BUILDING CAPABILITY

BUILDING

CAPABILITY



Sustainability Report 2007

www.mtr.com.hk/sustainability

CONTENTS

01 About this Report



02 From the Chief Executive Officer



04 About MTR Corporation



08 Management Discussions



12 Governance



13 Merger Case Study



16 Commentary:

Value Strategy



18 Social Responsibility

Online Reporting

20 Commentary:

Society’s Challenge This is our fifth year in reporting under the Global Reporting Initiative (GRI) - 2002

Sustainability Reporting Guidelines. The 2007 GRI Content Index is posted online, and links

28 Environmental Stewardship

to this printed Report and further discussions of particular indicators. A summary table for

30 Commentary: our 2001-2006 GRI Content Indices is available along with an additional table reviewing this

Response to Climate Change

year’s environmental performance reported under the G3 Guidelines.

32 Basis of Reporting

Webcasts

33 Independent Assurance Report

To facilitate an understanding of MTR Corporation’s business case in sustainable development,

34 Performance Data

the Sustainability Development Department has developed a series of webcasts that use

36 Definitions audio and animated graphics to explain the selected models and drivers to our sustainable

development. Amongst them are the Sustainable Competitive Advantage model, Enterprise

Risk Management, stakeholder engagement, the Materiality Map and the Maturity Matrix.

These can be accessed on our sustainability website.





Six Sustainability Drivers

Provide value for money to customers while delivering safe and environmentally sound rail and

property services

Pursue a business model that promotes long-term economic and financial viability for

MTR Corporation

Provide employees with a safe, healthy and caring work environment

Develop and build environments that create quality living and working communities in

Hong Kong and beyond

Maintain ongoing stakeholder communications and build relations that seek to achieve

common objectives

Sustain environmental, health and safety standards in relationships with suppliers, contractors

and business partners









* 1 January to 31 December 2007 inclusive. The financial data captured in this Report includes audited data from the KCRC

as of post-merger date 2 December 2007. The non-financial data captured includes data from the KCRC as of post-merger

date 2 December 2007 and NP360 Cable Car, except page 9 and where indicated.

This year, MTR Corporation holds a unique institutionalises sustainability in context of It is our hope that this Report will serve

position amongst our peer group of global a corporate merger. Discussions examine as a reference tool and practical guide in

reporters. The 2007 year, in addition to how the Sustainable Competitive Advantage sustainable development for organisations

meeting performance expectations, posed model synthesises the merger process that are facing substantial change through

the singular challenge of preparing for a and how the Company’s sustainable mergers or significant acquisitions of assets.

major corporate merger under sustainable development process may operate in future. To our knowledge MTR Corporation is one

best practice. of the first to publicly disclose the testing

Our internet site, www.mtr.com.hk/

of the principles of sustainability in a

Our theme, building capability, guides this sustainability, supports this document with

merger/acquisition environment. We seek

Report citing the initiatives undertaken extensive data, webcasts and information

to establish a dialogue with readers on our

during the year to advance the principles of as well as addressing the implementation of

efforts to address this challenge.

sustainability and to leverage the scalability management directives under our identified

of skills and management systems in order six sustainability drivers. The purpose The Corporation values stakeholders’

to direct and grow the organisation. This is to demonstrate how sustainable best feedback. You serve as independent sources

applies to both ongoing operations and the practices are cascaded down and across of information and a constructive critique on

year’s transition planning for the merger. the organisation. Online information that how we report and what areas are in need of

augments this Report is marked with , our attention. We encourage your feedback

We continue our dialogue on best practices,

and links to cited external organisations are to help us better deliver the information

measuring the year’s progress in social,

indicated on the relevant pages. you seek. Contact the Head of Sustainability

economic and environmental stewardship

Development, sdmngr@mtr.com.hk , for

under our Sustainable Competitive To maintain continuity in reporting, we have

further information or any queries in regard

Advantage model and the Maturity elected in 2007 to remain with the GRI - 2002

to this Report and our online discussions.

Matrix developed in accordance with Sustainability Reporting Guidelines for our

British Standard’s Guidance for Managing last year in operating as the pre-merger

Sustainable Development (BS8900:2006). In MTR Corporation. We have continued to

addition, we highlight the introduction of retain PricewaterhouseCoopers to conduct

the Corporation’s Climate Change Policy and assurance on our reporting exercise. As in

its practical application within operations. previous years, they focus on the critical

social and environmental responsibilities

We also introduce by way of a case study

and economic contributions of the

a predictive-corrective methodology

Corporation. Their independent assurance

to explore a valid framework that

report is on page 33 of this Report.









www.mtr.com.hk/sustainability About this Report 01

FROM THE CHIEF EXECUTIVE OFFICER







The Chief Executive Officer of MTR

Corporation, C K Chow, discusses the

organisation’s sustainability journey

in context of the major events and

opportunities of the past year and how

they will shape the Corporation’s future.

Following are the highlights of his remarks.



The Rail Merger

We enter the 2008 year as an empowered

organisation. We have greater business

capacity, broader capabilities, a greatly

extended transport network and, critically,

the opportunity to bring change that fosters

social, economic and environmental benefits

for the communities we serve.



The rail merger has established the means

to better facilitate a major business

objective, that is, to be the backbone of

public transport in Hong Kong. Essentially,

the intent has not changed but rather

demands a higher degree of care and

responsibility in stewardship. We continue

our mission to serve as the premier public

transport operator, to build or reinvigorate

communities along our rail lines and to

bring our expertise to mainland China and

the international markets. The change

comes in how we deliver; that is, how we

have evolved sustainable competitive

advantage to manage the increased risks

and in parallel, optimise opportunities.

Realising the economic and social benefits

as a result of operational synergies is only

the beginning.



The process of the merger itself demanded

a high degree of stakeholder engagement









02 From the Chief Executive Officer

“There is the recognised need for greater care and responsibility in stewardship of

the merged company and in the future undertaking of new rail projects. Growing

sustainably is a cornerstone tenet of success in both these areas.”







both internally and externally, which rail, designating Hong Kong as the southern we have steadily progressed. We are well

continues today. In this latest stage terminus of this system. Following the advanced by way of addressing risks and

involving the actual integration and example of existing high-speed railways including our stakeholders in decisions

implementation of systems and cultures, we worldwide, this express service brings relevant to our enlarged businesses in

recognise the need to have a more inspiring together the broader regional communities rail and property. What we have put

vision-mission-values set in order to move while delivering on the social and economic into practice over the years serves as

forward cohesively as an organisation. This aspirations of travel convenience, services a knowledge bank and foundation for

supposition arises out of the apparent accessibility and spacious, affordable living new projects while we remain vigilant in

challenge to mobilise both corporate environments. responding to society’s evolving aspirations

body and spirit as a single force powering and expectations.

Community Rail

forward to achieve common corporate and

The evolving practices covering social, As a member of the global rail community

community benefits.

economic and environmental stewardship we continue to push forward with our

Growth are paying dividends in our endeavour to work in the UITP (International Association

The rail merger is only a part, albeit of major be a true community railway. The West of Public Transport) and most recently, in

strategic importance, of our 2007 story. Island Line (WIL) is a prime example. The adopting a formal Climate Change Policy.

Hong Kong is entering a phase of dynamic deliberate early-stage public consultation We also pointedly continue to participate in

growth in which four new rail lines form part has revealed the overwhelming local the many benchmarking exercises to

of the major territory-wide infrastructure community support for the line and has maintain our SEE profile amongst international

planning announced under the year’s identified for us where investment can stakeholders and standards organisations.

HKSAR Government Policy Address. be leveraged to bring growth to the

This poses an exciting future for MTR community, kick-start urban renewal while The 2008 year is a challenging one. We are

Corporation as it heralds the opportunity maintaining sensitivity to local heritage on an uphill climb to maintain our high

to expand our footprint within Hong Kong and, more importantly, provide connectivity standards for sustainable development

and to extend our services and capabilities and convenience through a series of while working to successfully integrate

into the Pearl River Delta and, by default, to network-linked escalators, elevators and two corporate cultures and operations into

greater mainland China. passageways that serve to connect the .

“One Company, One Team” At the same

entire community outside our stations. As time, it presents the singular opportunity

Some 60 kilometres of rail line are expected to review how we can effectively and

we plan and build future lines the dynamics

to be added to our local network over efficiently implement best practice under

of such engagement will change, as each

the next decade, reaching into new the competitive advantage framework for

community has its vested interests to be

communities and creating local hubs of the new organisation.

considered. Their input, combined with

social and commercial activity. The result

our expertise and work ethos of continual

will establish seamless cross-territory

improvement, can only further our vision

travel and enhance rail as the preferred

to be a company that connects and grows

mode of public transport. The new regional

communities with caring services.

express link announced as part of this CK Chow

broad infrastructure plan integrates the Sustainability Report Card Chief Executive Officer

Hong Kong network into mainland China’s In reviewing our progress for the 2007 year 15 April 2008

12,000+ kilometres of national high-speed in context of sustainability development,









www.mtr.com.hk/sustainability 03

MARKET SHARE OF FRANCHISED PUBLIC TRANSPORT

(In percentage)



MTR KCRC Buses Mini-buses Trams & Ferries



MTR (December 2007 only) All other public transport modes (December 2007 only)









3.7 3.6 3.5

13.8 14.2 14.4





41.6

41.9 41.6 41

25.2 25 26.7



58.4





15.4 15.6 14.4









2005 2006 2007









AbOUT MTR Capturing Synergies Centralised control over future rail

To optimise business outcome of the projects establishes better planning with

CORPORATION Government and optimises the across-the-

merger, extensive reviews of both

organisations’ operations were conducted board efficiencies in how new rail lines will

with the intention of identifying “best of be built. This paves the way to facilitate

Expanded Corporate Footprint

both” in management and systems as the the development of the four rail projects

Following the enactment of the Rail Merger

underlying basis for future operations. confirmed by Government in the 2007-08

Ordinance effective from 2 December 2007,

From this, the new organisational structure Policy Address.

the Kowloon-Canton Railway Corporation

(KCRC) granted MTR Corporation the 50-year was shaped and, significantly, the social, The land bank acquisition, which gives rise

service concession to operate, manage and economic and environmental risks to the to substantial revenue potential, extends the

maintain the operational assets of the KCRC. merger and future operations as a single long-term stream of recurrent income from

Additionally, under the terms of agreement rail network were identified for further property sales and investments. Emphasis

for the merger, MTR Corporation acquired action. The process also identified potential is given to green building so as to create

the portfolio of investment properties and synergies and other revenue enhancement sustainably built environments.

property development rights of the KCRC. opportunities that will support the long-

The new Fare Adjustment Mechanism

term sustainability of the new organisation.

(FAM) using a direct-drive formula based

The merger consolidates Hong Kong’s mass

A set of drivers was established that dictated on changes to the composite consumer

transit rail network into a single entity

the new organisational footprint and price and wage indices creates a measure of

managed under MTR Corporation. This

necessarily evolved best practices: certainty in respect of fares, which will fairly

network includes nine domestic rail lines,

balance the interests of, and benefit,

cross-boundary services, a light rail system, With the licence to operate the combined rail

all stakeholders.

the dedicated Airport Express and bus network, some 6,000 employees comprising

Integration of the two rail networks

services, collectively capturing about 41% mainly front-line staff and maintenance

introduces an expanded network with

of the city’s overall public transport market. crews are added to the existing 6,500-strong

seamless connection and reduced fares

The bulk of MTR Corporation’s operations MTR Corporation staff, a decision taken to

across the board for commuters, in

continues to be in Hong Kong, with home ensure the continuity of quality rail services

particular for lengthy journeys and network

market contributions to revenues being over across the expanded network. A parallel

interchanges. This positions MTR to better

95% of the total at 2007 year-end. programme to realise operational synergies

compete with other transport providers and

including staff rationalisation optimises

in time, with better planning and services

deployment and retraining opportunities for

delivery, become the preferred mode of

the some 1,300 new positions identified.

public transport in Hong Kong.





