Grow in Hong Kong, Mainland of China and capture opportunities in Europe by extending our core competencies
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
We aim to be a globally recognised leader that connects and
grows communities with caring service.
Vision
Values
Excellent
Service
We are committed to proactively provide safe, efficient and caring service valued by customers.Mutual
Respect
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.
Value
Creation
We create profits through efficient execution, continuous improvement and innovation in delivering products and services valued by customers.Enterprising
Spirit
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.
Vision Mission Values (VMV)
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.
About this Report
From the Chief Executive Officer A Global Business Sustainability is Mainstream Focus Issues Stakeholder Engagement Climate Change Supporting Information Independent Assurance Report 01 02 04 06 10 18 22 26 35
Contents
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 multi-generational community asset with increasing global presence. This involves not only the responsible long-term 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.
About this Report
This report covers the MTR Corporation’s 2009 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 self-assessed 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 AA1000 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, www.mtr.com.hk/sustainability, which details the many initiatives and day-to- day 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 2009 year-end and before publication of this report are specified with the 2010 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 non-financial 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.
Scope of Report
Basis of Reporting
We value your feedback. Please contact the Sustainability Development Manager, [email protected], for comments or any further assistance you require in relation to our annual sustainability report and our other sustainability-related activities.
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 30 April 2010 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 2009. Rail operations maintained its high service standards and steady patronage and we embarked on our next round of rail asset improvement under Railway Vision 2020. 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 long-term 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 2009. 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 30-plus 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.
From the Chief
Executive Officer
HK$ billion
Social
TURNOVERRailway franchise revenue outside of Hong Kong Station commercial and rail-related revenue Hong Kong fare revenue 17,628 Rental, management and other revenue
08 09 HK$ million
18,797
Total 3,449 11,467 2,712 3,328 11,498 1,043 2,928FIXED ASSETS GROWTH
Service concession assets Investment properties Other property, plant and equipment 131.0 08 09 HK$ billion 38.1 77.4 15.5 41.0 77.3 19.3 SAFETY TRAINING PROPERTY DIVISION number of participants
Environmental
Economic
137.6
Total 264 ELECTRICITY PURCHASEDCorporate supporting units Property investment and management Railway operations
percentage (%) cubic metres (m3)
09 77.45 20.99 1.56 08 20.71 77.71 1.58 WATER CONSUMPTION
Property investment and management Total Railway operations 09 21,336 910,650 860,386
1,792,372
Total PASSENGER NUMBERS4,329
Total 08 09 4,273 weekday average ‘000 Airport Express Cross-boundary Service Domestic Service Light Rail Buses IntercityDEBT EQUITY RATIO
Total equity attributable to equity shareholders Loans outstanding 05 06 07 08 09 20 40 60 80 100
106.4
23.9
Corporate supporting units 100 200 300360
08 09Recurring businesses remained resilient with a marginal revenue increase of 0.7%. Including contribution from the new railway franchises outside of Hong Kong, total revenue grew 6.6%.
Fixed assets increased owing to further investment in Shenzhen Line 4 and investment property revaluation gains. 9 99 385 29 237 3,514 8 107 402 27 240 3,545
Sustainability Performance Highlights
• Board-level 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
• ISO 14001 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
People’s Republic of China
Hong Kong SAR (Headquarters)
Shenzhen United Kingdom
London Sweden Stockholm Beijing Australia Melbourne Shenyang Hangzhou
A Global Business
Weighted Sustainability Issues
• Guiding passenger safety behaviours • Managing diversity of customer expectations • Resources management
• Continuous improvement
Organisational Focus Issues
• Economic Viability • Customer Service • Safety Standards • Staff Development
• Community and Social Expectations • Environmental Protection
• Climate Change Mitigation and Adaptation
Hong Kong Passenger Services
Seamless and convenient rail travel connects people to their destinations across Hong Kong and into mainland China.
See MTR Operating Network with Future Extensions and Properties on pp.28-29.
218.2
kmTotal route length84
Heavy rail stations68
Light rail stops1
Cross-boundary passenger service17
Feeder bus routesNP360 Cable Car
Organisational Sustainability
Business Units
Our Vision is to be a globally recognised leader that connects and grows communities with caring service.
