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Sustainability Report

VIEWS: 15 PAGES: 46

									Sustainability Report 2011
Sustainability
Report 2011




 CONTENTS
                                                                                        Resources
            Scope of                     1                                              Management
            the Report
                                                                                                     14

            From the                     2
            CEO                                                                                                       Health and
                                                                                                                      Safety

            Transport at                 3                                                                                            19
            Its Best

                                                                                                                      Environmental
                                                                                                                      Management
            Global                       4
            Presence                                                                                                                  23
                                             Customer
            • Hong Kong Operating        6
              Network with                   Services
              Future Extensions

                                                               16
            Management                   8
            Drivers



            Strategic                   14
            Priorities



            Climate                     34
            Change


                                                                                                          Supply Chain
            Performance                 36                                                                Sustainability
            and Supporting
            Information                                                                                                    27
            • Priority Sustainability   37
              Business Risks and
              Performance 2011
                                                                                                                      Societal
            • Maturity Matrix           38                                                                            Development
              BS 8900:2006
              Guidance for
              Managing Sustainable                                                                                                    32
              Development

            • Financial Performance;    39
              Economic Contribution

            • Independent               40
              Assurance Report
                                             Sustained
            • CoMET Benchmarking        41   and Dynamic
              Results 2010
                                             Engagement
            • Definitions               42                     29




  SUSTAINABILITY AND THE COMPANY
  As an organisation that operates with the perspective of a 100+-years in rail asset
  life, we think and plan in generations. We steward the company to meet the
  needs of the present without compromising the ability of future generations to
  meet theirs. This commits us to being transport at its best.
  In fulfilling this commitment, we plan, build and operate our transport network
  to respond to evolving societal aspirations. At the same time we work to establish
  ourselves as a cornerstone of the sustainable development of the societies and
  institutions of tomorrow. We recognise and embrace the responsibilities this
  brings and actively seek a leading role in them.
   Scope of                  From the           Transport at        Global                 Management                 Strategic            Climate                 Performance and
   the Report                CEO                Its Best            Presence               Drivers                    Priorities           Change                  Supporting Information




                              Scope of
                              the Report
                              In this sustainability report, we focus principally on the                In response to reader feedback and opinion leader assessment,
                              performance of our Hong Kong rail and property businesses                 we are taking steps to further integrate this report’s
                              and their related operations. With the understanding of                   management discussions with performance results. While
                              how the Hong Kong operations work as the business case                    our governance, management processes and quality systems
                              for sustainability development, strong insight is gained into             serve us well, this year we focus on how leveraging them to
                              how we are managing, operating and growing our group                      manage our strategic priorities supports the necessary care,
                              subsidiaries and affiliates, in particular in our mainland China          collaboration and creativity that we need for future
                              and international markets.                                                sustainability of our organisation. 

                              Specific discussions and performance data and information                 We have broadened our online sustainability discussions to
                              concerning subsidiaries and affiliates, whether wholly owned              communicate with our larger universe of stakeholders, who
                              or minority shareholding, are stated in the report where                  are not necessarily versed in relevant industry standards and
                              relevant.                                                                 practices. Their expectations are more diverse and often
                                                                                                        group-centric, giving rise to a series of direct dialogues with
                              In structuring this report, we have applied the AA1000                    these stakeholders on our sustainability microsite, in particular
                              AccountAbility Principles of inclusivity, materiality and                 with the community, potential employees and our customers. 
                              responsiveness. The diagram on page 9 illustrates how these               For industry analysts and professionals, we have structured the
                              principles are used in both the reporting process and in relation         sitemap on the microsite to facilitate the location of selected
                              to our sustainability management process, which includes the              performance information and data. 
                              Sustainable Competitive Advantage (SCA) model.
                                                                                                        PricewaterhouseCoopers (PwC) has been commissioned to
                              Discussions mainly cover our management approach and                      provide an independent assurance report on selected
                              thinking, operations management frameworks and the                        quantitative data that confirms progress of key performance
                              strategic priorities that influence our organisational                    indicators. Their report is on page 40 of this report.
                              sustainability. We also give detailed attention to our position
                              on climate change. We demonstrate in a series of charts and               Under the Global Reporting Initiative (GRI) framework, we
                              diagrams how we define and manage priorities and we                       apply the self-assessed A+ level. The 2011 G3 Content Index
We value your feedback        tabulate our performance in comparable annual data sets.                  is located on our sustainability microsite to facilitate access
and comments about            The sustainability microsite elaborates on the priorities, where          to more extensive and relevant documents from within
our sustainability report
and overall sustainability    needed, as well as covering further areas deemed significant              the company.
journey. Questions            under the SCA model and of interest to our readers
or comments can be
addressed directly
                              (www.mtr.com.hk/sustainability). Other issues identified as
to our Sustainability         important are managed at the business unit levels and are not
Development Manager,          included in this year’s reporting exercise. Refer to the
sdmngr@mtr.com.hk
or through our                sustainability microsite for an interactive discussion of the
sustainability microsite.     model’s architecture and processes. 



