SOS Children's Villages of India’s mission is to provide abandoned and orphaned children with a family, a home, education and a foundation for an independent life. Future First is supporting a family home in Faridabad and Family Strengthening Programmes in Anagpur (Haryana), Bhuj (Gujarat) and Latur (Maharashtra) for the benefit of children facing the risk of abandonment.
Parivartan Social Welfare Society runs community based education centres serving about 2000 out-of-school slum children every year. The project supported by Future First, in Kolkata, aims to provide non-formal education to street children, mainstream these children into formal school and retain enrolled children in schools.
Apart from the above-mentioned examples, HSBC also partners with other NGO’s and till date, it has supported 141 projects in 39 countries, and benefitted around 133,000 children. In India specifically it has supported 19 projects and benefitted 19,237 children.
In addition to this, HSBC undertakes initiatives for provision of life and livelihood skills to the marginalized sections of society, to allow them to integrate into society.
Yuva Parivartan HSBC supported Kherwadi Social Welfare Association's program 'Yuva Parivartan', trains youth, from underprivileged communities in Mumbai, in skills needed by the job market.
Livelihood Advancement Business School (LABS), a flagship program of Dr. Reddy's Foundation (DRF), promotes customized vocational courses for young men and women from economically weaker sections of society. HSBC's support to the LABS project in Pune has trained 187 youth who are now gainfully employed.
They undertake capacity building and microfinance initiatives for marginalized women so as to promote economic independence.
Manndeshi Udyogini Business School for Rural Women, in Satara district of Maharashtra, targets young girls who have dropped out of school and women with limited or no formal education. The school prepares them to be entrepreneurs by training them in financial literacy, marketing, technical skills, negotiation skills and confidence building measures.
HSBC provides microfinance and started a lending program for small Microfinance Institutions (MFIs) in 2005. It started offering commercial loan products to Large Microfinance Institutions (MFIs) who in turn provide small loans to groups of poor people (mostly women) using well-established micro credit delivery mechanisms. Between January and July 2008, Rs. 1.12 billion (US$ 25.8 million) has been sanctioned out of which Rs. 850 million (US$ 19.58 million) has been disbursed to MFIs with a member base of approximately 5.5 million people.
Finally, this category also includes projects aiming at global financial literacy.
Students in Free Enterprise (SIFE) is an international organisation active in more than 40 countries that mobilises university students around the world to make a difference in their communities while developing their skills to become socially responsible business leaders. SIFE students form teams on their university campuses and develop community outreach projects that equip others with the knowledge and skills to achieve greater economic success.
Environment
The first issue that HSBC aims to tackle is that of Climate Change. It has a public private partnership with Ministry of Science and Technology and Ministry of Earth Sciences, GOI called Earth Sciences Forum. It aims to provide solutions to and create awareness about climate change. Another initiative undertaken is HSBC Climate Partnership, which is a USD 100 million five-year global program. The objective of the program is to assess the impact of climate change on various factors like people, cities, forests, etc and then to find solutions to either mitigate or reduce these impacts. This is a partnership between HSBC and four charities - the Climate Group, World Wide Fund for Nature (WWF), Earthwatch and the Smithsonian Tropical Research Institute.
In India, they celebrated the environment week in June 2010, the focus was on the Ganges river dolphins. The WWF undertook research on the Ganges River and is assessing the impacts of climate change and pollution in the river and on the surrounding communities.
Operation Kachhapa HSBC supports this project undertaken by Wildlife Protection Society of India (WPSI). The objective of this initiative is to educate fisher folk and local communities on the importance of conserving the endangered Olive Ridley Turtle.
In addition to all these partnership, in their Mumbai office, they use low energy light bulbs & intelligent controls, which is supposed to increase energy saving by 7%.
Under waste and water management there are initiatives like Vermiculture.HSBC has also installed sensor taps in place of conventional taps in some offices to reduce wastage of water.
On the same lines, they have also employed waterless urinals and dual mode cisterns.
Employee Volunteering
In all the initiatives and programs that HSBC supports, employees are encouraged to participate and volunteer. This program was formally introduced in 2007 and is called “Catalyst”. In various events like the Mumbai marathon, world environment day, etc, there is heavy employee participation.
Other Initiatives
HSBC has contributed to many disaster relief efforts during calamities like Mumbai floods, tsunami and Mumbai blasts (Spirit of Mumbai program).
HSBC has also supported conservation of many old and heritage buildings in the city of Mumbai as well as publication of books and festivals.
