Our vision, to be a world-class enterprise growing in Hong Kong and beyond, focusing on rail, property and related businesses, shapes our future as a company and as a workforce. The choices in how we achieve this
and the methodologies we employ drive our performance strategies.
Mission ¡E Our corporate mission is to provide excellent value to our customers, enhancing their quality of life and, contribute to the
development of the communities in which we operate. We provide opportunities for our employees to grow and prosper with the Company and reward our investors. We work to develop the rail network as the backbone of Hong Kong's public transport system and develop property along our rail network lines. Similarly, we seek to grow our successful rail+property model in mainland China. We work to capture opportunities in Europe
by building on our core competencies in
rail management.
Values ¡E We articulate our vision and mission through clear working values and their consistent application across all businesses and markets in which we operate. Excellent service, mutual respect, value creation and enterprising spirit form the foundation of our values and mission. The Code of Conduct and, most recently, the CSR Guideline express these corporate values and direct how we apply them in practice. The Code specifies employee conduct as a representative of the Company while the CSR Guideline frames the ethical approach to our working lives.
Management structure and strategy ¡E The Corporation is structured into seven divisions-Operations, Property, Project, Human Resources and Administration, Finance, Legal and Procurement, and China and International Business. Each division, while sharing common goals and targets, utilise their own defined sets of processes and procedures to identify risks, optimise performance and, manage and achieve specified operational targets through purpose-driven initiatives. In addition to these seven divisions, the Marketing, Corporate Relations and Internal Audit departments are directly supervised by the CEO.
CSR Guideline ¡E In December, the enterprise-wide CSR Guideline was established. It enshrines the international principles of social and environmental responsibility, ethical behaviour, human rights and establishes the means for consistent application of our corporate values across the organisation and in all businesses in which we engage.
This Guideline provides a clear position linking current initiatives while allowing the principles to reflect the Corporation's changing businesses. It is supported by a number of top-down and bottom-up initiatives with our key stakeholders in the area of community investment, employment and social affairs, sustainability and environmental initiatives. Most importantly and aligning with our sustainability goals, the CSR Guideline establishes a single set of corporate workplace principles that will shape our best practice in all markets in which we operate.
Risk management ¡E Under the umbrella supervision of the Executive Committee, the recently implemented Enterprise Risk Management (ERM) strategy combined with active stakeholder engagement embodies our broader strategic vision to achieve sustainable competitive advantage.
The ERM strategy significantly improves business risk assessment and subsequent management processes. The purpose of further evolving strategy is to provide a uniform corporate-wide visibility on risk, thus giving internal stakeholders an understanding of how risks impact the whole of the organisation, rather than on the previous held division by division basis. The strategy establishes a common standard for identifying and measuring risks across all functions and business units and prioritises the primary risks to be collectively managed while encouraging a common risk management culture.
The methodology of the ERM strategy employs our established process of identification, prioritisation, action and monitoring and reporting while utilising at the identification stage a new consequence index criteria. This criteria rates risk within the five key areas of impact ¡V finance, rail safety, operations, reputation/political and legal ¡V for their effects using a combination of highest consequence score and the likelihood score to establish a specified "E-rating" so as to allow the corporate risk rating to be quantified. Those factors that in previous years including 2005, constituted the priority risks form a part of the overall major identified risk areas for the ERM strategy. As the ERM strategy is fully functional from early 2006, the process and related changes in identification and prioritisation will be part of the 2006 reporting process. For an in-depth discussion of risk management refer to the Sustainability section of our website.
Chart: Selected Priority Business Risks, Key Stakeholders, Performance Indicators and 2005 Performance
Engagement process ¡E Stakeholder engagement interacts with our risk management process to form a continuous dialogue of information sharing and process adjustment to maintain timely response and business planning. This interaction utilises appropriate avenues and formats to gauge and address sensitivities to arrive at constructive management decisions and, ultimately, sustainable competitive advantage in business strategy.
Sustainability accounting ¡E Our proprietary accounting methodology which links sustainable business risks to financial consequence marked its third year of practice. The framework, based on a combination of our internal priority risk model and the SAM Group's Corporate Sustainability Questionnaire, aligns with the Corporation's Activity Based Costing (ABC) system as the accounting base. This framework is consistent for these first three years of practice. It utilises data from staff, departmental operating expenses and, as of 2004, includes non-risk capital costs principally sourced from the asset improvement works. While not indicative of overall corporate operations, this accounting process enables us to measure annually, quantify and compare the costs of our sustainability risk management on a passenger-services basis. The 2005 results show a three-year trend in generally consistent expenditure. With the refined risk identification process brought about by implementation of the ERM strategy, the accounting data inputs are anticipated to change in 2006 and create a more encompassing financial assessment on risks.