04 About MTR Corporation

PASSENGER NUMBERS MTR CORPORATION ASSETS FOOTPRINT



Total (1) MTR Services (2) Airport Express

The Company’s assets and related operating activities have expanded in size and scope.



Total no. of passengers Total no. of passengers Pre-merger Post-merger Increase (%)

(MTR Services, in millions) (Airport Express, in millions)







1000 Route length (km) 91 211.6 133

28

950 Ngong Ping 360 Cable Car √ √ No change

24

900 Stations 53 82* 55

850 20 Light rail, bus services √ New business

800 Freight √ New business

16

750 Rail consultancy √ √ No change

700 12

Mainland China rail line 1 1 No change

650 8 European rail operating concession 1 1 No change

600

4 Investment properties (lettable floor area in m2) 231,184 272,141 18

550

Land development rights (million m2) 2.15 3.32 54

500 0

Property management

98 99 00 01 02 03 04 05 06 07

Residential units 61,997 71,851 16

(1) The KCRC leased transport assets from 2 December 2007 included Commercial / office space in m2 663,530 756,556 14

(2) Domestic, cross-boundary & light rail services, bus & intercity

services * Excludes 68 light rail stops









A World-class Enterprise the norm for Hong Kong, the principal

Our long-term goal is to be a world-class mode of rail supported by a secondary road

transport network is the long-term objective 2004

enterprise, growing sustainably in Hong

Kong and beyond while focusing on our we collectively pursue. Government tables proposal for merger of

the KCRC and MTR Corporation defining five

core strengths in rail, property and related

With urban transport infrastructure set to parameters to be achieved:

businesses.

move towards a clearer pathway, better Adoption of a more objective and

opportunities for shaping the communities transparent fare adjustment mechanism

Under the hybrid rail plus property business

around our rail lines arise. Our evolving Abolition of a second boarding charge

model, we have sustained ourselves for

and review of fare structure with the

over 28 years as a commercially viable master plan in property development

objective of reducing fares to the public

organisation through building and closely aligns to changes in social Early resolution of interchange arrangements

operating the mass transit network of Hong aspirations and directly influences how our for new rail projects under planning

Kong. The development rights help us to partnering developers plan and build new Job security for front-line staff of both rail

communities. The LOHAS Park development operators

ensure a commercial return is achieved

demonstrates this strategy in progress. The Provision of seamless interchange

that can support construction of future

arrangements in the long run

railway projects. This business model has additional development properties acquired

facilitated competitive fare arrangements through the merger give the potential to

2006

for passengers while maintaining our extend this strategy considerably.

Memorandum of Understanding (MOU)

profitability and leading the way towards signed outlining the terms and conditions

Our reputation in sustainable rail

providing a “quality of life” environment for of the merger:

development and operating expertise

the broader community. Lease arrangement of the KCRC rail assets

has bolstered our international presence,

and operations

The merger enhances the opportunity to particularly in mainland China and Purchase of property and development

achieve more sustainable urban planning recently, in Europe. Projects include a rail rights by MTR Corporation

under this model. The rail network line development joint venture in Beijing, Joint Merger Report details structure of the

managed under a single entity allows for operating concession in the UK and a series merged organisations.

a more holistic view in urban transport of consultancies worldwide on rail design,

building, operations and maintenance. 2007

development and consolidates our position

in working with Government on sustainable Rail Merger Ordinance passed by the

Legislative Council.

transport policies. As satellite cities become www.lohaspark.com.hk

MTR Corporation Limited independent

shareholders vote on Rail Merger.

Merger announced 2 December 2007.







www.mtr.com.hk/sustainability 05

MTR OPERATING NETWORK WITH FUTURE EXTENSIONS



Existing network Legend

Airport Express Station

Disneyland Resort Line Station with Depot

East Rail Line Interchange Station

Rail and Related Services Island Line Proposed Station

Provision of rail transport and Kwun Tong Line Proposed Interchange Station

maintenance of facilities Light Rail Ngong Ping 360 Cable Car

Station businesses and marketing Ma On Shan Line Shenzhen Metro Network

Operating and maintaining Tseung Kwan O Line * Racing days only

Ngong Ping 360 Cable Car Tsuen Wan Line

Properties Owned / Developed /

Tung Chung Line

Managed by the Corporation









Pi ong

Property









ng

L

West Rail Line

01 Telford Gardens / Telford Plaza I and II

40

Urban planning, design and joint- 47

Projects in progress 02 World-wide House 48









ai

venture development









W

03 Admiralty Centre









ui

Kowloon Southern Link









Sh

n

Managing investment properties









Ti

Tseung Kwan O South 04 Argyle Centre









g

Managing non-owned commercial 05 Luk Yeung Sun Chuen /









n

Ho

Luk Yeung Galleria









u

Si

properties Extensions under study

06 New Kwai Fong Gardens

Guangzhou-Shenzhen-

Managing residential properties Sun Kwai Hing Gardens









un

07

Hong Kong Express Rail Link









M

en

08 Fairmont House









Tu

Kwun Tong Line Extension

Projects 29 30 45

09 Kornhill / Kornhill Gardens

Shatin-to-Central Link

Rail line design and development 10 Fortress Metro Towers 28

South Island Line (East)

in Hong Kong 11 Hongway Garden / Vicwood Plaza

West Island Line

12 Perfect Mount Gardens

China and International Future extensions 13 New Jade Garden

Development and operations of North Island Line 14 Southorn Garden

mainland China rail line Northern Link

15 Heng Fa Chuen / Heng Fa Villa /

Paradise Mall

Operation of European rail South Island Line (West)

16 Park Towers

operating concession Tseung Kwan O Line Extension Felicity Garden









-

17









po rld

Ex Wo

Provision of consultancy services









ia

18 Tierra Verde / Maritime Square









As

Property Developments under 19 Tung Chung Crescent / Citygate /









t

or

rp

Construction / Planning Novotel Citygate / Seaview Crescent /









Ai

Coastal Skyline / Caribbean Coast

19 Tung Chung Station Package 3

20 Central Park / Island Harbourview /

21 Kowloon Station Package 5, 6 & 7 Park Avenue / Harbour Green /

23 Tseung Kwan O Station Area 56 Bank of China Centre / HSBC Centre /

Olympian City One /

34 LOHAS Park

Oympian City Two

35 Ho Tung Lau Site A

21 The Waterfront / Sorrento /

Lantau Island

36 Wu Kai Sha Station The Harbourside / The Arch / Elements

37 Tai Wai Maintenance Centre The Cullinan / Harbourview Place /

International Commerce Centre

38 Che Kung Temple Station

22 One International Finance Centre /

39 Tai Wai Station

Two International Finance Centre /

40 Tin Shui Wai Light Rail Terminus IFC Mall / Four Seasons Hotel /

41 Kowloon Southern Link Site C Four Seasons Place

42 Kowloon Southern Link Site D 23 Central Heights / The Grandiose /

The Edge

24 Residence Oasis / The Lane

West Rail Line Property Development 25 No 8 Clear Water Bay Road / Choi Hung

(As Government Agent) Park & Ride

43 Nam Cheong Station 26 Metro Town

44 Yuen Long Station 27 Royal Ascot / Plaza Ascot

45 Tuen Mun Station 28 Pierhead Garden / Ocean Walk

46 Tsuen Wan West Station 29 Sun Tuen Mun Centre / Sun Tuen Mun

Shopping Centre

47 Long Ping Station

30 Hanford Garden / Hanford Plaza

48 Tin Shui Wai Station

31 Citylink Plaza

49 Kam Sheung Road Station

32 MTR Hung Hom Building / Hung Hom

50 Pat Heung Maintenance Centre

Station Carpark

51 Kwai Fong Station 33 Trackside Villas









06 About MTR Corporation

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LOHAS Park









07

new fares implementation on merger day, implementation of an increasing number of

single network operating performance, job internal programmes that bring CSR to life.

security, merger cultural gaps and safety These can cover a wide range of activities,

systems performance. Due to intensive including work-life balance, volunteerism,

mitigation actions taken over the last two energy savings and waste minimisation. To

business Case

years, several risks have been downgraded improve their effectiveness, programmes,

Sustainable competitive advantage drives

while others linked to the integration regardless of size or scope, from 2008

the business decisions that manage the

process roll-out remain at the significant onwards are subject to a rigorous set of

social, economic and environmental impacts

level and thus require senior management’s criteria supervised by a mandated Board-

of MTR Corporation. At the working level

continued attention. level CSR Committee that aligns each

this translates as the dynamics of risk

initiative to business case justification.

management and stakeholder engagement The Priority Business Risks table (page 9)

interacting with corporate strategy to expresses the sustainable competitive The opportunities identified through the

deliver value performance. advantage management process in terms sustainable competitive advantage process

of our economic, social and environmental are often manifested as better efficiencies in

Risk management works within the

performance for 2007. New risks have ongoing operations or even a new business

framework of the Enterprise Risk Management

been added in recognition of changing strategy that gives rise to innovation in

(ERM) system. A series of risk registers

business conditions, social aspirations and product or services. At MTR Corporation, this

identify and rank risks for impact on

stakeholder interests. value performance has on balance proven to

stakeholders and the organisation. Through

be evolving rather than step change or short

defined management process, ownership Change Management

term by nature. This aligns closely with how

and mitigation actions are assigned and The risks and stakeholder interests managed

our organisation learns and how, as a rail

monitored and the management outcome is under the Sustainable Competitive

company, we foster gradual yet substantial

reported for future actions. Advantage model are specific to MTR

social and environmental change where we

Corporation’s sustainability journey and

Similarly, stakeholder engagement can be of greatest influence (and sustainably

consequently, subject to change.

works within a process of identification, effective) in planning the city’s infrastructure

prioritisation, ownership, mitigation, The Corporation views corporate social and the wider community development.

monitoring and reporting that manages responsibility (CSR) as the vehicle through Examples of how identified opportunities

expectations and integrates their influence which internal change is implemented have instituted change both internally

into business decisions. Engagement works and controlled. It can drive initiatives that and externally are discussed in the context

in a more flexible environment that takes influence corporate strategy such as our of social, economic and environmental

into account the changing priorities of master development plan for LOHAS Park impact commentaries (pages 16, 20 and 30,

stakeholders at any given time in addition or the introduction of a new corporate respectively) of this Report.

to including any changes in their interests policy as demonstrated through the Climate

Sustainability Principles

and the subsequent ability to influence the Change Policy. Alternatively, it will give

The Sustainable Competitive Advantage

Corporation over time. rise to division-specific programmes such

model by nature of its processes embraces

as the community engagement processes

the four principles of sustainability

At the enterprise level, risks are quantified used in Ngong Ping 360 Cable Car (NP360)

(stewardship, integrity, transparency and

in terms of their severity in such areas and the WIL . Overall, CSR initiatives

inclusivity). By recognising these principles

as finance, safety, operations, political/ historically have been embedded into the

as inherent to the business case, we do not

reputation and legal compliance against continual improvement culture of the wider

lose sight of the sustainability journey and

the scaled likelihood of occurrence. In 2006, organisation and integrated as part of job

can easily translate these principles into

a selected number of risks attached to the skills training.

