SUSTAINABILITY ACCOUNTING

During 2003 and early 2004, MTR undertook a Sustainability Accounting study to estimate the costs of managing priority social responsibility and environmental business risks for the operating railway and MTR's support divisions for calendar year 2003. It is MTR's intent to estimate these costs and benefits on an annual basis to provide a broad indication of how these costs change as the Corporation evolves into new business areas and geographic locations and invests in new railways.



At an early stage, it was agreed internally that the study would not be sufficiently accurate to allow its results to be used for management purposes. As such, the study was primarily intended to reinforce MTR's commitment to transparency and openness to its stakeholders. In addition, many organisations, especially Hong Kong corporates and urban rail operators world wide, regard MTR as a role model and are keen to understand the financial costs of incorporating sustainability as a means of enhancing long-term shareholder value.

The study was undertaken by an ad hoc MTR Working Group with discussions with senior management. The framework for the study was based on MTR's priority business risks and on the Corporate Sustainability Assessment questionnaire developed by Sustainable Asset Management. MTR's Activity Based Costing (ABC) System was used to provide cost data, comprising staff costs and departmental operating expenses, for the study and already incorporates some costs that are inherent in the activities reported below. Cost data from the ABC system does not include capitalised activities (eg: capital works, projects work and extension works). The majority of costs incurred by the Project and Property Divisions?are capitalised costs and as such, these Divisions were not included in the study.
Summary results of the study are presented in Table 4.2. The cost of managing priority social responsibility and environmental business risks for the specified Divisions is HK$292m, equivalent to 18% of total costs of HK$1,643m.