Good corporate governance and risk management form the bedrock of a sustainable business and underpin long-term success. To protect this bedrock, the Group continuously strives to embed good corporate governance practices in its day-to-day operations, in pursuing its vision and by implementing CLP's Value Framework.
Corporate governance framework and code
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Robust corporate governance framework promotes and safeguards the interests of shareholders and other stakeholders. CLP is committed to maintaining a rigorous framework of corporate governance that upholds the Group’s credibility and reputation.
GRI reference: 2-9, 2-12, 2-15, 2-23, 2-24
Corporate governance is a matter of culture, driving CLP to continually make conscious decisions around correct behaviours. Over the years, the Company has developed and put in place a CLP Code on Corporate Governance, Corporate Governance Framework and a comprehensive set of procedures, systems, policies and guidelines that make up the unique CLP corporate governance structure.
The CLP Code was last updated in early 2023 to reflect the new requirements under the Corporate Governance Code Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (HKEx). The CLP Code, while embracing the terms set out within HKEx's Corporate Governance Code, goes beyond this by advancing a structure that builds on CLP’s own standards and experience.
The Board is CLP’s highest governance body and actively promotes the success of the Group by directing and supervising all of its affairs in a responsible and effective manner. Some of these responsibilities are discharged through delegation to six Board Committees. The two committees most involved in sustainability-related matters are the Sustainability Committee and the Audit & Risk Committee.
In 2022, the Board spent its time on strategy, performance monitoring and planning, governance and risk, stakeholder engagement, leadership and people.
The CLP Corporate Governance Report in the Annual Report discloses the Company's governance performance in detail. Below are the highlights from 2022:
Board Succession – Appointed Board members and Independent Non-Executive Director (INED) to enhance the Board's diversity.
Board Committees Refresh – Refreshed the composition of CLP Holdings Board Committees.
Alignment of Subsidiary Board Leadership with Business and Functional Responsibilities – Refreshed the Board directorship of CLP Group Subsidiaries with two key objectives, which are:
delegating the management of the subsidiary board from the C-suite management to mid-management such that the C-suite management can better focus on the management at the senior leadership level; and
empowering mid-management to take up the leadership and management of the subsidiary boards whilst ensuring that this would be well aligned with their business/functional responsibilities.
Female Director Representation Target of 30% – Set target for female Directors representation on the CLP Holdings Board to enhance diversity. The target of 30% representation is not a ceiling, and if it fails below 30%, CLP will provide clarity in relation to the appointment or change in Board composition and the expectations of return of female Director representation to at least 30% or higher. This will be reviewed by the Nomination Committee on an annual basis.
A strong governance framework is key to ensuring that the sustainability issues CLP faces are incorporated into the corporate agenda. Sustainability is well integrated into CLP's business strategy and the CLP Board has overall responsibility for CLP’s environment, social and governance (ESG) reporting and sustainability. Sustainability governance has been embedded in the corporate governance structure throughout the Group – from Board-level committees to management-level Group functions and business units.
Two of the Board Committees, the Sustainability Committee and the Audit & Risk Committee, have separate but complementary roles in sustainability management. These two committees are supported by the Sustainability Executive Committee and coordinated by the Group Sustainability Department.
Sustainability Committee
The Sustainability Committee holds the primary role of overseeing the management of the Group’s sustainability issues.
Following on from the update of our Climate Vision 2050 in September 2021, the Committee has been closely monitoring the evolving developments on climate change. Ensuring that the Committee maintains a balanced view, the Committee was briefed on the latest developments by two leading external experts on separate occasions on the topics of the impact of the energy crisis on climate action and the key outcomes of COP27. The Committee also had a robust review of the Climate Vision 2050 and how CLP’s performance and commitment on climate action have been received by CLP’s stakeholders.
Between 1 January 2022 and the date of this report, the Committee met four times (including three times in 2022 and once in 2023). The following table is a summary of how the Committee spent its time during this period.
Overview of work conducted by the Sustainability Committee between 2022 and the date of this Report
2022
2023
Feb
Oct
Nov
Feb
Climate Change-related Matters
Other Sustainability Matters – risks, opportunities and emerging issues
Sustainability Reporting/Indices performance
Sustainability Governance
Health, Safety, Security and Environment
Community, charitable and environmental partnerships and initiatives
The Committee will continue its focus on longer-term emerging sustainability issues concerning the Group, in particular on climate change. It is well aware of the Group’s stakeholders’ increasing focus on climate-related issues.
A key responsibility of the Audit & Risk Committee (ARC) is to maintain oversight of CLP’s financial control, risk management and internal control processes, by ensuring that adequate systems are in place and followed.