measurable actions initiated within the

merger process were added to the existing

The Sustainability and CSR (S&CSR) Steering risk management and stakeholder

register with appropriate mitigation actions

Committee established in 2005 oversees engagement cycles.

prepared. These included such risks as







www.np360.com.hk









08 Management Discussions

Priority business Risk Key Stakeholder Performance Indicator 2005 2006 2007





Economic

Financial sustainability Government, Operating profit from railway and 5,101 5,201 5,912

Shareholders, related business before depreciation and

Business partners amortisation (HK$ million)

Social

Maintaining Shareholders, Passenger trips 2.52 2.55 2.63

passenger numbers Staff (weekday average in million)

Maintaining rail and Passengers Customer Service Pledge achieved:

retail patronage Train service delivery (%) 99.9 99.9 99.9

Passenger journeys on time (%)

MTR 99.9 99.9 99.9

Airport Express 99.9 99.9 99.9

Train punctuality (%)

MTR 99.6 99.7 99.7

Airport Express 99.9 99.9 99.9

Train reliability (revenue car-km/incident) 928,563 1,448,915 1,808,854

Develop and retain staff Staff Staff turnover rate (%) 1.9 2.3 2.8

Ensuring the health and Passengers Passenger safety

safety of passengers, Fatality 0 0 0

staff and contractors Number of serious injuries 5.77 4.11 4.10

per 100 million passengers

Staff Staff safety on the operating railway

Fatality 0 0 0

Loss time injury frequency rate 0.77 0.63 0.52

per 200,000 man-hours worked

Contractors Contractor safety on the operating railway

Fatality 0 0 0

Reportable accident frequency rate 0.12 0.08 0.09

per 100,000 man-hours worked

Construction and Construction safety for railway extension

Contractors’ staff projects

Fatality 0 1(2) 0

Reportable accident frequency rate 0.88 0.34 0 0.60

per 100,000 man-hours worked



Contractor safety for property development

projects

Fatality 1 00 0

Reportable accident frequency rate 0.62 0.69 0 0.49

per 100,000 man-hours worked

Environmental

Breaches of statutory Government Legal compliance (MTR Corporation) - 0 0 0

environmental number of successful prosecutions

requirements

Government, Legal compliance (project contactors) - 0 0 0

Contractors number of successful prosecutions



Long-term Shareholders, Greenhouse gas emissions 613,708(3) 615,066 675,560

energy supply Passengers, (tonnes CO2eq)

without renewables Customers,

(GHG emissions) Suppliers,

Community

Climate change Staff, Passengers, Annual review of risk - the annual review n/a(4) n/a(4) Review

(Response to pandemics Customers, comprises a risk assessment and a continuous completed

and other climate Community, process of risk management actions

change risks) Suppliers, (see pages 30 and 31)

Contractors

(1) Economic data captured includes audited data from the KCRC as of post-merger date 2 December 2007. Social and Environmental data captured excludes the KCRC and NP360

Cable Car except where indicated.

(2) A member of the contractor’s specialist team suffered fatal injuries during the construction phase of NP360 Cable Car.

(3) Data restated in 2006 due to changes in conversion factors

(4) Risk not prioritised at enterprise level





Refer to pages 36 and 37 for definitions of the terms used.



www.mtr.com.hk/sustainability 09

MTR CORPORATION MATURITY MATRIX 2003-2007



2003 2004 2005 2006 2007









Stakeholder engagement



4

Reporting

Key drivers



3







2

Review

Leadership, vision

and governance

1









Environmental

assessment

Managing risk









Key management

issues Sustainability

development culture

Building capability









Principles Practices 2003 2004 2005 2006 2007





Inclusivity Stakeholder engagement 2.8 3 3.5 3.6 3.7

Key drivers 2.8 3 3.5 3.5 3.6

Integrity Leadership, vision and governance 3.2 3.5 4 4 4

Managing risk 2.8 3.2 3.5 3.6 3.8

Sustainability development culture 3.2 3.4 3.5 3.5 3.5

Building capability 3 3 3 3.2 3

Stewardship Key management issues 2.5 3 3.5 3.5 3.6

Environmental assessment 3.2 3.5 3.8 3.8 3.8

Transparency Review 3 3.5 3.8 4 4

Reporting 3.2 3.5 3.8 3.8 4









10 Management Discussions

Community Investment – The “More Time Reaching Community” scheme attracts 1,800 staff volunteers and benefits some

12,000 people.

Employment and Social Affairs – The “Sustainability, My Responsibility” slogan campaign kicks off the future of CSR educational

programmes for staff.

Sustainability and Environment – The energy management initiative saves 14,258 MWh electricity for MTR rail system.

Public Recognition – Thirty-four Hong Kong and international awards are received, recognising outstanding performance in social

and environmental stewardship.









With over seven years in reporting on sections on social and environmental assess our strengths and weaknesses in a

sustainable development, we realise that stewardship expand these discussions. time-sensitive framework and subsequently

our corporate metrics in sustainability act upon them in a consistent and

Integrity, Transparency and Inclusivity

must support the growing number of progressive manner.

The Sustainable Competitive Advantage

key performance indicators demanded

model drives integrity, transparency and Our progress to build capability is included

by external organisations relevant to

inclusivity of operations. Through the in this assessment. Although initiatives

our operations and reputation. Robust

inherent processes of risk management and (discussed online and in the Social

management systems, clear governance and

stakeholder engagement, we capture and Responsibility and Environmental Stewardship

work procedures, and strong data capture

practise these principles in a methodical and sections of this Report) were undertaken,

facilitate our ability to measure against the

transparent process. activities pertaining to the merger transition

growing number of international guidelines

planning took precedence for all staff time

and standards guided by and aligning to the Prioritisation of the material issues for

and training, and therefore achievement

four above-mentioned principles. As a result, purposes of reporting to stakeholders

in this area has fallen short of our target

our reporting capabilities currently adhere is derived from our internal materiality

expectations for the year.

to the industry-specific benchmarking mapping process. This process identifies

exercises (CoMET, UITP) as well as the wider and categorises outcomes as critical,

global reporting frameworks captured under substantial or important to our sustainability

the GRI, WBCSD, UNEP, BSI, AccountAbility, Our management discussions for the 2007

as an organisation. Critical outcomes form

the DJSI , Ethibel and FTSE4Good indices, year necessitate addressing the approach to

the basis of discussions in this printed

and other relevant environmental and social how sustainability factors into the merger.

Report. Substantial outcomes are treated

benchmarking organisations. A special section of this Report, Merger Case

in our online reporting and the important

Study, examines our approach and analysis

outcomes, the bulk of the materiality issues,

Stewardship of the business case for a sustainable

are not discussed as they generally sit at the

Our performance is based on a business MTR Corporation post merger. It describes

divisional risk/engagement levels and are

culture driven by the ethos of continual how the Sustainable Competitive Advantage

managed at these levels.

improvement and guided by the six model has been applied to the assessment

sustainability drivers. These drivers continue This same mapping process defines the of risks and stakeholder influence for

to evolve the organisation as we move inclusivity principle in reporting both in both the process of the merger and in

through the merger-related changes in terms of stakeholders engaged as well as the new corporate entity. Although we

corporate culture, external expectations, the scope of issues that are addressed. cannot predict the exact outcome of our

work competencies and management assessment, we have, at minimum, identified

practices. The underlying systems and The Scorecard

the new sets of prioritised risks and

processes that measure and improve against Our internal scorecard for 2007 in managing

stakeholders, and the means by which to

internal targets in conjunction with global MTR Corporation under the sustainability

manage them.

industry standards remain the framework principles is reflected in the BS8900:2006

for workplace achievement. The following Maturity Matrix. This Matrix helps us to





www.comet-metros.org www.globalreporting.org www.unep.org www.accountability21.net www.ethibel.org

www.uitp.com www.wbcsd.org www.bsi-global.com www.sustainability-index.com www.ftse.com





www.mtr.com.hk/sustainability 11

GOVERNANCE The 2007 Annual Report includes a An outcome of the recommended

governance report, which provides further organisational structure was the

information on the governance of our identification of economic efficiencies that

corporate performance and management would serve both the Corporation’s and

MTR Corporation functions under a strong

for the year. shareholders’ interests. These efficiencies

governance framework supported by

form part of the anticipated three-year

control mechanisms that clearly delineate

programme of realised cost and revenue

the responsibilities and accountability of the Of importance to our readers in reporting

synergies (HK$450 million/year) tabled

Board of Directors, the Executive Directorate on governance during the 2007 year, we

to shareholders. For discussions of the

and company managers. elect to focus on governance in terms of

Board-level actions undertaken during the

sustainability and the merger. That is, how

Governance is executed through the merger, refer to our online discussions. For

best practice under a specified governance

Board and the Executive Directorate. The additional details on the merger in terms of

framework was identified during the

overall management of MTR Corporation’s future sustainable best practice, refer to the

merger process and how sustainability/CSR

businesses is vested in the Board, which has Merger Case Study (page 13).

governance will be integrated at the Board

delegated the day-to-day management of

level under the expanded MTR Corporation CSR Committee

the Company’s business to the Executive

organisation. These two issues are essential Of particular interest for future sustainable

Directorate and focuses its attention on

to understanding how practices and development is the Board-level CSR

matters affecting the Company’s overall

decisions taken in the run-up to the merger Committee that is to be established in

strategic policies, finances and shareholders.

foreshadow the new internal governance 2008. This decision reflects the substantial

The Board is responsible for the system

framework and management systems commitment to establish the corporate-

of internal controls, setting appropriate

that will help drive forward the long-term wide CSR policy and related practices.

policies and reviewing the effectiveness of

sustainable development of MTR Corporation. Implementation will become active

such controls. The Board also oversees the

upon announcement of the Committee’s

management of other executive committees Merger management structure.

through the Executive Directorate. In anticipation of the complexity of

integration, the Merger Integration Office In 2008, the CSR Policy will be introduced

The Board comprises a 13-member

(MIO) was established in 2006 to manage and the Committee structure and

panel, two of whom were appointed in

the merger integration process. This office membership formalised. Under direct

December 2007. The majority (12) are

planned and assisted in the implementation governance of the Board, the Committee is

non-executive directors, eight of whom are

of the organisational structure for the new charged with policy formulation and related

independent non-executive directors. The

rail entity, and also worked to enhance duties to supervise implementation and

Executive Directorate comprises the Chief

the relationships among the stakeholders review of policy directives. The Committee

Executive Officer (CEO), also a member

involved to ensure that the stated goals of is responsible for the appointment and

of the Board, and the heads of the seven

the merger could be achieved. overseeing of a management committee

divisions (Operations, Projects, Property,

which will draw upon existing in-house

China and International Business, Legal ,

Working on the basis of “best of both”

sustainability and CSR expertise, and

and Procurement, Finance, and Human a bottom-up assessment of existing systems

through the S&CSR Steering Committee,

Resources and Administration). Members and related management practices was

will supervise and implement appropriate

of the Executive Directorate are appointed conducted which established best practices

activities across the organisation. Within this

by the Board and are responsible for the and how such practices would influence the

framework, the Committee has the power

implementation of strategy and policies organisational structure. Essential in this

to recommend improvements, allocate

as decided by the Board. They oversee the process was the input from staff across both

resources and, if deemed appropriate,

ongoing management of the Company and, companies and an independent third party

introduce new organisational initiatives.

together with senior managers, regularly acting as best practice arbitrator. One of

This structure will reinforce and clearly

report to the Board on the performance of the objectives was to embed accountability

identify CSR as a key objective of sustainable

the principal activities of the Company. into the new organisational structure and to

development and will promote the

put in place the systems and mechanisms to

necessary senior-level ownership to ensure

identify, monitor and measure performance.