  Vision Mission Values (VMV)

  VISION

  We aim to be a globally recognised leader that connects and grows
  communities with caring service
  MISSION                                                                                  VALUES
  • Enhance customers’ quality of life and anticipate their needs                          Excellent Service
                                                                                           We are committed to proactively provide safe, efficient and caring service valued by
  • Actively engage in communities we serve                                                customers.

  • Foster a company culture that staff can learn, grow and take                           Mutual Respect
    pride in                                                                               We work in an open team environment based on trust, joint commitment and respect.
                                                                                           We listen and respect the views of the community and other stakeholders.
  • Provide sustainable returns to investors
                                                                                           Value Creation
  • Set ourselves new standards through innovation and continuous                          We create profits through efficient execution, continuous improvement and innovation
                                                                                           in delivering products and services valued by customers.
    improvement
                                                                                           Enterprising Spirit
  • Grow in Hong Kong and mainland China and capture                                       We have the courage to question the status quo to seek improvement, proactively
    opportunities in Europe by extending our core competencies                             taking initiatives and having the resourcefulness to overcome obstacles and reach
                                                                                           new horizons.



                                                                                     -1-
Scope of     From the            Transport at        Global                Management              Strategic        Climate             Performance and
the Report   CEO                 Its Best            Presence              Drivers                 Priorities       Change              Supporting Information




              From the
              CEO

                                                                                                                Our vision is to build 
                                                                                                                and connect communities.
                                                                                                                This commits us to 
                                                                                                                developing and
                                                                                                                stewarding a transport
                                                                                                                system that responds 
                                                                                                                to our business objectives
                                                                                                                while leading to broader, 
                                                                                                                co-generated sustainable 
                                                                                                                development.




              Having taken the helm of the corporation in what is now just              To me, this brings sharper focus to the need for seamless
              shy of six months, I am struck by how deeply the ethos of                 integration of our services with the community. We need to
              transport at its best permeates our company’s culture. As a               be ambitious and forward thinking as we forge ahead to
              relatively young mass transit system, the corporation has                 continuously improve our existing businesses, develop more
              achieved and consistently maintains recognition as a global               local rail projects and pursue further franchises outside Hong
              industry leader. This past year’s performance once again                  Kong. We must also embrace innovation and actively engage
              confirms this position in the league tables.                              with all our stakeholders every step of the way. Critically, we
                                                                                        must be guided by a clear vision of how transport systems will
              Our vision is to build and connect communities. This commits              support future generations and improve their lives.
              us to developing and stewarding a transport system that
              responds to our business objectives while leading to broader,             As CEO, I have been entrusted with an organisation that has
              co-generated sustainable development. We are well under                   strong core values and fulfils important social responsibilities.
              way in this with our biggest expansion ever, adding over 56               With thoughtful stewardship, it is my hope to extend these
              km of routes to the system while taking an active planning                values to build a better company and a better world for all
              role in the numerous new residential and commercial                       whom we serve.
              properties that will connect to the expanded network. These
              are the fundamental drivers to our services, corporate growth
              and the prosperity of Hong Kong.

              Expansion into mainland China and international markets plays             Yours,
              a purposeful role as well. Our corporate footprint is growing
              both in terms of assets and businesses, driven by our strong
              sense of economic, social and environmental excellence. 
              Our challenge and advantage in these external markets is
              delivering international best practices while thinking locally
              to facilitate the adoption of our core values in product and
              services.