Measurement Indicators
Since 2007, HSBC has used the Connected Reporting Framework, an approach to reporting an organisation’s environmental footprint and its financial impact.
The key principles of this approach are -:
- Sustainability issues should be visibly linked to the organisation’s strategy by large
- Sustainability and financial information should be presented in a more lucid manner to give a balanced picture of the organisation’s performance
- Consistency should be maintained to aid comparability between years and organisation
- Reported information should be aligned with business information
HSBC has appointed functional heads of corporate sustainability for IT, corporate real estate and purchasing. Together, they are responsible for an annual spend in excess of US$6 billion.
With respect to CO2, the sustainability expenditure on green travel has increased over the past two years while that on energy efficiency has decreased.
Here, the total disposal cost has decreased from 5.1m $ to 3.2m $ in 2 years
The environmental target-driven savings from improved effeciency has increased to 11.7m$ which indicated HSBC’s energy effeciency.
HSBC adheres to 6 of the 8 Millennium Development Goals.
Voluntary Codes and Standards
Equator Principles
The Equator Principles are a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions. Project finance is often used to fund the development and construction of major infrastructure and industrial projects. The EPs are adopted voluntarily by financial institutions and are applied where total project capital costs exceed US$10 million. (http://www.equator-principles.com/)
HSBC has adopted EP in 2004. HSBC applies the EPs to all projects it finances as well as to those for which it provides only financial structuring advice.
Impacts are assessed on their degree of potential impact and are classified as:
Category A – Projects with potential significant adverse social or environmental impacts that are diverse, irreversible or unprecedented;
Category B – Projects with potential limited adverse social and environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures;
Category C – Projects with minimal or no social or environmental impacts.
At HSBC, majority of the transactions fall into Categories B where 31 projects worth US$ 4063m were financed in 2010. However, Category A and C transactions are managed responsibly in accordance with the EPs.
PricewaterhouseCoopers LLP, London has verified the compliances with EPs as on 18 May 2011.
HSBC has been a member of FTSE4GOOD and DJSI which are sustainability stock indices.
HSBC also adopted to GRI standards and Prince‘s Accounting for sustainability.
HSBC has voluntarily agreed to abide by a number of external codes of conduct, as mentioned
- UN Environmental Programme Finance Initiative
- UN Global Compact
- Global Business Coalition on HIV/AIDS
- Global Sullivan Principles
- OECD Guidelines for Multinational Enterprises
- UN Universal Declaration of Human Rights
Challenges
HSBCs activities involve, to varying degrees, the measuring, evaluation, acceptance and managing of risk or combinations of risks. These risks are classified as ‘top’ and ‘emerging’. A top risk is a current, potential risk which is likely to have a material effect on the financial results or reputation of the company. An emerging risk is one which has large unknown components which could have a material impact on the long term strategy of the company. Top and emerging risks fall under the following four broad categories:
- Challenges to business operations at times of economic downturn and in case of internet crime and frauds
- Challenges to governance and internal control systems with regards to information security risk
- Macroeconomic and geopolitical risks arising out of emerging markets and the Middle East regions
- Regulatory risks to the business model affecting the conduct of business
Corporate Governance
HSBC’s management structure is headed by the Board of Directors of HSBC Holdings and led by the Group Chairman. The purpose of the board is to deliver sustainable value to stakeholders. The Board sets the strategy for the Group and approves the risk appetite, capital and operating plans presented by management for the achievement of the strategic objectives it has set. This ensures the efficient application of resources for the achievement of these objectives. Implementation of the strategy set by the Board is delegated to the Group Management Board led by the Group Chief Executive.
Board of HSBC Board Members Principal Committees
- DJ Flint , CBE , Group Chairman Audit Committee
- ST Gulliver , Group Chief Executive Remuneration Committee
- SA Catz (INED) Nomination Committee
- LML Cha , GBS (INED) C S Committee *
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MKT Cheung , GBS , OBE (INED)
- JD Coombe, (INED)
- RA Fairhead (INED) Group Management Board
- AA Flock Hart, CBE
- JWJ Hughes-Hallet , SBS (INED)
- WSH Laidlaw (INED)
- JR Lomax (INED)
- IJ Mackay, Group Finance Director
- G Morgan , CM (INED)
- NRN Murthy , CBE (INED)
- Sir Simon Robertson (INED)
- JL Thornton(INED)
- Sir Brian Williamson , CBE (INED)
RG Barber -- Group Company Secretary, DJ Shaw -- adviser to the board.
No. of independent directors in board --- 12 (75% > 50 % required as per FSA standards.)