Risks are managed at both the strategic and operational levels to support the long-term sustainability of growth objectives, while at the same time supporting the operational needs of the current business.
The ARC is also responsible for ensuring the assurance of the ESG data in the Sustainability Report is appropriate. Independent oversight is maintained through a robust internal control system and assurance of the accuracy of metrics and reporting that follows appropriate accounting principles and reporting practices. CLP’s independent auditor is also responsible for assuring key ESG data and their findings and observations are presented to senior management and the Board through the ARC.
The Sustainability Executive Committee (SEC) has the strategic responsibility of assessing and managing sustainability issues.
The SEC is chaired by the Chief Executive Officer (CEO) as part of the role’s executive-level responsibility for economic, environmental and social matters. Set up in 2016, the SEC comprises the corporate senior management team of:
Mr Richard Lancaster (CEO), Chairman, also Chairman of the Sustainability Committee;
Ms Quince Chong (Chief Corporate Development Officer), also a member of the Sustainability Committee;
Mr Nicolas Tissot (Chief Financial Officer);
Mr Derek Parkin (Chief Operating Officer) (since September 2022), in place of Mr Michael Hutchinson (Acting Chief Operating Officer) (since December 2021);
Mr David Simmonds (Chief Strategy, Sustainability and Governance Officer);
Ms Eileen Burnett-Kant (Chief Human Resources Officer); and
Mr Hendrik Rosenthal (Director – Group Sustainability).
The SEC steers the sustainability strategy of the Group and approves relevant deliverables. The CEO and CFO also hold management responsibilities for the assurance of ESG data, and jointly sign off the General Representation Letter connected with the assurance process.
In 2022, the SEC convened five times, including before each Sustainability Committee meeting. These meetings provide a platform for the executive team to initiate or develop strategic sustainability projects, shape and receive progress updates on current projects and engage in strategic discussions on emerging issues.
Key themes discussed in 2022 are summarised below:
Monitored emerging stakeholder expectations on climate actions. This included increased transparency of a company's commitments with the Paris Agreement, low-carbon transition plans, and exposures to climate-related risks and the implications to its business strategy;
Reviewed the climate benefits of different energy services. Specifically, the carbon reduction potential of CLP’s new energy services offerings, and their commercial potential;
Provided direction to CLP's Climate Vision 2050 review, in light of the developments mentioned above;
Monitored the latest development of voluntary carbon markets and their implications on CLP. This included:
reviewing CLP’s response to the public consultation, conducted by the Integrity Council for the Voluntary Carbon Market on the draft principles for voluntary carbon credit standards developed; and
monitoring the Voluntary Carbon Markets Integrity Initiative, which is developing guidance on the credible use of carbon credits;
Reviewed the material topics identified in materiality assessment and determined the impact material topics and financially material topics to be featured in the Sustainability Report and the Annual Report respectively;
Maintained oversight of the Company’s public disclosures on sustainability issues, including the CLP Annual and Sustainability Reports, and the CLP Climate-related Disclosures Report;
Provided direction to the Company’s response to the various ESG disclosures standards, including the ISSB exposure drafts on General Sustainability-related Disclosures.
Reviewed the scope of sustainability data assurance;
Reviewed and endorsed the Group’s environmental targets, covering air emissions, waste and water use;
Reviewed performance of ESG indices results and trends to drive improvements in operational performance;
Reviewed the World Business Council for Sustainable Development (WBCSD) membership criteria; and
Reviewed and endorsed the Supplier Code of Conduct and three-year roadmap to embed sustainability in procurement practices.
Group Sustainability Department
The Director-led Group Sustainability Department regularly reports to and seeks guidance from the Sustainability Committee and SEC.
The Department is responsible for managing the implementation of the Group’s climate change strategy. This includes reporting and reviewing progress on CLP’s Climate Vision 2050 and TCFD implementation, as well as monitoring changes in stakeholder expectations and their implications to the Company.
Through its role, the Department embeds sustainability into existing operational practices and helps inform the development of the business strategy and planning processes. It monitors sustainability issues and updates the Sustainability Committee and SEC on emerging risks and opportunities. It also leads corporate sustainability reporting and identifies areas for improving operational performance.
In executing best practice, the Department is committed to developing capacity on ESG reporting and performance management as well as exchanging its experiences across organisations, sectors and countries. It supports and organises sustainability-related events and works closely with different stakeholder groups. For instance, the Department hosts Sustainability Forums and meetings with Group functions and Business Units across regions on a regular basis to facilitate the sharing of experiences and insights on how to move sustainability forward.
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