Global Performance Highlights
• Funding support approval and Entrustment
Agreement signed for the Hong Kong section of the Guangzhou-Shenzhen-Hong 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 2010) Hangzhou Metro Line 1
TOTAL STAFF STRENGTH
07 08 09
1,242 Station commercial and rail-related business
Offshore employees Property and other business
14,134 14,076
20,150
TotalProjects
Corporate management and support departments Operations China and international business 1,319 1,365 239 294 8,632 7,059
AWARDED/CONFIRMED
• Shenzhen Line 4 • Shenyang Line 1 and 2 • Beijing Daxing Line
(extension of Beijing Line 4)
• Hangzhou Line 1 (March 2010)
(Concession Agreement subject to approval by relevant Chinese authorities)
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
Weighted Sustainability Issues
• Align built environments to rapidly changing
social aspirations
• Use highest standards in building practices • Deliver value for money
Mainland and Overseas Growth
Property and Other Businesses
Our reputation in safety, reliability and quality services leverages our business growth in mainland China and overseas markets.
In conjunction with professional property developers, we build and manage environments that deliver quality of life aspirations. IN OPERATION • London Overground • Stockholm Metro • Melbourne Metro • Beijing Line 4
Weighted Sustainability Issues
• Local community buy-in and support • Effective communications with stakeholders
and society
• Environmental management including asset
life-cycle 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
Rail Project Construction
We build an enduring community asset that envisions and contributes to the long-term sustainability of our society.
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
INVESTMENT
274,508
m2lettable floor area
DEVELOPMENT RIGHTS
2.56
million m2 MANAGED79,449
residential units742,414
m2 commercial/office spaceWeighted Sustainability Issues
• Innovation in service platforms
• Provide service that adds to the travel experience
Station Commercial and
Rail-related Businesses
We provide customer service that enhances the travel experience and reflects modern lifestyle aspirations.
HK$7.11
millionAdvertising revenue per station
STATION COMMERCIAL AND RAIL-RELATED REVENUE COMPRISED
17.7%
of total revenue for the year 20091,228
Kiosks and mini-banks in stationsWhy the Business Case?
An interactive presentation of the SCA model's processes in practice is available on our sustainability website.
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.
The model is resilient to the changes that impact the framework’s processes over short periods of time while guiding the longer-term 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. For full explanation of the Sustainable Competitive Advantage business model as a management decision-making process and framework for materiality assessment, refer to the webcast of the Materiality Map on our sustainability website.
Sustainability Policy
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.
STAKEHOLDER ENGAGEMENT Corporate Strategy/ VMV RISK MANAGEMENT
Sustainable Competitive Advantage
(SCA) Business Model
Sustainability is Mainstream
• 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.
Developing a Community Presence
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 co-operation. 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.
We aim to be a
globally recognised
leader that connects
and grows communities
with caring service.
The Corporate Vision
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.
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.
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. 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.
Our Board of Directors comprises a majority of non-executive directors that ensure policy is balanced through their broad spectrum of expertise in business and society. The Corporation’s 2009 Annual Report discusses corporate policy and governance in-depth.
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.
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 thought-provoking 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.
Environmental Heritage
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 100-plus-year-old 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: www.mtr.com.hk/eng/projects/treedata/wil-treedata.html
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.
Christine Loh
CEO, Civic Exchange on Climate Change
Independent Stakeholder Panel
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 carbon-intensive sectors in Hong Kong. What better way to establish a base line than to look at the best practices from our own community?
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.
Priority Sustainability Business Risks and Performance 2009
Priority Business Risk Key Stakeholder Performance Indicator(1) 2007 2008 2009
Economic Financial
stability Government Shareholders Business partners
Operating profit from railway and related business before depreciation and amortisation (HK$ million)
5,912 9,325 9,502
Social Maintaining
passenger numbers Shareholders Staff Passenger trips (weekday average in million) 2.63 4.27 4.33 Maintaining rail and
retail patronage Passengers 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 99.9 - - -99.9 99.9 99.9 99.9 99.8 99.9 99.9 99.9 (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
99.9 99.9 - -99.9 99.9 99.9 99.9 99.9 99.9 99.9 99.9 (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 99.7 99.9 - - -99.7 99.9 99.8 99.9 99.9 99.7 99.9 99.9 99.9 99.9 (d) Train reliability (revenue car-km/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
1,808,854 -2,296,511 1,906,355 1,926,928 2,636,479 Developing and
retaining staff Staff Staff turnover rate (%) 2.8 3.6 2.0
Ensuring the health and safety of passengers, staff and contractors
(Expanded divisional targets and data presented on p.27)
Environmental Breaches of statutory environmental requirements
Government Legal compliance (MTR Corporation) —
number of successful prosecutions 0 0 0
Government
Contractors Legal compliance (project contractors) — number of successful prosecutions 0 1 2
(3) Long-term energy supply without renewables (GHG emissions) Shareholders Passengers Customers Suppliers Community
Greenhouse gas emissions (tonnes CO2-e)(4)
675,560 1,097,151 1,161,431
Climate change (Response to pandemics and other climate change risks)
Staff Passengers Customers Community Suppliers Contractors
Annual review of risk — the annual review comprises a risk assessment and a continuous process of risk management actions
Review
completed completedReview completedReview
(1) Refer to p.37 for definitions. (2) Excludes KCRC data post rail merger.