              The culture of providing transport at its best sets the bar for
              managing and operating all our businesses. Discussions                    Jay H Walder
              within this report examine our progress, including a focus on             Chief Executive Officer
              our strategic priorities. While these priorities serve to drive our       MTR Corporation
              development forward, we must also ensure that sustainability              29 June 2012
              is an integral part of our daily decision making. It is important
              that we incorporate environmental and social objectives
              together with commercial decision making.


                                                                     -2-
Scope of     From the           Transport at       Global                Management              Strategic        Climate            Performance and
the Report   CEO                Its Best           Presence              Drivers                 Priorities       Change             Supporting Information




              Transport at
              Its Best
              Transport at its best is the seamless, almost invisible, anchor to the fabric
              of society. To us, it is a convergence of the commitments and actions that
              create social, environmental and economic value. It is not framed as a
              series of isolated decisions, but rather is a continuous transformation that
              parallels societal aspirations for sustainable development.

              We recognise that to achieve such an ambitious goal, we must            We operate under the highest standards in governance. We
              be the best in ourselves and deliver best value in our products         are accountable and transparent with clear internal controls
              and services. We need to think and act with flexibility to              and protocol. Corporate policies and codes guide responsible
              manage change. We need to manage and deploy resources                   workplace practices and behaviours. 
              responsibly. We expect to set the bar as the business partner
              that leads through best practices. Further, our own metric              We demand the best of systems’ performance to
              ensures we continue to operate under commercial business                safeguard effectiveness of purpose and quality of
              principles, while at the same time contributing to the                  process. We ensure robustness of management systems and
              sustainable development of the societies and institutions of            highest service standards in all our operations.
              tomorrow. 
                                                                                      We share core competencies and values. Partnering
              Taking on these long-term social, environmental and economic            with our supply chain generates innovation and secures
              ambitions pledges us to a series of work commitments that               specified outcomes. Our international operations increasingly
              drive how we think, manage and act as an organisation. These            demonstrate measurable performance improvements
              commitments directly link to the strategic priorities discussed         with the adoption of our core competencies. We share our
              in this report.                                                         expertise in mainland China to raise the bar in local rail
                                                                                      transport infrastructure and services. 
              We are a community asset. We engage our stakeholders
              and broader society to translate social trends and aspirations          We plan and build to serve the needs of the future. We
              to services reality. Stations become transport and community            envision the co-generated future of high regional connectivity
              hubs that provide seamless connectivity and a travel                    between communities and commercial centres. We work
              experience that extends lifestyle between destinations.                 with policy makers and influential social groups to realise this
                                                                                      future. 
              We seek social inclusion. Station premises are continuously
              improved to facilitate barrier-free use for the disabled and            We build in resilience of assets and services to evolve with
              those in need of assistance. We provide travel concessions              societal development. 
              annually to a broad spectrum of social groups and we practise
                                                                                      We contribute positively to cities’ low carbon futures. We
              employment policies that reflect non-discrimination and
                                                                                      respect the natural environment and the prudent use of
              ethical behaviour towards employees.
                                                                                      social and economic resources in our operations. We plan
              We are a self-sustaining rail transport business. The rail              and manage to best efficiency and, where possible, improve
              plus property business model gives us the financial capability          resources for future generations.
              to build a mass transit network. The provision of affordable
              fares and the ability to invest in, maintain and upgrade our
              railway assets allows us to continually deliver quality services
                                                                                      The many stories and the insights that we include in this
              that respond to customer expectations. 
                                                                                      report demonstrate our thinking and the actions that put
              In new markets and projects, we adapt the rail plus property            these commitments into workplace reality.
              business model to reflect local conditions. 

              We encourage the best in people and demand the
              optimum in processes. Continuous improvement drives
              our work culture. We value creativity and best efforts from our
              people. We establish safe and healthy work environments. 
              We collaborate with our supply chain to push innovation and
              optimise resources deployment. 




