Stewardship
Leading by Example
Year of the Customer
Building Community Capacity
Business Partners
Investors
Environmental Excellence

Stewardship

In the stewardship of this community asset, our performance is underpinned by a focused strategy, an enterprising work culture and defined management systems to achieve best practice. However, in today's business climate stewardship expects a leadership that requires more than maximising effiencies or achieving set targets. It centres on systematically driving the strategies, processes and initatives forward to workplace application that embeds a socially responsible mindset.

We view stewardship as sustainable thinking in action. We seek the entrepreneurial, which is expressed in our mindset of continuous improvement, but fostered by the learned knowledge of what brings about sustainable best practice. As a working example, we now think quite differently from even five years ago when approaching the planning, design and refurbishment of rail stations. We have learned that bigger stations are not necessarily better. We have adapted station infrastructure to keep pace with technology opportunities and we build capacity with the communities surrounding our stations, which are among the primary stakeholders in our rail network and related services. Change has come about through observing human behaviour and understanding how people use our stations and their expectations of our services. The result is better accessibility through strategically planned traffic flows and passenger communications, better use of station real estate for retailing, eco-efficient design for enhancing asset lifecycle management and, ultimately, delivering the premier customer services that will draw passengers to our network.

This same thinking drives the numerous smaller-scale initiatives in progress. The network's heavily trafficked stations often intersect with major retail and commercial centres. In working with the developers and owners of these properties, we have opened new underground passageways and above-ground connecting walkways that provide convenient access for our passengers to outside destinations, thus relieving street-level pedestrian congestion and driving patronage through the rail system.

Within our Property Division, in applying the interests of the end user to planning, we enhance scheme design to suit community needs where opportunity arises. In view of the surplus school provision at Tseung Kwan O Area 86, we have recently modified the master plan for the area to provide more open spaces for enjoyment by the residents and further increase the space between residential towers. In this planned township of 58,000 people, we have also implemented a comprehensive walkway system throughout the entire community to segregate effectively vehicular traffic from pedestrians. Walkways are planned to follow desired lines and changing of levels is minimised to facilitate pedestrian circulation, in addition to accommodating strollers, wheelchairs and other walking aids.

Integrated Management

Seven divisions, Operations, Property, Project, Human Resources and Administration, Finance, Legal and Procurement, and China and International Business constitute our general corporate structure. Each division, while sharing the collective corporate strategy and work culture, utilises defined sets of processes and procedures to identify and mitigate risks and optimise performance. However, with increasing cross-divisional co-operation on projects and business functions, several management systems are now converging at the divisional level and in workplace practices, resulting in a process that breaks the silo focus of management thinking. This can be seen with the adoption of the Integrated Management System currently used for rail operations assets management as the model policy for the Project Division's development and construction of new rail projects. Through such convergence of system and processes, the resulting management and engagement efficiencies, the seamless project work flows and the more adaptable and multi-skilled work force enhance the delivery of competitive advantage.

 

IMS case study

Aligning to International Standards

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 has developed a sector position on climate change. Consultation across the 27 divisions of the UITP has progressed during the year, with expectations of the overall sector reporting standards established by the end of 2008.

The Corporation has been an active member of the CoMET Group for more than 12 years. This voluntary affiliation of twelve major international metro operators annually undertakes a benchmarking exercise of key performance indicators and a series of case studies for the purpose of gauging best performance and practices in areas such as service reliability, cost effectiveness, staff efficiency and safety. The 2005-06 benchmarking exercise has again confirmed our performance excellence within the group. In the 12 categories measured, we ranked on average among the top three of participating metros, reaffirming our consistent performance and world-class services excellence.

 

In 2006, the fifth External Safety Management System Review was undertaken by the American Public Transportation Association (APTA) at the invitation of the Corporation. Held once every three years since 1994, this review examines and benchmarks the Operations Division's safety management system against recognised international best practice and, subsequently, safety performance. The Division has received very high ratings from the APTA auditors. Highlights of the year's review included the identification of a series of eight safety practices deemed as "Industry Leading Effective Practices".

Undertaking independent assurance on our reporting process by internationally recognised providers helps us to gauge the acceptance levels of sustainable best practice. By soliciting an independent opinion on the integrity of our reported data and the robustness of systems that support best practice, we can identify potential areas of weakness. For this year's reporting exercise, our immediate goal is to conduct examination of our systems and processes to ensure scalability for smooth integration into new projects both in Hong Kong and our international markets, as well as provide seamless transition into the new rail entity should the merger be approved.

Leading by Example

Corporate excellence begins with our employees. They are the public face of the Corporation and one of our most important assets. Our human- resources policy is to provide career opportunities, training and development to enhance competencies and the skills to help each individual achieve career goals and personal fulfilment.