(3) Contractor breach of Noise Ordinance fine HK$12,000 and contractor illegal construction work in a conservation area fine HK$75,000. (4) Refer to p.25 for detailed breakdown.
Economic Viability
Focus Issues
What Keeps Us
on 360˚ Alert?
• Economic Viability • Staff Development • Customer Service • Community Expectations • Safety • Environment
Governance, liquidity, risk management and trust are amongst the hard lessons learned from the global financial crisis. They are poignant reminders to our own economic sustainability and how we must steward the Corporation in the years to come.
With the launch of an ambitious territory-wide infrastructure programme announced in 2007 by HKSAR Government, the Corporation takes up four new rail projects of the proposed ten mega projects and will substantially extend the existing network. This ramp-up of activity requires continuous and innovative allocation of resources, skills and management across the organisation as we initiate each new project.
In the two years since we have merged our rail
operations with the Kowloon-Canton Railway
Corporation, we have grown in competencies, head
count and business opportunities. The commitment to
sustainable development has supported and guided
business decisions during these times and continues to
shape activities as we expand our global footprint.
Our core competencies of rail transport and related
services and, property development and management
drive our organic growth. Within this growth pattern,
a set of prioritised sustainability risks has evolved.
While this portfolio of risks has remained relatively
constant over time, the dynamics around them are
in constant flux, resulting in different and varying
degrees of impact. We label these dynamics "weighted
sustainability issues".
This year, a number of these issues have emerged
or intensified that pose significant challenges to our
organisational development.
SHARE PRICE PERFORMANCE MTR share price relative to HSI MTR share price
Jan June Dec 09
Relative Index 15 10 20 25 30 35 HK$ 140 120 120 100 80 160
OPERATING PROFIT CONTRIBUTIONS
Railway operations and related businesses
Property ownership, management and other business
Property development
Railway franchises outside of Hong Kong
HK$ million
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.
07 08 09
13,056
13,995 14,216 7,398 1,927 4,670 3,554 8 2,062 7,432 4,618 1,294 8,304Our “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 2009. The current portfolio includes investment projects and operating concessions through wholly-owned 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 multi-level 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.
The 2009 Annual Report gives full details on our economic performance for the year. View the report at www.mtr.com. hk/eng/publications/ index.html
Urban Landscapes
Our "Rail and Property" business model is internationally recognised as a leading strategy for 21st century urban development.
Sustainable Competitive Advantage
Risk Management Process
Identify and Prioritise Actions
Monitor and Report
STAKEHOLDER ENGAGEMENT Corporate Strategy/ VMV RISK MANAGEMENT
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 high-speed network of mainland China.
Provide sustainable
returns to investors
Corporate Mission Statement
A number of newly prioritised community-based stakeholder risks have emerged in the run-up 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 buy-in 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.
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 long-term 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 barrier-free access to stations and services and more intelligent passenger communications, while the upcoming Generation Z and the “One-der” 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 2020 spearheads our rail asset enhancement. Covering a spectrum from leading-edge infotainment delivery systems to rail-car travel efficiency and comfort, we emphasise quality of life. In 2009, 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 high-speed internet services. We are in progress to upgrade customer service counters that provide more personalised customer interaction.
Connectivity
Our 218.2 kilometres of rail lines extend across Hong Kong to connect communities in a seamless travel experience.
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.
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, www.mtr.com. hk/eng/publications
Customer Service
Enhance customers’
quality of life and
anticipate their needs
Corporate Mission Statement
New Vision in
Customer Service
Jordan Station on the Tsuen Wan Line brings Railway Vision 2020 to life. A new level in customer service promotes more visible and interactive information displays, optimises efficiency and, through an icon-based IT platform, automates transactions. These enhancements give staff more time for personalised customer attention.
