[Home](/)/[Resources](/resources)/HK ESG Supply Chain Reporting Hong KongESG / Sustainability # HKEX ESG Reporting: Supply Chain Disclosure Requirements for Hardware Manufacturers HKEX's ESG regime has moved well past voluntary disclosure. Mandatory environmental KPIs, a binding supply chain due diligence obligation under B5, and the incoming IFRS S2 climate framework mean that electronics and hardware companies listed in Hong Kong need a structured data infrastructure — not just a well-worded annual report chapter. Copy Link[Share on WhatsApp](https://wa.me/?text=https%3A%2F%2Fkrono-labs.com%2Fguides%2Fhong-kong-esg-supply-chain-reporting) At a glance Framework HKEX ESG Reporting Guide (Appendix C2) Mandatory since 2020 (environmental KPIs) IFRS S2 (HSI) Mandatory from 2025 Supply chain KPI B5 — mandatory disclosure ## HKEX ESG Framework: What Hardware and Electronics Issuers Must Know ### HKEX ESG Reporting Guide (Appendix C2) — Mandatory Comply-or-Explain Since 2020 The HKEX Environmental, Social, and Governance Reporting Guide is set out in Appendix C2 of the Main Board Listing Rules (and equivalent provisions in the GEM Listing Rules). Since the 2019 revision took effect for financial years commencing on or after 1 July 2020, all HKEX-listed issuers are subject to mandatory 'comply or explain' requirements for the environmental and governance aspects of the Guide. This is a significant escalation from the earlier 'recommended disclosure' status: issuers who do not report on mandatory KPIs must now explain in their ESG report why they have not done so and when they intend to comply. For electronics and hardware companies, the mandatory environmental KPIs — energy consumption, water use, GHG emissions, and waste — require data collection infrastructure that many manufacturing-oriented businesses did not have in 2020 and are still building out. ### Mandatory Environmental KPIs Since 2020: Energy, Water, GHG, and Waste The HKEX ESG Guide mandates disclosure of four environmental KPI categories for all listed issuers: energy consumption (total energy use and intensity; breakdown by type — electricity, gas, fuel), water consumption (total usage and intensity; sources), greenhouse gas emissions (Scope 1 direct emissions and Scope 2 purchased energy emissions, in tonnes of CO2 equivalent, with intensity metrics), and waste generation (hazardous and non-hazardous waste in tonnes; waste disposed by method). For electronics manufacturers with owned or contracted manufacturing facilities, this requires aggregating data across factory sites — including those operated by contract manufacturers — where the issuer has operational control or financial control (the chosen boundary must be stated). GHG calculations must reference an internationally recognised methodology; the HKEX Guide references the GHG Protocol Corporate Standard as the default. ### Supply Chain Management KPI B5 — Mandatory Disclosure Directly Affecting Hardware and Electronics Issuers KPI B5 of the HKEX ESG Guide (Supply Chain Management) requires issuers to describe their practices for managing environmental and social risks in the supply chain. This is not a checkbox exercise: the guidance expects issuers to identify material supply chain risks (environmental, labour, human rights), describe the policies and processes in place to manage those risks, and report on the number of suppliers assessed or audited against those criteria. For electronics and hardware companies — whose supply chains span component suppliers (semiconductors, passive components, PCBs), contract manufacturers (typically in mainland China, Vietnam, or Malaysia), and logistics providers — B5 is the most operationally demanding disclosure. Issuers are increasingly expected to report on second-tier supplier assessment, conflict minerals sourcing policy (consistent with OECD due diligence guidance), and supply chain audit findings. ### Social KPI B6 (Product Responsibility) — Recall Policy, Data Privacy, and Quality Standards for Hardware Manufacturers KPI B6 of the HKEX ESG Guide covers Product Responsibility, requiring issuers to disclose their practices relating to health and safety of products, advertising and labeling compliance, customer privacy protection, and product recall procedures. For hardware and IoT product manufacturers, B6 disclosures should address: the product safety testing and certification regime (CE, FCC, UL, or relevant market authorisation), the product recall policy and historical recall data, data privacy practices for connected products that collect consumer data, and quality management system certification (ISO 9001 or sector-specific equivalent). HKEX has increased scrutiny on B6 disclosures for technology and hardware issuers following a number of high-profile product liability events involving HKEX-listed manufacturers. Disclosures should be specific — generic policy statements without quantitative metrics are increasingly flagged in HKEX query letters. ### HKEX Roadmap to IFRS S1/S2 — Mandatory for HSI Constituents from 2025, All Main Board from 2026 HKEX published its Roadmap for Sustainability Disclosure in April 2024, aligning with IFRS Sustainability Disclosure Standards S1 (General Sustainability-related Disclosures) and S2 (Climate-related Disclosures). Under this roadmap, Hang Seng Index constituents must apply IFRS S1 and S2 for financial years commencing on or after 1 January 2025. All other Main Board issuers follow for financial years commencing on or after 1 January 2026. IFRS S2 is closely modelled on the TCFD framework and requires disclosure of climate-related risks and opportunities across four pillars: governance, strategy, risk management, and metrics and targets. A key practical implication for hardware manufacturers is the requirement to disclose Scope 3 GHG emissions — initially with limited assurance, progressing to reasonable assurance — which demands data from across the value chain. ### Scope 3 Upstream Emissions — Category 1 Purchased Goods and Category 11 Use of Sold Products For electronics and hardware manufacturers, two Scope 3 categories under the GHG Protocol Corporate Value Chain Standard are most material. Category 1 (Purchased Goods and Services) covers the embedded emissions in all components, materials, and services sourced — semiconductors, metals, plastics, contract manufacturing services. Calculating Category 1 requires either supplier-specific emission factors (preferred, but rarely available from first-tier suppliers in the electronics value chain) or spend-based or activity-based industry average emission factors from databases such as the IPCC, ecoinvent, or the HKEX's own reference data. Category 11 (Use of Sold Products) captures the lifetime energy consumption of electrical and electronic products sold by the issuer — relevant for any hardware manufacturer whose products consume electricity in operation (consumer electronics, industrial equipment, IoT devices). Both categories are material for IFRS S2 disclosure and are already appearing in investor ESG questionnaires for HKEX-listed hardware companies. ## Building HKEX ESG Compliance: Step by Step 01 Review the current version of the HKEX ESG Reporting Guide (Appendix C2 of the Main Board Listing Rules) and map each mandatory KPI against your company's current disclosure capability — identify data gaps across environmental (A1–A4) and social (B1–B8) sections. 