                                                                   -3-
   Scope of              From the                Transport at            Global                     Management               Strategic            Climate              Performance and
   the Report            CEO                     Its Best                Presence                   Drivers                  Priorities           Change               Supporting Information




                           Global
                           Presence
                           The MTR Corporation is an internationally recognised model                             This business model establishes a synergy between community
                           in self-sustained rail transport that leads 21st-century urban and                     and rail, providing transport hubs that encourage social
                           transport planning and development. The rail plus property                             and economic development around stations, revitalising or
                           business approach is the long-term sustainable financing model                         establishing new centres of activity. By building consensus with
                           that builds communities while continuously providing quality                           the local communities on rail aspirations, we establish a social
                           railway services. By leveraging investment and management                              contract for our services, while contributing to the broader
                           opportunities in developed property assets, long-term financial                        development of our society.
                           sustainability can be assured. Through this self-financing of rail
                           assets, competitive fare structures are established, contributing
                           to sustained patronage of the system.
                                                                                                                            People’s Republic
                                                                                                                            of China
                                                                                                                            Hong Kong SAR (headquarters)
                                                                                                                            Shenzhen




                                                                               Sweden                                          Beijing
                                                                               Stockholm
                                                                                                                                  Hangzhou




                                                                                                                                                                     The MTR Corporation is
                                                                                                                                                                     a public company, listed
                                                                                                                                                                     and headquartered in
                                                                                                                                                                     the Hong Kong SAR.
                                                                                                                                                                     We have established
                                                                                                                                                                     businesses in mainland
                                                                                                                                                                     China through long-
                                                                                                                                                                     term rail partnerships
                                                                                                                                                                     and property
                                                                                                                                                                     management and
                                                                                                                                                                     investment. We also
                                                                                                                                                                     undertake rail operation
                                                                                                                                                                     concessions in Europe
                                                                                                                                                                     and Australia and
                                                                                                                                                                     are engaged in rail
                                                                                                                                                                     consultancies in several
                                                                                                                                                                     locations, including the
                                                                                                                                                                     Middle East, Southeast
                                                                       United Kingdom                                                        Australia               Asia and South America.
                                                                       London                                                                Melbourne




 Mainland China and Overseas Railway Business at a Glance
                                                                                                                                                                        Pending
                          In Operation                                                                                                                                  Finalisation of
                                                                                                                                                                        Agreement
                          Beijing Metro           Daxing Line of          Shenzhen                   London                 Stockholm Metro,         Melbourne          Hangzhou
                          Line 4 (BJL4),          BJL4, mainland China    Metro Line 4,              Overground,            Sweden                   Metro,             Metro Line 1,
                          mainland China                                  mainland China             United Kingdom                                  Australia          mainland China1
Effective interest        49%                     49%                     100%                       50%                    100%                     60%                49%
of MTR Corporation

Business model            Public-Private-         Operation and           Build-Operate-             O&M                    O&M                      O&M                PPP
                          Partnership (PPP)       Maintenance (O&M)       Transfer (BOT)2            Concession             Concession3              Concession
                                                  Concession
Commencement              Sept 2009               Dec 2010                Phase 1: Jul 2010          Nov 2007               Nov 2009                 Nov 2009           2012
of franchise/                                                             Phase 2: Mid 2011
expected date of
commencement
of operation

Franchise/                30 years                10 years                30 years                   7 years                8 years                  8 years            25 years
concession period

Number of stations        24                      11                      Phase 1: 5                 55                     100                      212                31
                                                                          Phase 2: 10
Route length (km)         28 km                   22 km                   Phase 1: 4.5 km            112 km                 110 km                   372 km             48 km
                                                                          Phase 2: 16 km
(1) The Concession Agreement with Hangzhou Municipal Government is subject to approval by relevant authorities in mainland China.
(2) Shenzhen Metro Longhua Line Phase 1 assets are owned by the Shenzhen Municipal Government. MTR Corporation (Shenzhen) Ltd took over the operation of Phase 1 in July 2010.
(3) Rolling stock maintenance under a 50:50 joint venture between MTR Stockholm and Mantena AS.