HSBC Group, having worldwide presence and listed on different stock exchanges,(i.e. LSE,NYSE, SEHK,EURONEXT,BSX),has to adhere to the corporate governance norms set by the governing bodies of each of the stock exchanges. Financial Service Authority of UK is the lead regulator of HSBC.
The roles and responsibilities of each committee have been defined. The remuneration of each director has been approved by the board. Time commitment expected by the non executive directors has been specified and directors’ interest in the company and its subsidiaries are disclosed. The processes for internal control have been developed to mitigate risks and enable HSBC to discharge its obligations under the rules and guidance issued by the FSA.
Because it follows a combined code, corporate governance is reported from two points of view, the first dealing generally with their adherence to the Code’s main principles, and the second dealing specifically with non-compliance of any of the Code’s provisions. The descriptions together give shareholders a clear and comprehensive picture of a company’s governance arrangements in relation to the Code as a criterion of good practice.
Future Prospects and Critique
Inadequate Reporting
Of the 17 core environmental indicators listed in the GRI guidelines, as pertinent to the financial services industry, HSBC reported only 9 of them. Of the many other indicators like the labor practices indicators, decent work indicators, human rights indicators and society indicators, it followed a fractional reporting approach. HSBC excluded the entire product responsibility category. In total, HSBC reported 61.538% of total core indicators, and 11.538% of additional indicators which according to GRI would provide a “C” rating to HSBC for completeness.
Auditing Issue
Investigation into the auditing of the report showed that the work that Pricewaterhouse Coopers conducted was in regards to the Equator Principles and the carbon neutrality and emissions offsets. Therefore, while we can presume, to the extent that internal audits are accurate, the information regarding carbon offsets and project financing is accurate. So HSBC provides no assurances to the accuracy and quality of statements in sustainability, lack of evidence leads to suspicion of the authenticity of the report.
Overstating Community Investment
On analyzing the financial statements, we found that in accounting for the community investments, the salaries of the employee volunteers have been stated as investment thus overstating the investment. Of the USD 127.7m, USD 20m is stated as the salaries given to the employees constituting 16.57% of the total investment.
Financing Issue
HSBC financed some palm oil companies which were engaging in “land clearance without environmental impact statements and land clearance without timber cutting permits.” In addition the group was engaged in land clearance of deep peat. They contributed majorly in emissions of CO2 thus effecting the environment. Major investment was in Sinar Mas which was busted apparently on two fronts: According to Greenpeace, it was engaging in illegal deforestation practices while misusing its RSPO membership as a buffer and shield. So it was “crafting an illusion of commitment to sustainability” while doing exactly the opposite, namely destroying forests and peatlands .
HSBC however does stand by its vision and mission statements which tout it as “WORLD’S LOCAL BANK” as it is engaged in many philanthropic projects as stated earlier.
The targets set for the community investments in the future have already been met in three spheres namely employee volunteering, restoring, protecting and managing wetland areas and managing projects in the major cities, so the future prospects are healthy as far as reputation of the company in regard to its CSR initiatives are concerned.
Apart from the targets achieved, HSBC being a carbon neutral company ,with its client environmental sustainability requirements, is planning to effect positive change in societies in which its various clients operate.
It is projected at a high level in the Dow Jones Sustainability index thus acting as a pioneer for effecting the CSR activities initiated in other companies. Its commitment towards the community can be gauged by looking at the huge amount USD 127.7m (0.9 % of total profits) spent on community investment. By promoting the sustainability in China, it is helping to pave the way for many developing countries.
HSBC was analyzed in accordance with the sustainability drivers and it was found that it maintains a unique position as a global company capable of large scale projects and influence, both directly and indirectly affecting the global economy and environment. It can thus be said that HSBC is on the right track in regards to the company’s sustainability initiative, there are still areas in which it can and it should improve.
REFERENCES
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HSBC Holdings plc Annual Report and Accounts 2010
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HSBC Holdings plc Interim Report 2011
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HSBC Holdings plc Sustainability Report 2011
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HSBC Holdings plc India Sustainability Report 2009
- http://www.hsbc.com/1/2/investor-relations/governance
- http://en.wikipedia.org/wiki/HSBC
- Gregory Lau, Kait Vinson, Kris King , 2010 University of Denver ”An analysis into the HSBC sustainability report”
Corporate Sustainability at HSBC in India, 2008
HSBC Holdings plc India Sustainability Report 2009
HSBC Holdings plc Sustainability Report 2011
HSBC Holdings plc Annual Report and Accounts 2010
HSBC Holdings plc Annual Report and Accounts 2010