of Science and Technology Simon Ng Visiting Scholar, The Hong Kong University of Science and Technology 18 About this Report From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information