                                                                                              -4-
  Rail
  Hong Kong Passenger Services                               Station Commercial Business                             Rail Project Construction
  A territory-wide rail network connects passengers to       The rail network’s stations provide convenient          Five new rail projects constructed over the next
  their destination in a seamless travel experience          customer services, including retail shopping,           seven years will add approximately 56 km of track to
  that links regional centres through a series of local      infotainment and social amenities.                      the Hong Kong mass transit network. These new
  community hubs. The network is one of the most                                                                     lines promote community growth and provide
  intensively used mass transit systems in the world                                                                 connectivity to the regional centres of Hong Kong
  and is known for its reliability, safety and operational                                                           and the Pearl River Delta.
  e ciency.

  total route length                                                                                                 • Express Rail Link (Guangzhou-Shenzhen-
                                                                                                                       Hong Kong Express Rail Link) (operating model to


  218.2 km                                                   1,294                       kiosks and mini-
                                                                                         banks in stations
                                                                                                                       be confirmed)
                                                                                                                     • West Island Line (owned by MTR)
                                                                                                                     • Kwun Tong Line Extension (owned by MTR)
                                                                                                                     • South Island Line (East) (owned by MTR)
  84                            68                           21,064                      23,669                      • Shatin to Central Link (operations franchise)

  heavy rail stations           light rail stops             advertising                 advertising
                                                             points                      points
  cross-boundary rail           17                           in stations                 in trains
  passenger service             feeder bus routes

  NP 360 cable car                                           3G communication access across network
                                                             49 e-instant bonus machines in stations


  Property
  Investment                                                                             Management
  The rail plus property model provides the opportunity for long-term revenue            The management of residential and commercial properties positions the
  streams accrued through property assets. Securing retail and commercial space          company as an industry leader in Hong Kong. We leverage our expertise with
  above stations provides the additional synergy between network and                     contracts in major cities of mainland China.
  community.

  Hong Kong’s lettable oor area of                                                       Hong Kong
  MTR shopping malls


  226,622 m                                 2
                                                                                         744,725 m
                                                                                         managed commercial and o ce
                                                                                                                                  2




  11,202 m2
  (real estate for other uses)
                                            41,000 m2
                                            (o ces)
                                                                                         86,162
                                                                                         residential units


  Mainland China’s lettable oor area


  18,398 m                             2


  Development

  532,900 m                                 2

  development rights for 2 sites (GFA obtained in May 2011)
                                                                                         We engage professional property companies to co-develop properties in
                                                                                         Hong Kong, secured under the rail plus property model. We closely consider
                                                                                         societal and environmental aspirations when engaging industry expertise
                                                                                         and seek innovation in living spaces and public amenities.




Operating Pro t Contributions* (HK$ billion)
Except for property development and other businesses, all business segments
achieved steady growth in operating pro t, which accounted for 71% of the
Group’s total in 2011.                                                                                                                              2011
     Other businesses                                                                               2009                  2010                       Total
                                                                                                    13.3                   15.2                      17.2
     Railway subsidiaries outside Hong Kong
     Property rental and management businesses                                                                                         0.1
     Hong Kong station commercial business                                                                                             0.4             2.5
                                                                                                               0.2
     Property development                                                                                      0.3         2.3
                                                                                         0.4                                                           3.1
     Hong Kong transport operations                                                                  2.0
                                                                                                                           2.6
                                                                                                     2.3
                                                                                                                                                       4.9
                                                                                                                           4.0
                                                                                                     3.6


                                                                                                     5.0                   5.8                         6.2
* Excluding project studies and business
  development expenses



                                                                                      -5-
   Scope of                From the                   Transport at          Global                   Management              Strategic       Climate                Performance and
   the Report              CEO                        Its Best              Presence                 Drivers                 Priorities      Change                 Supporting Information




Hong Kong Operating                                    This operating network and future extensions map is updated from the same published in
                                                       the 2011 Annual Report. The changes reflect the commencement of construction on the Shatin
Network with Future                                    to Central Link and the proposal of new regional railway corridors by the Hong Kong SAR
Extensions                                             Government in April, 2012.


LEGEND                                                 PROPERTIES OWNED / DEVELOPED /                       21 The Waterfront / Sorrento /
                                                       MANAGED BY THE CORPORATION                              The Harbourside / The Arch / Elements /
        Station                                                                                                The Cullinan / The Harbourview Place /
        Interchange Station                            01 Telford Gardens / Telford Plaza I and II             W Hong Kong / International Commerce
                                                       02 World-wide House                                     Centre
        Proposed Station
                                                       03 Admiralty Centre                                  22 One International Finance Centre /
        Proposed Interchange Station                                                                           Two International Finance Centre /
                                                       04 Argyle Centre                                        IFC Mall / Four Seasons Hotel /
        Cable Car Ngong Ping 360
                                                       05 Luk Yeung Sun Chuen / Luk Yeung                      Four Seasons Place
        Shenzhen Metro Network                            Galleria                                          23 Central Heights / The Grandiose /




