2024 Marks a Shift From Discussion to Direction

For many small and mid-sized businesses in Hong Kong, ESG has long felt distant.
There has been no immediate legal obligation, and for some, little direct impact on day-to-day operations.

That perception began to change in 2024.

With the Hong Kong Stock Exchange (HKEX) publishing its climate disclosure consultation conclusions, and the Government releasing the Roadmap on Sustainability Disclosure in Hong Kong, the overall ESG direction has become significantly clearer. While new requirements continue to focus on listed companies and large public-interest entities, the signals are no longer abstract.

The question is no longer whether ESG expectations will shape the market — but how and when they will reach smaller businesses.

HKEX Climate Disclosure Updates: Targeted Changes, Clear Direction

In April 2024, HKEX published the conclusions to its 2023 consultation on climate-related disclosures. The Exchange confirmed that climate disclosures will progressively align with ISSB / IFRS S2, with phased implementation starting from 1 January 2025.

It is important to be precise about what this means.

This is not a move to make all ESG disclosures immediately mandatory. Instead, it focuses on specific climate-related disclosure requirements, transitioning selected core indicators from a “comply or explain” approach to mandatory reporting for listed companies.

Key areas include:

• Board-level climate governance

• The impact of climate risks and opportunities on business models, cash flows, and capital allocation

• Greenhouse gas emissions (Scope 1 and 2, and Scope 3 in certain circumstances)

• Transition plans, targets, and progress

• Climate scenario analysis and risk management processes

These requirements represent a structural shift in how climate risk is assessed and disclosed — not just as sustainability commentary, but as part of financial and strategic decision-making.

Why This Matters to SMEs: The Supply Chain Effect

Although the rules apply directly to listed companies, their impact extends beyond the listed market.

To comply with climate disclosure requirements — particularly those relating to value chain emissions, supply chain risks, and transition exposure — listed companies will need information from their suppliers. In practice, this means many Hong Kong SMEs will increasingly be asked to:

• Respond to ESG or climate-related questionnaires

• Provide basic emissions or environmental data

• Share policies, practices, or improvement plans

• Accept ESG-related contractual terms

HKEX has acknowledged these challenges and introduced the concept of “reasonable information relief” to support smaller listed issuers and their value chains. However, the overall direction is unambiguous: supply chain data will become progressively more important.

Hong Kong’s Sustainability Disclosure Roadmap: Setting the Long-Term Path

In December 2024, the Financial Services and the Treasury Bureau published the Roadmap on Sustainability Disclosure in Hong Kong: Ambition, Assurance, Enablement.

The roadmap outlines a territory-wide approach to aligning sustainability disclosures with ISSB IFRS S1 and S2, with a clear timeline for large and public-interest entities (PAEs), such as listed companies and major financial institutions, to adopt aligned standards by no later than 2028.

While SMEs are not the primary targets of the roadmap, the document explicitly recognises their role within corporate value chains. It also highlights the Government’s intention to support market participants — including SMEs — through capacity-building initiatives, tools, and funding support.

In other words, SMEs are not being mandated to report today, but they are increasingly expected to be ESG-ready.

What 2024 Really Means for SMEs

As of 2024, most non-listed SMEs in Hong Kong still have no statutory obligation to produce ESG or sustainability reports.

However, the market context is changing:

• ESG considerations are becoming part of commercial due diligence

• Banks and investors are linking financing to sustainability indicators

• Customers are beginning to differentiate suppliers based on ESG readiness

In this environment, the greatest risk is not imperfect data — it is having no structure or understanding at all.

How SmooothESG Provides SMEs a Clear ESG Starting Point

As ESG expectations become clearer, SMEs do not need to rush into complex frameworks or comprehensive reporting. What they do need is a practical way to understand where they stand, what is relevant to their business, and how to respond when questions arise.

SmooothESG is designed to support this early stage of ESG readiness. It guides businesses through understanding their current position, identifying relevant ESG themes, turning expectations into practical actions, and tracking progress in a lightweight and structured way. This allows SMEs to prepare gradually and respond confidently to future requests from customers, financiers, and partners — without treating ESG as a one-off compliance exercise. Learn more about SmooothESG or join our beta program to start working with the platform early.