CSR integration into our business strategy.









12 Governance

acting independently. Undertaking the Testing the New Dynamics

rail merger in this context is an exercise in At the time of the MOU a set of perceived

risk management that marshals available key business risks was established by the

resources to realise a set of synergies that Enterprise Risk Committee. Mitigating these

Challenges to Institutional Change

reduces risk exposure in the combined risks was central to the licence to operate

The merger initiates a series of institutional

railways to a level that could not be realised and assuring the future sustainability of

changes that substantially affect the dynamic

under the separate operating networks. the new organisation. The Sustainable

balance of MTR Corporation’s sustainability

Competitive Advantage model, which

management system (Sustainable In 2004, the HKSAR Government tabled

provides the process to manage the social,

Competitive Advantage model) due to new a proposal based on this framework of

economic and environmental impacts on

inputs arising from the process. To this optimisation to merge the two rail network

the organisation, served as the platform to

end, we have dedicated this section of the operators in Hong Kong, MTR Corporation

manage these identified risks.

Report to addressing the unique challenge and the KCRC. In this proposal, five principal

of maintaining the sustainability perspective parameters were identified that would drive

Sustainable competitive advantage

while undergoing a major corporate the merger agreement for the purposes of

operates as the dynamic interaction of risk

reorganisation, in this case, a merger. promoting the future of rail as the backbone

management and stakeholder engagement

of public transport. These parameters were:

Our approach is a test of the integrity and acting independently or collectively with

portability of the Sustainable Competitive Adoption of a more objective and the corporate strategy to deliver value-

Advantage model as an underlying transparent fare adjustment mechanism added performance. Each operates under

hypothesis for developing the business case Abolition of a second boarding charge and a process of identification, prioritisation,

in sustainability. By applying the model to review of fare structure with the objective mitigation, monitoring and reporting as new

the new set of identified priority business of reducing fares for the public inputs impact the process, giving rise to a

risks attached to the new organisation and Early resolution of interchange reiterative system of management. The chart

to the merger process itself, we investigate arrangements for new rail projects under on sustainable competitive advantage (page

and test the model’s ability to effectively planning 9, Sustainability Report 2005) graphically

reduce the collective risks and deliver on represents the dynamics between risk

Job security for front-line staff of both rail

expected outcomes. To this end, we will management and stakeholder engagement.

operators

assume that the model can be used to predict The Materiality Map (page 12, Sustainability

Provision of seamless interchange

a correct outcome of the risk management Report 2006) gives guidance on how risk and

arrangements in the long run

and/or stakeholder engagement processes. engagement are prioritised and reported.

However, as a predictive-corrective exercise, MTR Corporation perceived these five

we will then consider correction to the parameters as the performance value In applying a predictive-corrective approach

basic components of the Sustainable outcomes to be achieved through sustainable to the model’s processes, the outcome of

Competitive Advantage model by looking at competitive advantage application. the mitigation measures the level of success

process outcomes in future years. To assist in risk reduction and identifies where gaps

In April 2006, the MOU was signed, which

in understanding this process, refer to the remain. This provides an understanding of

included the rail merger structure and

illustrative graph immediately following this the resilience of the merged entity’s future

the key terms of the merger agreement

case study discussion. sustainability and points to those areas

with due consideration to the five value

background in need of further action. Likewise, the

outcomes. The subsequent Rail Merger

The purpose of a merger is to arrive at a predictive-corrective approach confirms the

Ordinance and Transaction Agreements

sum of the risks or a sum of the mitigation importance of those gaps when considering

form the legal and commercial basis upon

of risks that is lower in the combined stakeholder engagement.

which MTR Corporation operates as the

organisation than in the individual entities merged organisation.









www.mtr.com.hk/sustainability Merger Case Study 13

The model has also been applied to Industrial discontent was identified potentially damaging social and economic

mitigating those risks identified at the as the risk mitigation focus. Using the impacts while delivering on the expected

divisional levels for the merger. These dynamics of stakeholder engagement, value outcome of job security.

included cultural integration, job skills, the Human Resources management

As continuous mitigation using the risk

service standards and other specific conducted sessions with staff

management and stakeholder engagement

business unit needs. By using the risk representative bodies including

processes brings change forward into

management and stakeholder engagement unions, staff and relevant consultants

sustainable actions at the enterprise

processes, actions and programmes were to enact programmes that reduced

level, the need to address adjustment in

structured and implemented to build the the potential of industrial action and

the vision-mission-values has become

capabilities required to smoothly integrate resolved contentious remuneration

apparent. By introducing the new vision-

the two organisations. points. This was achieved through

mission-values set, sustainable competitive

clear communications and consensus

An illustrative example of the model’s advantage is institutionalised. With such

building for constructive employment

application at the enterprise level is the change, performance outcomes will align

practices within the new organisation.

management of the linked risks to ensuring more closely with the specific long-term

job security for front-line staff in both rail A deed poll was issued prior to the business goals of MTR Corporation. This

operators (one of the five defined value merger that effectively guaranteed next step is currently under review with the

outcomes). Under the Enterprise Risk job security for relevant front-line new set of vision-mission-values expected

Management system, the priority business staff post merger as well as keeping to be issued by mid-2008.

risks related to the merger outcome were existing remuneration packages intact.

identified as service maintenance in The threat of industrial action was

conjunction with the more direct risk to subsequently substantially reduced

the development and retention of staff, along with the enterprise risk. Since

both having substantial social impact on the merger, the introduction of unified

MTR Corporation. Triggering these risks employment packages has actually

would be a general industrial discontent by increased earnings opportunities for

staff prior to the merger if job security was such staff.

not resolved. This would directly result in

Value Outcome

widespread services disruption. Such an

Within the predictive-corrective

adverse event would have subsequently

approach, we have successfully

damaged the merger process. With 80%

back cast the job security issue to

of staff in the combined organisations in

substantiate the effectiveness of the

front-line jobs, such actions would severely

Sustainable Competitive Advantage

threaten the merged organisation’s licence

model’s ability to reduce risk and, in

to operate and its reputation.

turn, drive the business case of the

merged organisation. In this case,

it demonstrates the mitigation of









14 Merger Case Study

ROADMAP TO SUSTAINABILITY



R Risk Management E Stakeholder Engagement VMV/Corporate Strategy





The graph illustrates how the Sustainable Competitive Advantage model is applied to the merger

process. In the lead up to the merger, risk management is heightened to focus on the combined risks

of two companies and of the merger process itself. In response, stakeholder engagement increases at

deeper levels to ensure inclusivity and comprehensiveness of interests. Finally, the vision-mission-values

set is reassessed as an appropriate corporate strategy. The end objective is to bring the model’s

dynamics back into balanced interaction.



“One Company,

One Team”







R E



Strategy/ VMV review

Reduced risk portfolio







R E

Enlarged risk

portfolio

Heightened

engagement



R E

Enlarged risk

portfolio

Heightened

engagement



R E









R E





05 06 07 08 09





Risk management is conducted through the Enterprise Risk Management (ERM) system,

an organisational tool which is used to identify, prioritise and allocate ownership of risks and then

serves to develop, enact, monitor and report on the mitigation to reduce the risk impacts. It is

reiterative and involves a hierarchy of risk managers to supervise the process.



Stakeholder engagement works within a flexible management approach that endeavours to prioritise

and manage both stakeholder groups and their expectations. These two categories change in

importance in direct relation to their influence on our divisional business activities at any given time.

Engagement functions within a process of identification, prioritisation and ownership of stakeholder

issues, followed by mitigation and the follow-up to monitor and report on the corrective actions. As

with risk management, it is reiterative and works within a hierarchy of assigned managers, mainly at

divisional levels.









www.mtr.com.hk/sustainability 15

Mass transit rail is a community asset that

fosters economic prosperity.



Value Strategy

MTR Corporation is a conduit to promoting widespread economic value. Through our preferred rail

plus property business model supported by sustainable business practices, the Corporation maintains

profitability while investing in and building new rail projects.



Underlying this model is the financial objective, investing on a WACC+ (Weighted Average Cost of Capital)

basis, a corporate premise announced at our public listing in 2000. The WACC+ approach guides assessment

of rail project viability irrespective of development models. With expansion into international markets

and more recently, in Hong Kong, alternative financial models in rail developments will be considered

where property rights are not feasible. While the rail plus property business model remains the primary

vehicle, utilising alternatives under the WACC+ basis widens our scope for business opportunities without

compromising our value promise to shareholders.



In broader terms, we are a community asset. Our world-class transport infrastructure is recognised as a

contributing factor to Hong Kong’s status as an international business and financial centre. In addition to

being the mainstream public transport provider, we support Hong Kong’s service-based industries through

our supply chain and significantly contribute to tourism with operations of the Disneyland Resort Line and

Ngong Ping 360 Cable Car and tourist village. Our transport network, which connects commercial centres

and residential developments across Hong Kong, provides the blueprint for an affordable quality of life in

urban and community development.



The resilience of our rail strategy broadens our long-term economic value to the communities we serve.

With the introduction of rail to older, more suburban communities, as seen with the South Island Line (SIL),

the Corporation facilitates the revival of communities while keeping local heritage and identity intact.

New stations are optimised for both social and economic value by soliciting early community input that

leverages planning and design in terms of potential usage and development costs.



The rail merger introduces immediate economic benefit to our wider group of stakeholders, in particular,

passengers and staff. In response to the five objectives underlying the merger agreement, fares have been

cut across the board for commuters, the Fare Adjustment Mechanism affords transparency and objectivity

and, jobs are guaranteed for the 80% of MTR Corporation staff holding front-line positions.









16 Commentary: Value Strategy

www.mtr.com.hk/sustainability 17

The PAS55-1 specification sets out the

requirements for a system to manage

physical infrastructure assets. Based on

this specification, MTR Corporation’s rail

Value to our stakeholders is achieved through operations utilise a framework taking

practices that drive sustainable competitive advantage a risk-based approach that links asset

management to business objectives. The

in the workplace. goal is to minimise life-cycle costs of assets

while maximising their value to the business.