International standards ¡E While we continually improve systems to achieve stringent internal targets, we solicit external opinion to measure our performance and systems effectiveness by international standards. To this end we actively participate in recognised industry initiatives that lend objective observation to our operations and lead to performance enhancement and adoption of best practices.
The MTR Corporation chairs the Sustainable Development Commission of the International Association of Public Transport (UITP) . Under the UITP Charter on Sustainable Development, the Commission is working internationally to initiate a set of economic, social and environmental reporting indicators and, in progress, to develop a sector position on climate change. This work potentially leads to overall sector reporting standards by the middle of 2007.
The CoMET Group is an affiliation of major international metro operators who annually undertake a voluntary benchmarking exercise for the purpose of gauging best performance in areas such as service reliability, cost effectiveness, staff efficiency and safety. The 2004 benchmarking exercise has again confirmed our performance excellence. In the 12 categories measured, we ranked on average amongst the best performing of participating metros, reaffirming our consistent performance and services excellence.
Our independent assurance programme conducted with PricewaterhouseCoopers Hong Kong is in its third year. The objective of their work is to collect and evaluate evidence to confirm the quality of data in respect to the most important indicators of our 2005 Performance which are presented on pages 10-11.
Property 'through train' ¡E Our mission is to bring people to our network by building regional communities in proximity to rail transport hubs that deliver modern lifestyle aspirations. To achieve this goal we operate under a 'through train' strategy that begins with an urban master plan realised through development co-operation in project delivery and ends with the framework for sustainable practices in property management.
Our vision for quality of life changes the way communities are designed and built in Hong Kong. The Dream City of Area 86 in Tseung Kwan O brings this vision to life. When completed, residents of this community comprising 50 tower blocks will own high-quality housing, have cultural and recreational amenities at their doorstep, walk at street level with minimal vehicular traffic and benefit from urban planning that incorporates the surrounding natural green environment. This will be achieved largely through the pedestrianisation of the community and its environs in which transport interchanges and access roads are located below ground.
In all our property developments, we work with developers in the design and construction process to ensure our master plan is achieved and projects are delivered to specified quality and standards. We have in place project managers and site representatives to monitor progress and hold regular meetings to ensure timely progress and professional management of site issues including safety, labour practices and delivery to specifications. For all future tenders for property development, specifically those of Area 86, we have enhanced the environmental aspects of the design requirements as well as adopted the voluntary certification by the HK-BEAM (Hong Kong Building Environmental Assessment Method) Society that provides the assessment and standards to measure, improve and label the environmental performance of buildings.
In addition to its safety management programme, the Property Division employs internally-developed systems for best practice that generally align with established ISO 14001 and 9001 systems and the OHSAS 18001 system. While working towards full certification for the division, these modified systems currently operate to fit the corporate business case and provide the model for eventual certification.
Global businesses ¡E We are at the threshold of major undertakings in projects both in mainland China and in Europe. In our current planning and bidding stages we are reviewing project scope and identifying areas where application of our vision and principles are opportune.
Mainland China poses a unique set of challenges in this direction. As our projects advance towards a works programme in Beijing and the detailed urban planning for the Shenzhen Metro Line 4 takes shape, we are increasingly exposed to the more contentious issues of environment, employment, supply chain and governance. While at this juncture our investments and activities in mainland China remain a minor component of our overall business operations, our priority nonetheless is to operate responsibly, to apply our corporate values across projects there and to embed long-term sustainable practices that serve as models for future projects. We acknowledge that this is an intensive and long-term engagement process and we may not achieve the current standards of Hong Kong. It will require, amongst other undertakings, a steep learning curve for ourselves and our working partners as to what works best in this emerging economy mindset without compromise to our services quality
and standards.
Our preliminary focus in view of the current progress is in sustainable safety management. In Beijing, where construction of the civil works by Beijing MTR Construction Administration Corporation is under way and will be handed over to us, we are in dialogue with project partners to ensure delivery of infrastructure integrity. The application of 'fit for purpose' safety standards in these early stages of construction are critical components of our own subsequent contracted works for the project. By encouraging such high standards in safety with partners we are effectively mitigating negative direct and indirect impacts of potential sub-standard work that affects our own staff performance, eco-efficiency, asset life-cycle management and the long-term maintenance costs of the rail network.