Career Opportunities

We continue to strive to be the employer of choice through policy and work practices. Our human resources practices exceed those stipulated by Hong Kong law and are competitive with other large, reputable Hong Kong companies. We are an equal-opportunity employer that formalises through an established and monitored process non-discrimination against race, sex, creed or economic status. Our human- resources practices exceed those stipulated by Hong Kong law and are competitive with other large, reputable Hong Kong companies.

 

For direct and indirect employees, we align with the spirit of the International Labour Organisation (ILO) in promoting minimum wage and workplace dignity. This, for example, is reflected as a contractual obligation supported by compliance procedures for all our retail and operations contractors, ensuring the government-specified minimum wage guidelines for all workers employed on our sites. All direct employees, except for those engaged on a temporary basis, are hired under a performance-based remuneration policy. Each employee is offered a continual stream of learning opportunities and undergoes a personal annual review to help guide further career choices.

From the global human-rights perspective, as voiced by such organisations as the UN Global Compact, our human-resources policies and practices generally align with the declarations on child labour, discrimination, harassment, freedom of association and the right to collective bargaining. Compulsory and forced labour are illegal in Hong Kong and as part of our internal policy and for the contractual compliance for all contractors, this is strictly enforced. Our policy on HIV/AIDS stipulates that the Corporation does not discriminate against infected employees and will continue to provide employment until their health impedes their ability to perform adequately. We monitor all our employment practices on a regular basis through our internal governance procedures and by contractual obligation to our site contractors to ensure compliance with our formalised practices, local regulations and international conventions. In 2006, as with the previous year, no prosecutions for violation of labour laws were incurred, nor were there any labour-related prosecutions against our site contractors and project partners.

In keeping with our employment promise, we assist employees in attaining career goals. For each individual we undertake an annual review to assess job performance and to guide that individual in further career opportunities. Training also forms a significant component of our employment strategy. We structure training to address the whole of the career, that is, we provide specific skills and job capabilities as well as management training and support in external tertiary degrees for those who show promise. Employees are offered a variety of training media, including workplace, classroom and on-line education. In 2006, the average training was 6.6 days per individual staff, 0.9 days more than last year's record of 5.7 man days and in line with the general Hong Kong annual average of six man days.

To augment workplace skills training, the Work/Life Balance programme is proving a popular avenue for personal development. This programme, arising from the findings of the Corporate Issues Working Group formed in 2004 to address issues found in the staff attitude survey, presents a series of personal well-being seminars and talks to address specifically work stress and its management. Additional benefits that promote wellbeing include professional counselling and a 24-hour hotline manned by qualified counsellors. The Corporation also provides vaccinations free to all staff as a preventive measure against seasonal influenza and a mitigating measure against the threat of avian flu.

Our staff turnover of 2.3% in 2006 remains well below the local average of 11.9% for the year. This continues the very low turnover trend that, while complimenting our employment practices, presents the challenge of effective management succession. The Corporation is faced with an ageing workforce exacerbated by the consequences of recent years' productivity drive and restrictive hiring of younger recruits. To address this, the Corporation has enacted selected initiatives, among them, the Leadership Pipeline to re-invigorate the work force, bring in younger talent and train existing staff for new career opportunities across the organisation. In addition to this Pipeline, a new approach to identifying and nurturing talent has prioritised restructuring of the Professional Development (PDP) and Accelerated Development (ADP) programmes to promote a pool of talent, rather than job-specific training. Individualisation is a key factor in the new strategy for staff development.

Empowerment through Engagement

Employees are well informed of their rights and privileges. In addition to timely briefings and workshops, a formal, well-established mechanism for consultation and dialogue between staff and executive management is implemented through the Joint Consultative Committee (JCC) and the Staff Consultative Council (SCC). The JCC provides the communication platform between the non-managerial staff and supervisors where work-related issues and matters of local common interest can be discussed and resolved. The SCC, comprising elected JCC representatives, brings together in dialogue employee representatives and senior management to address broader policy issues such as employment terms and conditions, corporate interests and, most recently, the rail merger. Specifically for the proposed rail merger, a task force is charged to address and communicate potential impacts on employees and their career prospects. A CEO newsletter, regular management to staff briefings and a dedicated hotline keep staff informed on a timely basis of the progress of the merger and range of possible impacts on the workforce.

Complementing the formalised consultation processes, employees enjoy a wide choice of channels to establish dialogue with senior management, supervisors and each other. Such tools as departmental magazines, the corporate intranet and cross-division group activities serve to promote dialogue and empower employees to share work issues and collaborate. Senior executives pointedly meet informally with staff groups to encourage dialogue and identify contentious issues well before crisis stage. In 2006, as part of our 'Service from the Heart' campaign, several senior-level executives voluntarily "adopted" a rail station to give the front-line team encouragement and support for the customer-service breakthrough journey. In 2006, we also introduced the first of our awareness training programmes in the form of an animated video for the development of the sustainability culture.