Changing Priorities customer interface, has improved staff

Prior to the merger, both MTR Corporation

Hong Kong’s empowered society capabilities in taking a proactive approach

and the KCRC achieved certification under

increasingly raises the bar in quality of life to their jobs. Performance feedback is

PAS55-1, thus giving the merged company

expectations. Our performance directly measured through regular customer

the distinction of being one of the few

reflects how we respond to and deliver on service engagement exercises and by a

railway organisations globally to achieve

such expectations. campaign for public nominations of the

certification under PAS55-1.

best service station team and individual

Established programmes that purposefully Upgrading the existing network services

station staff for annual awards. The

guide the revitalisation of the people, is an ongoing programme that seeks

frequent visits by senior management and

services, operations and asset dimensions to improve connectivity, enhance the

company directors to individual stations

of our business continue to serve us well in community rail vision and deliver safe and

to hold discussions with staff on service

responding to expectations: reliable services. In 2007, a further two

issues confirms this campaign as a front-line

underground passage ways at high-traffic

“Service from the Heart” the ongoing

, service training priority.

stations opened to facilitate convenient

campaign to hone staff skills at the rail

all-weather access to rail stations. In-









18 Social Responsibility

station refurbishment accommodates the identified under our priority business risks. Capturing New Customers

fast-developing consumer technology These pledges serve to support continued In planning and designing new rail

innovations and continues to modernise rail and retail patronage, passenger safety lines, demand and destination play an

and reconfigure station retail space for and commuter numbers. increasingly pivotal role in network strategy

better convenience and tenant retail mix. The 2020 Vision was tabled in 2007 for and delivery. With the acquisition of light

In managing our shopping centres and consideration by senior management. rail services under the merger and the

commercial and residential properties, It outlines the scenario planning for proposed SIL , the network is better

a new chapter in customer services managing our rail assets to anticipate positioned to reach new catchment areas.

commenced with the opening of Elements, customer-of-the-future expectations The ability to build and manage light and

Hong Kong’s largest premier shopping and the hard asset response to them. It medium rail lines justifies the investment to

centre. In addition to providing spacious examines three levels of response, with extend our network to these more suburban

retail and entertainment facilities that business-as-usual the mean scenario. The areas within the HKSAR, which would not

strategically use skylights, the Union Square study addresses such issues as the need normally meet our traditional heavy rail

public park located above the mall brings for capacity management, barrier-free specifications. The SIL is configured as a

a tranquil respite from city life with a green access for the disabled, aging population medium capacity rail project supported by

country park in the heart of Kowloon. expectations, improved train environment sustainable design innovation and advanced

and the expansion of options within the technologies to justify the future viability

Assets optimisation combined with staff

network that capitalise on consumer of the line. It is currently in the advanced

capability development underpin successful

technology innovations. This document stages of approval by Government.

delivery of the 13 Customer Service Pledges

for rail management and services. These serves as the starting point for collective

pledges, in conjunction with other major thinking on the changing risks inherent to

programmes such as occupational safety the long-term maintenance and growth of

and health, set internal targets and the KPIs the rail network patronage.





www.elementshk.com









www.mtr.com.hk/sustainability 19

20 Commentary: Society’s Challenge

An empowered Hong Kong society increasingly

raises the bar in quality of life expectations.



Society’s Challenge

Mobility, reliability and connectivity drive the high-density, high-convenience transport model for city

development. In Hong Kong, economic and trade growth has and continues to evolve this strategy.

Rail now connects and serves several regional commercial hubs and logistics centres across Hong Kong

and, recently, in the Pearl River Delta, thus enabling the separation of residence from workplace and

lowering density without sacrificing the critical convenience factor.



Population growth, affluence and marked changes in social aspirations are as well reshaping local

community development. MTR Corporation progresses with such aspirations through our disciplined

and iterative stakeholder engagement process. We have established an industry model for collective

environmental stewardship when developing projects, pioneered an interactive communications

programme that invites local community participation in new rail line development and, in recent years,

marshalled grass roots support for urban renewal linked to rail line introduction.



Under our rail plus property business model, new township developments are in progress that are

resilient to changing and maturing social expectations. Our master planning continues to evolve,

emphasising green and open community spaces, eco-efficiency of built environments, larger individual

residential spaces, barrier-free access to amenities and the proximity of service facilities. These communities

of the future are linked to wider regional centres through a coordinated transport system in which rail is

the primary travel mode, supported by road-based connection to surrounding local regions. LOHAS Park,

the new mini-city taking shape over the next ten years, takes this vision forward.



Aligning to our premise that sustainability is inherent to the business case, our social investment strategy

links directly to the economic benefits achieved. The Value Strategy commentary on page 16 discusses

resilience in economic strategy. Combining this with the above discussions on inclusion of society’s voice

in organisational development, we demonstrate how we contribute to more effective and widespread

economic prosperity while being mutually beneficial to our business and to the communities we serve.









www.mtr.com.hk/sustainability 21

Investing in Communities rights allocated under the rail plus property project, multi-party negotiations agreed

Creating a railway is a people and community business model. on a solution for a community heritage

proposition. Under our long-term planning building use. For longer-term urban

Social risks affecting our property

vision of “Rail to People People to Rail”, our development, LOHAS Park will deliver a

development strategy are now registered

stations are built and managed to be focal green built environment and captures our

as critical enterprise risks. A general

points for local community activities while management approach to mitigating such

proliferation in community resistance

serving as regional transport hubs. risks posed by the increasingly stringent

to some property developments and

community expectations in living and

Proactive stakeholder engagement has infrastructure projects as a result of the

lifestyle environments.

guided the successful community buy-in desire for heritage conservation and

to the building of the WIL. Through early healthier, greener living spaces gives rise The community railway vision for our

identification of the stakeholders and to our active management in addressing stations and network continues to grow with

their interests, the Corporation proposed these growing social influences. High-rise the further expansion of our established “art

a community-oriented rail line, sensitive developments that create a “wall effect” in mtr” programme, which stages cultural

to local heritage and urban renewal within the densely populated districts programmes and exhibitions by local artists

opportunities. Frequent dialogue with and adjacent to our network stations require a within stations to enhance the customer

input from the local communities on design rethink in development scales, plot ratios experience. These activities and events

and access points for the rail line facilitated and alternatives to wind-blocking high augment the increasingly diverse range of

the planning and design championed rises. Our Property and Projects Divisions’ retail outlets and infotainment programmes

by these future users. The influence of risk registers now include these and other available to commuters, which add the

the community voice arising from this anti-development sentiments as part of essential convenience factor in travel.

engagement exercise aided in the timely their assessment programmes along with

Staff and Career Development

approval of an alternative rail development the added impacts of heritage conservation.

The 2007 year focused on close and

model which requires government financial Although still in the active management

comprehensive workforce engagement.

support in lieu of property development stage, the results are promising. In the WIL









MILLENNIUM CITIES DATABASE FOR SUSTAINABLE MOBILITY

The UITP has compiled a database of 100 of the world's major cities to make available to the transport

industry a set of metrics for benchmarking or measuring industry performance. The database covers 66

raw indicators relevant to the global industry enabling interested parties to design 223 standardised

overall mobility indicators for their use.

The graph below compares transportation cost as part of the % GDP with population density.

Hong Kong is the most efficient, with approximately 5% GDP expenditure to serve some 320 inhabitants

per square hectare.





Cost of Urban Transportation (%GDP)

14 Houston Bangkok

12



10

New York

8

Paris

6

Munich

Singapore Hong Kong

4



2

Shanghai





0 100 200 300 400

Density (Inhabitants per ha2)









22 Social Responsibility

With the merger in a fluid position due Low morale and job insecurity amongst staff Building Capability

to protracted government and legislative are major risks in merger and acquisition Skills training forms a critical component of

negotiations, staff motivation and career situations. Managing these requires the job competency. In addition to the diverse

development were some of the greatest mobilisation of extensive resources to range of training opportunities related to

challenges facing the organisation. discuss and secure job status for employees, specific processes or services sponsored by

identify deployment opportunities and each division, each employee undergoes

In communicating change for corporate

retraining and, for employees choosing to an annual review to assess and assist in

life post merger, the Joint Consultative

leave, structuring a voluntary separation individual career paths. This designates the

Committee (JCC), the Staff Consultative

scheme. The decisions and final programme roadmap for personal development and aids

Council (SCC) and the two MTR Corporation

for these issues were and continue to in the achievement of individual KPIs for

unions provided responsible and effective

be undertaken with open dialogue and advancement.

staff support and representation in the

feedback with employees and their

transition planning and in structuring future Despite the best efforts in nurturing staff

representatives prior to any decisions taken

job security status for most employees. towards realising individual career aspirations,

so as to arrive at mutually satisfactory terms.

The high degree of trust between these the uncertainty of the merger process

organisations and our management Supplementing these formalised hindered a number of efforts to initiate

developed over time aided in the timely consultations is a broad communications sustainable best practices. This is reflected

resolution of differences. Due consideration campaign to keep staff informed as to in the year’s slow progress in fostering the

was given to and extensive consultation merger progress and decisions. This culture of sustainable development and

was undertaken with the three unions campaign supplemented by CEO and in implementing the tools and training

representing the KCRC staff. The issues were director briefings, intranet and staff to further workplace capabilities. For

in essence the same, but required a more newsletter announcements, and divisional 2008, the focus will remain on building

specific dialogue and agreement process meetings address the questions and staff capabilities, with the added target of

to reassure the KCRC representatives of concerns of staff and will continue into 2008 bringing overall cohesion to work activities.

management’s good faith. as part of the integration progress.









AVERAGE TRAINING DAYS TOTAL STAFF STRENGTH



MTR Corporation Hong Kong Station commercial and Offshore employees Property and Projects

rail-related businesses other businesses



Annual average days Corporate management Operations China and international

per employee and support departments businesses





7 14,134

305

6 1,311

6.4(1)

1,141

5

942

4 1,530



6,629 6,555 7,363(2) 8,770

3 6,991(2)

61 67 82

5 5 82

486 733

2 642 660 688 832

2.6(2) 398 362 242 260

793 792 810 823

1 4,730 4,669 4,600 4,521



0

05 06 07

83 112 135

(1) Excludes data from the KCRC and NP360 Cable Car 03 04 05 06(1) 07

(2) Data restated due to IHRM changes in study parameters

and in measurement methodolgy (1) Excludes NP360 Cable Car

(2) Data restated to include full-tme staff employed outside Hong Kong









www.mtr.com.hk/sustainability 23

Consultation and communication with staff

were critical to achieving the rail merger’s

objectives and in securing the successful future

integration of corporate cultures.





Merger and Cultural Integration “preserve, adapt or change” The objective to

. The task to integrate corporate cultures

The merger of the two rail operators has find “best of both” in systems and processes remains a priority issue and a merger risk.

significant social impact on the organisation was undertaken systematically through Buy-in at middle management and front-line

and for our stakeholders. Early recognition the bottom-up approach, with appropriate service levels remains the pivotal challenge

of these impacts gave rise to the formalised support from independent management to integration, as some 12,500 employees

Joint Integration Committee formed in consultants. Final choice of corporate practice have been affected by the change

2004, which drew up the blueprint for was approved by the MIMC and adopted management process. To lower the risks

change management using the Sustainable into the merged organisation. The smooth of resistance and inertia, in addition to the

Competitive Advantage model (page 13, operations on “Appointed Day” and the early broader restructuring in remuneration and

Merger Case Study). Under this committee realisation of merger benefits have justified alternative career choices, each division is

functions the Merger Communications the extensive preparation to create the undertaking from 2007 onwards a series of

Committee (MComC), which deals with seamless network travel of MTR system today. programmes that target skills development

external and internal communications; the in conjunction with job placement.

HR Integration Management Committee In 2008, the MIO will provide input into Cultural integration is a complex issue, and

(HRIMC), which manages staff and job critical areas of the merger to ensure a we seek to maintain focus on achieving the

migration; and the Merger Integration seamless integration progress: set targets as we continue on the integration

Management Committee (MIMC), which

Stabilise the merger integration process, path. Regardless, our long-term objectives

drives merger integration activities.

including operational deliverables, are clear:

The Merger Integration Office (MIO), achieving budget controls and synergy We maintain the high service standards

working full time and accountable to the targets and accountably implementing the expected by our rail and retail customers.

MIMC, serves as the resource centre for year-one management programme.

We fulfil the five parameters under the

action. Working against a tight schedule Communicate with stakeholders on the merger framework agreement to retain

and with limited availability of resources, progress and implementation of the merger. our licence to operate.

some 11 task forces and 37 sub-teams

Provide interface support for line We grow our brand franchise.

including subject-matter experts reviewed

management in implementing inter-

and assessed different functional areas of We are an employer of choice.

divisional/departmental tasks.

the organisation using the guideline of We deliver new railway and extension

projects on time and within budget.