MARKET SHARES OF FRANCHISED PUBLIC TRANSPORT IN HONG KONG
Mini-buses Buses MTR
Trams & Ferries
08 09 percentage (%) 14.9 42.0 3.4 39.7 15.1 42.6 3.4 38.9
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 in-station traffic flows and platform crowding.Engagement, feedback and day-to-day 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 2009 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.
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 2009 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 long-term solutions by taking the steps to ensure safety improvement across the industry through specialised training and to motivate on-site practice through financial reward. Structuring financial reward incentivises target achievement. However, to ensure embedded practices, we require stringent verification and the robust on-site 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.
Safety
With millions of people using our network daily, the absolute safety of our passengers, staff and services is a non-negotiable 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.
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 18001 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 day-to-day management and performance, while we only monitor compliance and on-site 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 fit-for-purpose 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 2009. 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 follow-up actions were taken to mitigate the associated risks and prevent future recurrences.
Shirlee Algire
Sustainability and CSR Manager, Gammon Construction Limited On Contractor Safety
Independent Stakeholder Panel
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 co-ordinated safety mindset established through this co-operation provides a best practice model for safety management across the local industry.
man days
08 09
STAFF TRAINING DAYS
Operations Management training (excludes offshore employees)
70,047 16,895 10,821 73,225 84,046
86,942
Total STAFF PRODUCTIVITYTurnover per operating railway employee
HK$ million 0.5 1.0 1.5
1.62
1.57 1.54 1.52 1.58 07 08 05 06 09Staff 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 industry-wide 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 2,000-plus vacancies by 2012 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 stepped-up 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 large-scale 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.
With the development of new rail lines and extensions, we are providing significant employment opportunities and economic activity to the territory from 2010 onwards.
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 AA1000 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.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 co-operation with the Government’s Mines Division and the Hong Kong Construction Association, an intensive training course that fast-tracks competencies and licensing for this specialised field. For the first training course, we enrolled 20 in-house engineers to supplement existing competencies and accumulate the necessary experience for the anticipated uptake in 2010.
Foster a company
culture that staff
can learn, grow and
take pride in
Corporate Mission Statement
We are also constructively responding to the results of our Staff Attitude Survey undertaken in late 2008. A series of corporate-wide 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 year-end 2009, we employed 605 Persons with Disabilities, accounting for 4.8% of our Hong Kong workforce (excluding subsidiaries).Community-focused
Property Development
The West Rail Nam Cheong Station property development demonstrates a new model in property development planning with community involvement. Approved in 2004, the originaldevelopment scheme created a series of side-by-side 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 2007 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 8.0 to 6.6. An office tower and one residential high-rise were eliminated, with the adoption of modified tower design and building re-positioning. 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 ground-level 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
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 buy-in. 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.
Actively engage in
communities we serve
Corporate Mission Statement
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.
Roadmap to Sustainability
In 2008, 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.
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.
Space Challenge
Rail construction within the dense urban space of Western District has raised the bar in applying innovative environmental practices.
Environment
The Environmental Management System (EMS) drives the management and mitigation of our railway operations and project impacts. This centralised system co-ordinates 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 14001 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.
Water Recycling
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 grey-water for use in cleaning and watering the extensive grounds of the estate. An estimated 100 cubic metres per day of recycled water will be produced once the plant is fully operational in 2010.
650
words
Responsible Procurement
Sustainability in building, operations and maintenance starts at the procurement stage. The Supplier Code of Practice, adopted in 2009, 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 responsible end-use resources consumption and the optimisation of an asset’s life-cycle. 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.Statistics on our 2009 water and electricity consumption by business units and our five-year environmental performance are located on pp.3, 32 respectively in this report.
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.
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 2009 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 in-house standards such as an energy-efficient 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 2009, 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.
HB-LED Lighting
Choi Hung Station leads the pilot programme for “green” lighting in our rail stations. The recent installation of HB-LED lighting throughout the public areas of the station is expected to reduce station lighting electricity consumption by some 40%. Each HB-LED light has an estimated life cycle of 50,000 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 network-wide adoption of the programme is expected to commence in 2010, once the pilot programme is completed and assessed.
Max Connop
Executive Director, Aedas On Sustainability and Design Independent Stakeholder Panel
World-class 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 forward-looking client and within a well-considered 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.
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 Non-Executive 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
Do Perceptions Align?
Stakeholder Engagement
• Internal Mapping and Perceptions • Gaps • Mainland China and Overseas Growth • Outcomes • External Perceptions
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 2009, 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 re-assess 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 re-positioning 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.