Code of Conduct

The Code of Conduct clearly articulates our "no tolerance" policy and guides action to be taken on such issues as bribery, corruption, conflict of interest, discrimination, ethical behaviour and relationships with customers and business clients. It also enshrines our policy and directives in providing equal opportunities in the workplace and forms a basis for certain stakeholder engagement practices, as well as instilling ethics and company values in the workplace. The Code was updated in 2006 and augmented with group briefing sessions to clarify any practice issues and questions. It is distributed to all employees on recruitment, and followed by a mandatory introductory session on business ethics. All employees must demonstrate their compliance by re-signing the Code every other year. We also pointedly make the Code available to our contractors, suppliers and business partners to introduce and encourage them to align with our defined ethical practices.

Year of the Customer

The corporate-wide campaign, Year of the Customer, was launched in 2006 to celebrate the patrons of our rail network and related services and our shopping malls. The campaign launched several new initiatives to communicate externally and promote our service focus, and internally enhance customer care and friendliness through the declaration that 'We serve from the heart!'

Driving this campaign and other initiatives is the strategy to differentiate the MTR from all other modes of public transport in Hong Kong, through service excellence, continuous improvement and delivering value at the customer interface. We achieve this by focusing on revitalising the critical dimensions of our business, that is, people, services, business and assets. For each of these, direct initiatives are being undertaken to raise the bar in performance.

The strategy also addresses the issue of public perception of our services. Acting upon solicited stakeholder input we have prioritised to change the negative perception of the MTR's value for money proposition that has influenced the patronage of our services. Recent independently conducted public surveys have indicated a positive change in this perception and we have achieved in the last quarter of 2006 the No.1 position in this attribute among all public transport operators. This is the second time we have achieved this standing in our 27 years of operation.

We measure performance outcome through passenger journeys made on time, which tracks how punctual and reliable our train services are. This performance measurement is a component of the KPIs included in our priority business risks. The incidents that affect passenger-journey performance are managed through fulfilment of the 13 Customer Service Pledges supported by the Integrated Management System. Combined, these provide the formalised mechanisms that effectively manage the human and mechanical factors that give rise to incidents.

Customer Health and Safety

Safety is stringently monitored and enforced at all points of the customer's interaction with our rail services. The IMS and a series of annual targets are set on a divisional basis under the Corporate Safety Committee to guide management. In 2006, our safety record maintained its high standards with no passenger fatalities for the year. However, the total number of incidents per million passengers carried increased to 0.94 against 0.86 for the previous year.

To gauge our rail services' performance against broader industry safety best practice, the annual CoMET survey provides us with the benchmarking opportunity for international standards in safety for rail operations. In 2006 we maintained our position as number two in safety performance among the participating metros worldwide.

The safety strategy and performance management for our Property Division is set out under the Property Committee of the umbrella Corporate Safety Committee. Safety practices align to ISO 9001, ISO 14001 and the OHSAS 18001 international standards. Additionally, the innovative and, to date, successful 'Safety Incentive Scheme' encourages safe performance of contractors with cash rewards for targets achieved.

 

Building Community Capacity

Community investment underpins our 'rail to people, people to rail' vision. Our stations serve as focal community centres linked by a rail network that connects our patrons to the wider network and social fabric of Hong Kong. Augmenting this strategy is our Art in Stations programme, which offers live performances, cultural activities and art exhibitions staged to enhance the rail-system experience.

The Race Walking event provides us the opportunity to promote a healthy lifestyle and raise money for charity. This year, with more than one thousand participants from the Corporation and invited companies in Hong Kong, we accumulated more than HKD 1.2 million for public health charity programmes. The Corporation was honoured with the President's Award in recognition of its contribution to the Community Chest with a total cash donation of more than HKD 2.5 million, thanks also to participation in the CARE Scheme, the Community Chest Green Day and Dress Casual Day. The Corporation also extends its stations and shopping malls to charities and NGOs for their social campaigns and other worthy causes.

We build capacity at the strategic level through the practice of engaging local communities for input on how we design and build our rail projects. The proposed West Island Line (WIL) and recently opened NP360 tourist attraction demonstrate this strategy in action. Carefully solicited opinion and suggestions have influenced changes and improvements to projects ranging from station placement and design to street access points to project environmental impact management.

In consideration of the Pearl River Delta's collective future, we join the growing community of socially aware corporations that are taking action. To date we are signatory members of the Clean Air and Hong Kong CSR Charters, which commit to environmental and social best practice. We take an active role in global transport issues by chairing the Sustainable Development Commission of the UITP and we sit on the Conference Board's Asian Pacific Human Resources Council. We also build social capital through activities that promote sustainability undertaken by local tertiary institutions and several NGOs, including ASrIA , Civic Exchange and HK-BEAM . On a more informal basis, we participate in public conferences and serve on business committees for the purposes of sharing best practice and learning from the business communities we work with.