24 Social Responsibility

The internal agenda for the merger process The Integrated Management System (IMS) adopting for the new organisation the

in 2008 focuses on a few selected points is the overarching framework that pre-merger KCRC’s construction safety

which encompass the broader spectrum of directs the key areas of system safety and management system, considered more

issues that will drive our future cohesion: occupational safety and health, aligning to advanced than current internal systems and

external OHSAS 18001 certification. During processes. From 2008, this new system will

Integration of cultures and systems

2007, the operating railway maintained oversee the construction safety aspects in

Maintaining reputation and brand value

its overall excellent track record in safety the several rail projects currently in varying

Developing skills, not just jobs performance. stages of planning and approvals. In other



The six sustainability drivers provide the areas of safety, risk management systems

MTR Corporation participates in the annual

framework to achieve these. and processes follow the existing

CoMET benchmarking exercise, which invites

methodology, albeit, being realigned to

11 leading metros worldwide to undertake a

address the additional operational risks and

Safety series of benchmarking exercises to gauge

stakeholders’ interests principally introduced

Safety, a key risk that affects our licence best practices and identify new pportunities

by the merger.

to operate, spreads across a number for improvement. Now in our 13th year

of stakeholder groups to include staff, of participation, we have maintained an Developing External Partnerships

customers, contractors and suppliers. The average ranking amongst the top three Developing working partnerships with our

Corporate Safety Management Committee, operators in the safety category since joining. suppliers, contractors and business partners

established in 2006 in response to growing In 2007, we ranked as number one when leverages our opportunity to influence

business needs in and outside Hong Kong, comparing safety performance in respect of sustainable best practice outside our

supervises safety management. Under fatality per billion passenger journeys. immediate corporate footprint. Substantial

direct governance of the Board of Directors, advancement in managing both up- and

the Committee, supported by divisional Safety was identified as a critical risk downstream impacts was made during the

committees, oversees the implementation element in the merger transition process, year that affects our supply chain, property

of the Safety Policy and guides the with extensive risk analysis attached to development strategy and international

management of safety across operations its subsequent management from Board business ventures.

and businesses. level downwards. Under the “best of both”

working guidelines for the merger, MTR

Corporation took the significant step of









www.mtr.com.hk/sustainability 25

Objective Description Target Performance





Passenger safety Fatality 0 0

No. of serious injuries per 100 million passengers 6.8 or below 4.10

Staff safety Fatality 0 0

on the operating railway

Lost time injury frequency rate per 200,000 man-hours worked 0.61 or below 0.52

Contractor safety Fatality 0 0

on the operating railway

Reportable accident frequency rate per 100,000 man-hours worked 0.26 or below 0.09

Contruction safety for railway Fatality 0 0

extension projects

Reportable accident frequency rate per 100,000 man-hours worked 0.60 or below 0.60

Construction safety for property Fatality 0 0

development projects

Reportable accident frequency rate per 100,000 man-hours worked 0.85 or below 0.49

(1) Excludes data from the KCRC and NP360 Cable Car









Procurement management or prosecution history, but International Business

The Procurement Department, which rather to work with suppliers to improve The Corporation secured during the year

directs corporate-wide supply chain practices. the seven-year concession to operate the

management, took a major step forward London Overground in joint venture with

Our future plans include continued

in 2007 with the completion of the CSR Laing Rail. The concession covers five rail

cooperation with other railways and

survey of human and labour rights issues. lines that serve 20 of London’s 33 boroughs.

corporations, mainly multinationals,

The survey, undertaken principally with our Under the agreement, MTR Corporation

using like methods to build a consensus

PRC contractors and suppliers, reviewed will bring to the table its expertise and

on sharing information on suppliers. In

corporate governance on labour issues brand reputation to support upgrading of

2008, the targets are to set up a code on

within our top 70 suppliers in order to customer services, revitalising rail assets,

information sharing and a liaison group to

identify areas where attention is needed improving train performance and reliability,

widen interest in this initiative.

and where improvement actions are to achieving stringent environmental targets

be undertaken. An underlying purpose of In promoting better management of and promoting growth of the network

this exercise is to respond to membership environmental issues in the general supply in line with the overall city-wide rail

criteria for the DJSI and FTSE4Good chain processes, we took a leadership role in strategy. Our sustainability drivers will play

indices. Going forward, our agenda is to becoming one of the 11 founding members a significant role in the overhaul of these

extend procurement practices to include of the Hong Kong Green Purchasing Charter. lines to deliver performance value in rail

environmental and labour issues as part Initiated by the Green Council, the driving assets and enhance people skills. Plans

of the tender pre-qualification processes. strategy is to consolidate the many scattered are currently in the early stages, with the

The strategy behind this is not to exclude initiatives across Hong Kong in order to project driven by our Hong Kong team in

or punish because of a lack of good establish common goals and standards in conjunction with an expanded London

managing our city’s collective green future. office staff.



www.lorol.co.uk









26 Social Responsibility

CoMET CAPACITY KM PER ROUTE KM CoMET PASSENGER JOURNEYS ON TIME

(Asset Utilisation) PER PASSENGER JOURNEYS

Our(1) performance vs best performance (%) Our(1) performance vs best performance (%)

(Best performance = 100) (Best performance = 100)

100 100 100 100 100 97.7 100 99.8 100 100 99.9 99.9

90 90

80 80

70 70

60 60

50 50

40 40

30 30

20 20

10 10

02 03 04 05 06 02 03 04 05 06







CoMET TRAINS ON TIME CoMET CAR KM

PER TOTAL TRAINS PER TOTAL LABOUR HOURS

Our(1) performance vs best performance (%) Our(1) performance vs best performance (%)

(Best performance = 100) (Best performance = 100)

100 98.9 99.6 99.9 99.7 99.8 100

90 90

80 80

70 70

60 60 62.1



50 50

40 40 39.0 39.3(2) 38.7

34.1

30 30

20 20

10 10

02 03 04 05 06 02 03 04 05 06

(1) Excludes data from the KCRC and NP360 Cable Car

(2) Figure restated by CoMET









Changes in Partnering of projects that lie outside our areas of rail operate. During the year, engagement and

Our partnering and subcontracting strategy expertise, we have now made the decision management of their interests in regard to

was reviewed in depth in response to the to employ the necessary expertise in house the merger shaped the long-term structure

temporary closure of Ngong Ping 360 where we find a vacuum of professional and performance management of MTR

Cable Car (NP360) during the year. An capabilities in such projects. This assures Corporation.

after-hours incident in June 2007 involving us of the ability to build and manage

The Rail Merger Ordinance and Transaction

a gondola dislodged from the overhead diverse business projects supported by our

Agreements that bind the merger enshrine

cableway during a test run led to an official own systems and processes that meet our

our responsibilities to Government and

enquiry and the eventual taking over of stringent targets in performance.

the community for services. They identify

the management from the subcontracted

Upon completion of the enquiry and the the parameters and objectives in

operator. As the owner of the cable car,

change in management, NP360 reopened performance delivery, including financial,

ultimate responsibility lies with us to

for business on 31 December 2007 to customer services and broader community

respond publicly to stakeholders and rectify

capacity crowds. obligations. In the run-up to finalisation

the situation.

of these legally binding obligations, the

Government Relations

This incident was a turning point in our Corporation negotiated directly through

The HKSAR Government ranks as a primary

contractor relations. Having already the Executive Directorate with Government

stakeholder to our business. They are

discovered and taken on board the need to on relevant issues.

our largest shareholder and, as official

actively look for risks in the development

transport regulator, grant us the licence to









www.mtr.com.hk/sustainability 27

CLIMATE CHANGE POLICY



In December 2006, the Corporation issued its Climate Change Policy. The aim of the Policy

is to work towards a positive impact on the global environment, and it is intended to apply

consistently across all our businesses and in the diverse markets in which we operate. Under

this policy we are committed to adapting and mitigating risks presented by climate change

and becoming one of the most resource-efficient and ecologically sustainable railways and

property-service providers in the world.



The key actions to be taken under the Policy are to assess the risks and opportunities posed

by climate change and implement actions to mitigate those risks. We will work to reduce

our direct carbon emissions in a targeted and continuous fashion and actively influence our

energy providers to address the climate-change issue. As part of our commitment to change,

we will report on achievements annually.









This programme influences several

workplace initiatives across all divisions,

including annual energy reviews conducted

on our managed properties and the rail

In committing to reduce the impacts of climate change, network energy optimisation programme.

we are not just thinking locally but rather in terms of the The merger has prompted the large-scale

challenges to regional and global communities. review of energy efficiency and synergy

opportunities within the KCR network

Climate Change Energy Management benchmarked against MTR Corporation best

The Climate Change Policy establishes the Several of the risks identified under the practices. The subsequent study plans the

change management strategy that will UITP’s Policy and Strategy have been improvement in the KCRC asset efficiencies

reduce emissions and waste, and most adopted and measured for impact under from 2008 onwards. These include better

importantly, fosters the initiatives and our internal ERM system. Resulting train headway management, cars and

methodologies to progressively reduce assessment, in particular the increase in equipment upgrades, and station energy-

our environmental footprint in future. electricity consumption, has prompted use audits.

further actions aimed at better efficiency

Our Policy is modelled on the UITP’s

and tighter annual targets.

sector-wide Greenhouse Gas Policy and MTR Corporation is the single largest

Strategy introduced in 2006. As Chair of The Energy Management Committee electricity consumer in Hong Kong on a

the Sustainable Development Commission drives the initiatives to manage electricity megawatt basis. Despite the economies

within the UITP, MTR Corporation played expenditure, our single largest energy of scale this presents, the influence on our

a significant role in leading the discussions issue. Having identified rail operations upstream energy impacts is limited due to

on policy as well as contributing to a set and property management as the current government policy on franchised

of KPIs for operators when measuring and biggest sources of GHG emissions, we electricity generation and the subsequent

mitigating carbon footprints under the UITP have inaugurated several proactive duopoly of suppliers. At present, suppliers

initiatives. These indicators are expected actions, such as the USE (usage, staff and do not offer any significant alternative or

to be issued in late 2008. This step forward efficiency) programme for reduction. green-energy choice to consumers. However,

supports the MOU between the UITP and That is, we stringently control energy we publicly encourage their current studies

the United Nations Environment Programme through optimisation, we educate staff in alternative fuel source technologies.

(UNEP) signed in 2005 and tables the clear to be energy-minded, and we employ

Anticipating the need for future efficiency,

leadership role public transport can take in technological innovations to upgrade

we are now addressing energy usage as

global climate change initiatives. existing assets’ efficiency and performance.

a factor in the design of our capital works









28 Environmental Stewardship

GRI Reporting – As in our

tonnes CO2eq

previous year’s Report, we elect

Activity 2005 (2) 2006 2007 to construct a supplement to the

Electricity - railway operations 406,588 412,574 444,984

year’s GRI Content Index which

Electricity - headquarters 6,099 6,001 6,290

reports on our environmental

performance using the G3

Electricity - managed properties 184,433 188,263 215,955

Guidelines. This supplement, the

Fuel - road fleet, locomotives, rail grinding units 2,253 2,093 2,149

GRI Content Index for 2007 (using

Waste disposed to landfill - railway operations 13,920 4,563 4,408

and extension projects the 2002 Sustainability Reporting

Staff flights 415 1,572 1,774 Guidelines) and our previous six-

Total 613,708 615,066 675,560 year performance can be viewed

(1) Excludes data from the KCRC and NP360 Cable Car online at www.mtr.com.hk/

(2) Data restated in 2006 due to changes in conversion factors

sustainability.









projects. Strategies include life-cycle Within our operations, Government standards and other internal targets

costing issues, station and depot design to Environmental Protection Department’s down into the front-line are numerous

secure better efficiency and maintenance, (EPD) regulations serve as the minimum programmes that progressively require

and the more efficient uses of resources in baseline in environmental management. reduction and efficiency. These include

construction. The South Island Line (East) We monitor and control air quality in all our sorting at source and programmes for reuse,

will be our first rail project to integrate fully stations on a frequent and regular basis. recycling and responsible disposal of waste

this project delivery strategy. For the fourth year in a row, our stations from our offices, train depots and stations.

have been 100% compliant to regulations.