02 Establish data collection processes for the four mandatory environmental KPI categories: energy consumption by type (electricity, gas, diesel) and by operating boundary; water consumption by source; GHG emissions Scope 1 and Scope 2 using GHG Protocol methodology; and waste generation by type and disposal method. 03 Conduct a supply chain risk assessment per KPI B5 requirements — identify your top-tier and significant second-tier suppliers, define the environmental and social risk criteria applied in supplier selection and evaluation, and document the assessment process and outcomes. 04 Deploy ESG questionnaires or third-party audit programmes to key electronics components and materials suppliers — prioritise by spend and risk, focusing on suppliers in categories with known ESG risks (smelters for conflict minerals, foundries for water use, battery manufacturers for hazardous materials). 05 Calculate GHG Scope 3 Category 1 emissions from purchased goods and services — use spend-based emission factors from a recognised database as a starting point, and develop a roadmap to supplier-specific data collection for the highest-spend categories within 2–3 reporting cycles. 06 Establish a product responsibility policy aligned with KPI B6 requirements — document the product safety testing and certification framework, the product recall trigger and execution process, customer data privacy practices for connected products, and quality management system governance. 07 Prepare your ESG report in the HKEX Guide format — include a KPI table cross-referencing each mandatory and recommended indicator, with quantitative data, intensity metrics, year-on-year comparisons, and methodology notes for GHG calculations. 08 Plan your transition to IFRS S1/S2 aligned climate disclosure by your applicable regulatory deadline — conduct a TCFD-aligned climate risk assessment, identify material physical and transition risks for your manufacturing and sales footprint, and establish Scope 3 data collection for categories material to your business. ## Frequently asked questions ### Is ESG reporting mandatory for HKEX-listed companies? Yes, on a mandatory 'comply or explain' basis for all Main Board and GEM issuers. Since financial years commencing on or after 1 July 2020, the environmental KPIs (energy, water, GHG emissions Scope 1 and 2, waste) and governance provisions of the HKEX ESG Reporting Guide (Appendix C2) are mandatory disclosures — issuers must either report the data or explain in their ESG report why they have not done so and when they intend to comply. Looking ahead, HKEX's April 2024 Roadmap mandates IFRS S1 and S2 aligned climate disclosures for Hang Seng Index constituents from 2025 and all Main Board issuers from 2026, with no comply-or-explain option for the core climate disclosures. ### What supply chain disclosures does HKEX require? KPI B5 of the HKEX ESG Guide requires mandatory disclosure of supply chain management practices, specifically: the practices for identifying and managing environmental and social risks in the supply chain; the number of suppliers assessed; and the policies governing supplier selection, evaluation, and performance monitoring. For electronics and hardware issuers, this encompasses supplier ESG audits, conflict minerals sourcing policy (consistent with OECD due diligence guidance for minerals from conflict-affected areas), labour standard requirements for contract manufacturers, and environmental performance requirements for major suppliers. HKEX's review of ESG reports has consistently flagged generic or unsubstantiated B5 disclosures and expects quantitative data on supplier assessment coverage. ### When must HKEX-listed companies adopt IFRS S2 climate disclosures? Under HKEX's April 2024 Sustainability Disclosure Roadmap, Hang Seng Index constituents must apply IFRS S2 (Climate-related Disclosures) for financial years commencing on or after 1 January 2025. All other Main Board issuers must apply IFRS S2 for financial years commencing on or after 1 January 2026. IFRS S2 requires disclosure of climate-related governance, strategy (including scenario analysis), risk management, and metrics and targets including Scope 1, 2, and 3 GHG emissions. The initial application period includes transition reliefs — including phased Scope 3 disclosure and limited assurance rather than reasonable assurance in the early years. ### What are the Scope 3 emissions reporting expectations for electronics manufacturers listed in HK? For HKEX-listed electronics and hardware manufacturers, the most material Scope 3 categories are Category 1 (Purchased Goods and Services — embedded emissions in components, materials, and contract manufacturing) and Category 11 (Use of Sold Products — lifetime operational energy consumption of products sold). Under IFRS S2, Scope 3 disclosure is required where it is material to the issuer's climate-related risks and opportunities. Given the energy intensity of semiconductor and electronics manufacturing supply chains, Category 1 is almost universally material. Category 11 is material for manufacturers of power-consuming products. HKEX's roadmap requires Scope 3 disclosure to begin progressively from the applicable IFRS S2 adoption date, with spend-based emission factors acceptable as a starting methodology. **Disclaimer:** Educational resource only. Regulatory requirements change. Consult a qualified compliance specialist before making decisions. 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