Business Partners

Our business partners, contractors and suppliers play pivotal roles in achieving corporate sustainable competitive advantage. Driven by internal strategy and lessons learned in project and service delivery, selected initiatives progressed during the year to secure mutual commitment to best practice.

We are enhancing our database of suppliers and contractors to track their performance in safety, quality and environmental best practice. This data bank serves as a reference for qualification and tracks on-site performance in projects and services. It also tracks legal compliance, offences under which can lead to banning from future tenders. Our next step is to include new suppliers from mainland China, which will require that they be auditable and meet our criteria for project qualification.

In working with our contractors and suppliers we lead by example in promoting best practice in employment. In 2006, all contracts were paid in accordance to agreed terms. We also have in place the requirement of contractors to stipulate wages for workers and the contractual obligation to verify such payments.

On the environmental front, we have refined our e-tendering system to accommodate international tendering through an embedded e-cert system. In addition, we have available for internal users a purchasing-card system and online catalogue. These refinements have already dramatically reduced paper consumption and improved time and cost efficiencies in the tendering process.

Also in line with environmental best practice, a system is being developed for vendor repurchase and responsible disposal of employed toxic materials. To encourage further responsible work practices, we are giving cost-saving incentives to contractors to keep below their project targets in waste generation.

Investors

Investors' interests closely influence our financial strategy. By choice, we align to international standards that demonstrate our standing and reputation as a premier Hong Kong investment and sustainability champion. The MTRCL is a constituent stock of the Hang Seng, MSCI and the FTSE All-World Hong Kong Indices Series. We actively maintain membership in the DJSI, FTSE4Good and the Ethibel Indices, which promote and measure corporate citizenship best practice.

Since listing in 2000, we have consistently delivered benefit to shareholders through annual dividends and maintained our sovereign credit ratings. These and other financial achievements engender confidence in our performance and have attracted major institutional investors worldwide.

Environmental Excellence

The year 2006 witnessed numerous small initiatives unfolding within the broader corporate strategy. Our purpose is to continue to deliver beyond operational compliance, encourage environmental commitment from our partners and suppliers and engender the eco-efficient mindset in managing assets and planning new projects.

In our managed properties, programmes are in progress to reduce energy consumption in building usage, create more efficient waste recycling logistics, track and systematically reduce wastage in petrol and diesel consumption and replace building infrastructure systems to be more eco-efficient. Energy audits are conducted regularly for our managed properties to compare performance and identify new areas of saving.

In the planning and development of the properties we tender, we play a leading role in applying environmental best practice through our master planning schemes that leverage eco-design and social integration into a community-level development vision. Our strategy of the "property through train" gives us the ability to assert best practice throughout the lifecycle of the property. As of 2006, for all property development tenders, specifically those of Tseung Kwan O Area 86, we have adopted mandatory certification by the HK-BEAM (Hong Kong Building Environmental Assessment Method). Also in Tseung Kwan O Area 86, where we are undertaking a number of infrastructure projects, we employ several innovative measures such as a grey-water recycling system to improve environmental stewardship of the entire project. At the city-wide level, we make an active contribution to Hong Kong's sustainable town planning by participating in feasibility studies and sitting on a number of steering groups of various government planning studies.

In mainland China, our property management business enhances our reputation for best practice in the industry. In managing the office and commercial centres in the capital cities of Beijing, Shanghai and Chongqing, we have adopted a programme of introducing Hong Kong standards to management on a gradual-change basis to solicit customer and owner buy-in, while progressively improving local standards. In 2006, we took a substantial step forward in securing ISO14000 certification for all of our mainland China managed properties, thus setting a high standard of practice that reflects our brand reputation in services delivery.

On our railway network, the IMS supports our endeavours in seeking operational excellence. In particular, this applies to electricity usage. Electricity fuels the whole of our operations and is one of our most significant direct operating costs and our major source of GHG emissions. Aided by the internal programme for energy optimisation and continuous improvement in workplace practices, we are able to monitor performance and put in place appropriate mechanisms that promote better operating efficiencies and encourage environmental best practices in energy consumption.

 

Regional Leadership

The Corporation models its Climate Change Policy on the initiatives in progress under the UITP. As a pivotal organisation in industry development, it established in 2006 the sector-wide UITP GHG Policy and Strategy, and by the end of 2008 will have in place key performance indicators to serve as a basis for policy throughout the Asia region. This supports the Memorandum of Understanding between the UITP and the United Nations Environment Programme (UNEP) signed in July 2005 and provides clear leadership in the world debate.