Discharges, Effluents and Waste Our principal source of waste, being

Air quality in our managed properties is

Improved efficiency in rail operations and construction related, was negligible during

continuously monitored against stringent

property management continues to be the 2007 due to relatively little construction

internally set air-quality targets that exceed

main focus area to manage better resources in rail development. The WIL, using the

compliance to the EPD’s recommended

and reduce wastage. PAS55-1 system, leverages our current

levels for indoor air quality.

series of contractors’ targets that reward

Air quality

Water achievement beyond the specified

No other environmental factor in Hong

Although we meet our licensing requirements requirements in reducing waste on site. In

Kong has such vocal and visual impact as

for effluent discharge consistently, water future, the same PAS55-1 system will impose

air quality. Within the public dialogue, we

management is reviewed regularly for better a more stringent and life-cycle management

choose to take a quiet leadership role to

efficiency. Cross-divisional cooperation approach that will steer resource management

help change this untenable situation.

in usage of recycled water and reduction when planning, designing and developing

We are a part of the solution to cleaner air of clean water consumption are primary new projects. The SIL will be the first rail line

within the territory. While vehicular traffic targets for the future. In such cooperation, to fully utilise this system.

represents only a portion of the causes of a programme to recycle grey water from



the city’s air pollution, the renewed impetus depots is in progress. A specially-built

The many systems, programmes and

of focusing rail as the backbone of public recycling plant adjacent to LOHAS Park has

external standards that drive our operations

transport supports the future sustainability been finalised, which will supplement the

and provide the roadmap to achieve

of public transport infrastructure through irrigation of the 6.2 hectares of landscaped

best practice are reported in our online

emissions reduction and overall “cleaner” open spaces for this urban development.

sustainability discussions. These initiatives

urban development. Refer to Society’s Waste management are supported by an archive of case studies

Challenge (page 21) and Value Strategy All waste generated by our rail operations that illustrate management in practice.

(page 16) in this Report for our position in and businesses is managed under ISO14001

supporting Hong Kong’s sustainable future. certification standards. Driving these









www.mtr.com.hk/sustainability 29

Environmental management is a learning

process that requires a balance between what is

acceptable to stakeholders and the cost at which

acceptance is tolerated.



Response to Climate Change

MTR Corporation has taken a decisive position on environmental stewardship with the adoption of the Climate

Change Policy. This Policy commits us to a series of key actions driven by risk assessment and mitigation. It also

obliges us to reduce our carbon footprint in a targeted and continuous manner and to endeavour to influence

our energy providers so as to address the broader scope of climate change.



Aligning to this commitment, MTR Corporation undertakes through a reiterative process the risk assessment of

impacts that would most likely affect our operations in conjunction with the identification of our primary sources of

GHG emissions. These identified impacts are mainly sourced from the UITP’s model for industry practices on climate

change, and further corporate-specific risks are added to secure a balanced view in assessment. In particular,

the possible outbreak of pandemic illnesses, the expected rise in energy usage due to a warmer climate and

the continued deterioration of air quality are closely monitored.



To address these and other energy-related issues, a series of stepped-up programmes are in progress to reduce GHG

emissions across the organisation. These include annual energy audits on all managed properties, initiatives under

the Energy Management Committee, energy optimisation of the rail system and numerous smaller department-

specific programmes.



The Climate Change Policy is changing our development future. Planning and design in both rail and property now

consider the issues of increasingly constrained resources and the related impact on the efficient life-cycle

management of built assets. We are currently in the early stages of addressing these and exploring global industry

advances as benchmark guidelines. LOHAS Park is our first step in this learning curve to find viable long-term solutions.



In our broader environmental stewardship strategy, which links us to economic and social expectations, we subscribe

to international certification. Certification serves a dual purpose in advancing strategy. First, it pushes our business

forward by linking environmental objectives to real business practices. This involves risk management, target setting

and the use of recognised performance benchmarks and standards as KPIs. Second, certification motivates staff.

By imposing targets on performance, we raise awareness in each employee in such areas as energy consumption and

efficiency in waste management, and most importantly, we provide the education that instils practice beyond the

workplace environment.









30 Commentary: Response to Climate Change

CLIMATE CHANGE RISK IDENTIFICATION



The Enterprise Risk Mangement (ERM) system is applied to assess our environmental risks

in relation to climate change. The table represents assessed risks ranked within an E1- E4

rating framework.



The Enterprise Risk Committee monitors the development of the risks annually and

evaluates if any of the risks need to be studied in greater detail. Post assessment, all risks

will be allocated to relevant risk registers wherein the process of prioritisation, ownership,

mitigation, monitoring and reporting is undertaken to manage each risk and its impacts.

This management process is continuous and, like the ERM system, is sensitive and responsive

to the changing business environment and to the influences of stakeholders, the natural

environment also being a principal stakeholder.





Risk Rating

E2 Pandemics affecting staff and business continuity

Avian flu

Other pandemics

E3 Climate change risks affecting business continuity

Increased water cost

Reduced access to water

Increased electricity use and cost

Flooding affecting operations

Reduced efficiency of electrical and mechanical (E&M) plant

Additional air filtration or purification costs

Increased deterioration of infrastructure

Reputation impacts

Carbon tax

E2 Risk : High risk. Director / divisional oversight required

E3 Risk : Medium risk. Line management to monitor









www.mtr.com.hk/sustainability 31

bASIS OF REPORTING based upon the principles of sustainable readers with a relative comparison on

development under the BS8900:2006, issued performance. The external sources of data

by the BSI Group. The indicators captured are specified accordingly throughout the

under this series form a standardised basis Report where applicable and verifiable.

MTR Corporation produces its annual

for measuring and benchmarking the

sustainability report to support and Although we are in principle confident in

Corporation’s performance over time, and

supplement our yearly financial reporting the integrity of the non-financial data used

allow for comparability in terms of industry

exercise and other corporate reporting in the Report, we acknowledge that in the

and global corporate performance.

initiatives through the in-depth discussion measurement, calculation and estimation

of our performance in the social, economic Reporting Scope of some of the environmental and social

and environmental stewardship of the The scope of this Report covers the 2007 responsibility data, there are limitations that

Corporation. The purpose is to augment economic, social and environmental cause a degree of uncertainty in relation to

the business case, provide a snapshot of our performance data of MTR Corporation in the data reported. These include different

sustainable development in action and to Hong Kong. Data presented for our activities interpretations of the reporting guidelines,

provide a comparison to peer companies outside Hong Kong is specified where such as those used for greenhouse gases;

when reporting on sustainability for our applicable. The financial data captured in inaccuracies in data resulting from the

readers. Our purpose is to engender this Report includes audited data from calculation and analysis methods used;

trust amongst stakeholders, especially the KCRC as of post-merger date 2 accuracy and sampling by environmental

those concerned with socially responsible December 2007. The non-financial data measuring equipment; and data sourced

business and investment practices, and to captured includes data from the KCRC from external entities and/or business

demonstrate our working commitment as of post-merger date 2 December 2007 partners where the Corporation has no

to the long-term sustainability of the and NP360 Cable Car, except page 9 and controlling interest in projects or contracts.

Corporation. where indicated. Our practice is to keep within a 5% range

Financial data reporting in variance and to state within data tables

This year, the decision was taken to continue

The financial and economic contribution where variance is applicable.

to report under the Global Reporting

Initiative (GRI) - 2002 Sustainability data covered in this Report includes the Target setting

Reporting Guidelines, as 2007 marks the accounts of MTR Corporation and all In practice, corporate targets are set through

last year of reporting in operating as MTR its subsidiaries except Octopus Cards discussions with senior executives and

Corporation pre merger. This allows the Limited, a non-controlled subsidiary of the directors based on past performance and

Corporation to present in 2008 a new set Corporation. The data is prepared according measured expectations. Divisional targets

of full-year social and environmental data to and aligns with the accounting policies of are set through discussions within individual

as the expanded organisation under the the Corporation’s financial statements. divisions in consensus with the Executive

G3 Guidelines. We also continue to follow Committee, and are based on the principle

The environmental and social responsibility

the World Economic Forum Framework for of continual improvement.

data is aggregated from the seven divisions

Corporate Citizenship Initiative.

within the Corporation, our business partners

We have included in this Report the five- and where applicable, from independent

year mapping exercise of performance bodies or organisations so as to provide









32 Basis of Reporting

Assess whether the subject matter is We have not provided assurance over

reasonably supported by underlying all contents of this Report, nor have we

evidence; undertaken work to confirm that all relevant

Read the Report to assess the consist- issues are included.

ency of the information presented

To the Directors of MTR Corporation We have not carried out any work on

with the findings of our work.

data reported in respect of targets or

Introduction – MTR Corporation has

Assurance work performed – future projections. We have not provided

issued a Sustainability Report 2007 (“the

Our procedures were limited to: assurance for previous years’ data.

Report”), covering its approach to corporate

sustainability and detailing the social Interviews with management and We have not performed work on the

responsibility, environmental and economic personnel in the sustainable development, maintenance and integrity of information in

contributions it has made during 2007. We operations, property, project and human- the Report published on MTR Corporation

have been asked to provide assurance over resources divisions involved in providing website.

selected data in the Report. The objectives information for inclusion in the Report in

It is also important that, in order to

of our assurance, the scope of our work and relation to the subject matter;

obtain a thorough understanding of the

our findings are detailed below.

Examination on a test basis of financial results and financial position of

The Directors are solely responsible for the documentary evidence relating to the MTR Corporation, the reader should consult

contents of the Report, the reliability of the subject matter on which we report; MTR Corporation Annual Report for the year

information presented and its maintenance ended 31December 2007.

Assessment of the relevant sections of

and integrity on the internet. Our

the Report relating to the subject matter to Conclusion – We have reported to

responsibility is only to the management

check for consistency with the findings of management that based on the work

of the Company and is to report on the

our work. performed and described in this report:

subject matter indicated based on our

assurance work and on the terms agreed basis of our work – We planned The subject matter is reasonably

with management for this purpose. The and performed our evidence-gathering supported by underlying evidence.

work described below has been carried out procedures to obtain a basis for our Nothing has come to our attention

solely for the Directors and was not planned conclusions in accordance with the to indicate that the subject matter is

in contemplation of any third party relying International Standard on Assurance materially misstated;

on it. Accordingly, PricewaterhouseCoopers Engagements (ISAE) 3000 Assurance The information presented in the Report

will accept no responsibility for the use or Engagements other than Audits or Reviews relating to the subject matter is consistent

interpretation of the results of its work by of Historical Information, approved with the findings of our work.

any third parties. December 2003 by the International

Auditing and Assurance Standards Board.

Our objectives – The subject of the

assurance engagement is the 2007 Considerations and limitations –

performance (hereafter referred to as the It is important to read the statements PricewaterhouseCoopers

“subject matter”) of the table entitled and data in the context of the reporting Certified Public Accountants

Selected Priority Business Risks, Key policies and limitations explained on page

Hong Kong

Stakeholders, Performance Indicators and 32 of the Report. Environmental and social

15 April 2008

2007 Performance on page 9. Definitions of responsibility data is subject to many more

the subject matter are on page 36. inherent limitations than financial data

given both their nature and the methods

The overall objectives of our procedures

used for data determination, calculation or

were to:

estimation.









www.mtr.com.hk/sustainability Independent Assurance Report 33

PERFORMANCE DATA



CoMET OPERATING COSTS PER CAR KM CoMET TOTAL COMMERCIAL REVENUE CoMET OPERATING COSTS

PER OPERATING COST PER PASSENGER JOURNEY



Our(1) performance vs best performance (%) Our(1) performance vs best performance (%) Our(1) performance vs best performance (%)

(Best performance = 100) (Best performance = 100) (Best performance = 100)



100 100 100

97.0 95.5 95.2

90 90 (2) 90 89.8

87.4

80 80 80 80.5

76.5

70 70 70

62.5 62.3(2)

60 60 60 60.0

50 50 50

45.7 44.7

40 41.0 41.6(2) 41.7 40 40

30 30 30

20 20 20

10 10 10

02 03 04 05 06 02 03 04 05 06 02 03 04 05 06



(1) Excludes data from the KCRC and NP360 Cable Car

(2) Figure restated by CoMET



DEBT / EQUITY FIXED ASSET GROWTH EBITDA

Operating profit from railway and related operations

Total equity attributable to equity shareholders Service concession assets before depreciation and amortisation

Loans outstanding HK$ billion

Investment properties



Other property, plant and equipment 10

HK$ billion

9

100

HK$ billion 8

90 132.4



80 15.2 7

91.0 106.9

99.7 103.3 5.91

70 96.9 6

26.3 38.1 5.10 5.20

60 14.2 18.9 22.8

5 4.53

50 3.75

4

40

82.7 80.8 80.5 80.6 79.1 3

30

20 34.1 2



10 1

03 04 05 06 07 03 04 05 06 07 03 04 05 06 07









Issue Division 2003 (2) 2004 2005 (3) 2006 2007





GHG Emissions

GHG emissions (tonnes CO2eq) Corporate-wide 570,110 616,525(4) 613,708(4) 615,066 675,560

Electricity consumption

Total (MWh) Operations 782,273 785,273 781,900 778,442 780,673

Per revenue car-km (KWh/car-km) 6.11 6.02 5.94 5.73 5.68

Traction energy (KWh/car-km) Operations 2.29 2.40 2.33 2.25 2.25



Waste Generation

Metals recycled (tonnes) Operations 1,204 1,231 1,258 1,573 1,650

Spent oil recycled (litres) Operations 15,800 18,654 25,792 20,610 36,212

(% total) 100 100 100 100 100



Water Usage

Water consumption (m3) Operations 253,579 324,751 281,633 290,634 347,771



Note:

(1) Excludes data from the KCRC and NP360 Cable Car

(2) Operations commenced on TKO Line

(3) Operations commenced on Disneyland Resort Line and the Asiaworld-Expo Station

(4) Data restated in 2006 due to changes in conversion factors









34 Performance Data

FINANCIAL PERFORMANCE

2005 2006 2007





Profit and Loss Account (HK$ million)

Turnover (fare and non-fare) 9,153 9,541 10,690

Operating profit from railway and related operations before depreciation and amortisation 5,101 5,201 5,912

Depreciation and amortisation (2,682) (2,674) (2,739)

Profit on property developments 6,145 5,817 8,304

Interest and finance charges (1,361) (1,398) (1,316)

Change in fair value of investment properties 2,800 2,178 8,011

Profit attributable to shareholders 8,450 7,759 15,180

Dividend (2,299) (2,328) (2,522)



balance Sheet (HK$ million)

Total assets 113,666 120,421 155,668

Loans, obligations under financial leases and bank overdrafts 28,264 28,152 34,050

Deferred income 3,584 1,682 515

Total equity attributable to equity shareholders of the company 69,875 76,767 91,014



Financial Ratios

Operating margin 55.7% 54.5% 55.3%

Non-fare revenue as a % of turnover 31.4% 31.6% 33.4%

Net debt/equity ratio 40.4% 36.3% 48.5%

Interest cover (in times) 7.6 6.7 9.0









ECONOMIC CONTRIbUTION



2005 2006 2007





Financial Performance

Turnover (HK$ million) 9,153 9,541 10,690

Profit for the year attributable to shareholders (HK$ million) 8,450 7,759 15,180

Return on average equity attributable to equity shareholders (%) 12.8% 10.6% 18.1%



Interaction with Hong Kong, Asian and Global Economics

Number of staff 6,991(1) 7,363(1) 14,134

Staff costs and related expenses (HK$ million) (1,614) (1,653) (1,802)

Energy and utilities (HK$ million) (541) (539) (576)

Repairs and maintenance (HK$ million) (496) (511) (521)

Stores and spares consumed (HK$ million) (120) (120) (130)

Railway capital expenditure (HK$ million) (1,987) (1,524) (1,400)

Total number of passengers (HK$ million) 866.5 876.4 945.3

Share of franchised public transport in HK (%) 25.2 25.0 26.7

Interest payments on borrowings (HK$ million) (1,377) (1,532) (1,544)

Dividend payment (HK$ million) (2,299) (2,328) (2,522)

Taxes paid overseas (HK$ million) (1) (2) (3)



(1) Data restated to include full-time staff employed outside Hong Kong









www.mtr.com.hk/sustainability 35

DEFINITIONS

CoMET Community of Metros (CoMET) is a programme of international railway benchmarking,

comprising a consortium of 11 metropolitan metros. Members include Hong Kong

MTR Corporation, Berliner Verkehrsbetriebe, London Underground Limited, New

York City Transit, Sistema de Transporte Colectivo, Régie Autonome des Transports

Parisiens Metro, Régie Autonome des Transports Parisiens Réseau Express Régional,

Metropolitano de São Paulo, Moscow Metro, Metro de Madrid and Shanghai Metro

Operation Corporation

Contractor Staff Reportable Accidents Those accidents to contractor staff while they are on duty within MTR premises and

result in inability to work for a period of 3 days or more immediately after an accident

Contractor Staff Reportable Accident Number of reportable accidents per 100,000 man-hours worked

Frequency Rate

Customer Service Pledge Annually published 13 performance targets in accordance with the Operating

Agreement

GHG (Greenhouse Gas) Emissions Calculated based on resource consumption of greenhouse gas-generating activities

and related emission factors according to “The GHG Protocol for Project Accounting”

jointly published by the World Business Council for Sustainable Development and

World Resources Institute

KCR or KCR System Collective name for East Rail Line, West Rail Line, Ma On Shan Line, cross-boundary

service, Light Rail, bus and intercity services

KCRC Kowloon-Canton Railway Corporation, a statutory corporation established under the

KCRC Ordinance wholly owned by the Financial Secretary Incorporated on behalf of

the Government in accordance with the KCRC Ordinance

KCRC Ordinance The Kowloon-Canton Railway Corporation Ordinance (Chapter 372 of the Laws of

Hong Kong)

MTR Corporation or MTR Corporation Limited, a company incorporated in Hong Kong under the

Company or Corporation Companies Ordinance (Chapter 32 of the Laws of Hong Kong) on 26 April 2000

MTR Ordinance The Mass Transit Railway Ordinance (Chapter 556 of the Laws of Hong Kong)

MTR or MTR System Collective name for the Kwun Tong Line, Tsuen Wan Line, Island Line, Tung Chung Line,

Tseung Kwan O Line, Disneyland Resort Line and Airport Express

NP360 Ngong Ping 360 Cable Car, formerly referred to as Tung Chung Cable Car

Operating Agreement The agreement entered into the Company and the Government on 30 June 2000

for the operation of the MTR System in the Pre-Merger period and a new agreement

entered on 9 August 2007 for the operation of the integrated MTR System after the

Rail Merger

PAS55-1 A voluntary Publicly Available Specification (PAS) that provides a consistent framework

for physical infrastructure asset management systems based on the structures for ISO

quality and risk management standards

Passenger Fatality Figure does not take into account fatalities owning to passenger suicide or

passenger’s own medical conditions

Passenger Journeys on Time Calculated as percentage applying formula [(Incoming patronage in a month) –

(passengers in a month delayed by at least 5 minutes)]/ [Incoming patronage in a

month] x 100%. Calculated monthly over operating period and then calculating the

mean thereof. MTR and AEL passenger journeys on time calculated separately using

same formula

Passenger Trips Fare-paying passengers entering the railway network









36 Definitions

Property Development Projects Property development projects include the foundation, building, alteration and

addition works for the property developments at Kowloon Station, Olympic Station,

Tung Chung Station, Tiu Keng Leng Station, Tseung Kwan O Station and LOHAS Park

Railway Extension Projects Railway extension projects include all civil and electrical and mechanical works for

LOHAS Park Station

Serious Passenger Injuries Those that require admission to hospital for observation or treatment immediately

after an accident, including injuries due to trespassing on the track and reckless

behaviour involving MTR equipment or operation, but excluding suicide, attempted

suicide, brawls between passengers or injuries owing to passenger’s own medical

conditions

Staff Lost Time Injuries Those injuries where a staff member, as a result of an accident while on duty, is unable

to work for one complete shift or more immediately after the accident

Staff Lost Time Injury Frequency Rate Number of staff lost time injuries per 200,000 man-hours worked

200,000 man-hours are approximately equivalent to 100 staff per year

Staff Turnover Rate Sum of 12-monthly turnovers calculated as number of voluntary staff resignations/

total staff strength by month-end

Train Punctuality Calculated as percentage applying formula: [(actual train trips in a month) – (train

trips in a month delayed by at least “y” minutes)]/ [actual train trips in a month] x

100% where “y” = 2 for MTR and 5 for AEL. Calculated monthly over operating period

and then calculating the mean thereof. MTR and AEL train punctuality calculated

separately using respective formulae

Train Reliability Calculated as revenue car-km per incident applying formula: (actual revenue car-km

run in a month/ total number of train failure incidents with trains delayed by at least 5

minutes in a month). Calculated monthly over operating period and then calculating

the mean thereof

Train Service Delivery Calculated as percentage applying formula: [(actual train trips in a month)/ (scheduled

train trips in a month)] x 100%. Calculated monthly over operating period and then

calculating the mean thereof

Train Trip A journey run by a train from one end of a line or an intermediate point on a line to

the point on a line that is scheduled by the Corporation to be the destination for

that train. In the event of a train being withdrawn from service before reaching its

destination point, train trip shall be determined by the Corporation on a pro-rata basis

based on the distance run by that train between its starting point and the point at

which it is withdrawn from service, and the distance between its starting point and its

destination point

Transaction Agreements The Merger Framework Agreement, the Service Concession Agreement, the Sale and

Purchase Agreement, the Operating Agreement, the Supplemental Service Concession

Agreements (if any), the Job Security Deed Poll; the KSL Project Management

Agreement, the West Rail Agency Agreement, the Property Package Agreements, the

US CBL Assumption Agreements, the US CBL Allocation Agreement, the Outsourcing

Agreement, the Liaison Committee Letter, the Land Comfort Letter, and any other

document designated in writing as a “Transaction Agreement” by Government, MTR

Corporation and KRCR, each as defined in the Merger Framework Agreement

Waste Disposed to Landfill Waste generated from railway operations and railway extension projects, excluding

waste from property development projects and managed properties owned by the

Corporation









www.mtr.com.hk/sustainability Project Management & Editorial: Streeter Strategic Limited • Design: CoDesign Ltd • Photography: Leong Ka Tai 37

MTR Corporation Limited



MTR Headquarters Building

Telford Plaza, Kowloon Bay

Hong Kong



Tel (852) 2993 2111

Fax (852) 2798 8822

www.mtr.com.hk









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