                                                                                                                                                                                          Pi ong
                                                                                                                                                                                            ng
                                                       06 New Kwai Fong Gardens




                                                                                                                                                                                            L
        Racing days only                                                                                       The Edge
                                                       07 Sun Kwai Hing Gardens                             24 Residence Oasis / The Lane                                                  47
                                                                                                                                                                                40
EXISTING NETWORK                                       08 Fairmont House                                    25 No. 8 Clear Water Bay Road / Choi Hung




                                                                                                                                                                                       ai
                                                                                                                                                                                     iW
                                                       09 Kornhill / Kornhill Gardens                          Park & Ride                                               48




                                                                                                                                                                                   u
        Airport Express




                                                                                                                                                                                Sh
                                                                                                                                                                                 n
                                                                                                            26 Metro Town




                                                                                                                                                                              Ti
        Disneyland Resort Line                         10 Fortress Metro Towers
                                                       11 Hongway Garden / Vicwood Plaza                    27 Royal Ascot / Plaza Ascot
        East Rail Line
                                                                                                            28 Pierhead Garden / Ocean Walk




                                                                                                                                                                   ng
                                                       12 Perfect Mount Gardens




                                                                                                                                                              Ho
        Island Line
                                                                                                            29 Sun Tuen Mun Centre /




                                                                                                                                                               u
                                                       13 New Jade Garden




                                                                                                                                                            Si
        Kwun Tong Line                                                                                         Sun Tuen MunShopping Centre
                                                       14 Southorn Garden
        Light Rail                                                                                          30 Hanford Garden /
                                                       15 Heng Fa Chuen / Heng Fa Villa /




                                                                                                                                                                    un
                                                                                                               Hanford Plaza




                                                                                                                                                                   M
        Ma On Shan Line                                   Paradise Mall




                                                                                                                                                               en
                                                                                                                                                             Tu
                                                                                                            31 Citylink Plaza                 29               30 45
        Tseung Kwan O Line                             16 Park Towers
                                                                                                            32 MTR Hung Hom Building /                 28
        Tsuen Wan Line                                 17 Felicity Garden
                                                                                                               Hung Hom Station Carpark
                                                       18 Tierra Verde / Maritime Square
        Tung Chung Line                                                                                     33 Trackside Villas
                                                       19 Tung Chung Crescent / Citygate /
        West Rail Line                                                                                      34 The Capitol/ Le Prestige
                                                          NovotelCitygate / Seaview Crescent /
                                                          CoastalSkyline / Caribbean Coast                  35 The Palazzo
PROJECTS IN PROGRESS                                   20 Central Park / Island Harbourview /               36 Lake Silver
                                                          Park Avenue / Harbour Green / Bank of             37 Festival City
        Guangzhou-Shenzhen-
                                                          China Centre / HSBC Centre /Olympian
        Hong Kong Express Rail Link                       City One / Olympian City Two                      WEST RAIL LINE PROPERTY
        Kwun Tong Line Extension                                                                            DEVELOPMENT
        Shatin to Central Link
                                                       PROPERTY DEVELOPMENTS UNDER                          (AS AGENT FOR THE RELEVANT




                                                                                                                                                                                                -
                                                                                                                                                                                         po rld
                                                       CONSTRUCTION / PLANNING                              SUBSIDIARIES OF KCRC)




                                                                                                                                                                                      Ex Wo
                                                                                                                                                                                        ia
        South Island Line (East)




                                                                                                                                                                                     As
                                                       23 Tseung Kwan O Station Area 56                     43 Nam Cheong Station
        West Island Line
                                                       34 LOHAS Park Package 2-10                           44 Yuen Long Station


                                                                                                                                                                                     t
                                                                                                                                                                                 or
                                                       37 Tai Wai Maintenance Centre
                                                                                                                                                                                 rp
                                                                                                            45 Tuen Mun Station                                               Ai                    19
POTENTIAL FUTURE EXTENSIONS
                                                       38 Che Kung Temple Station                           46 Tsuen Wan West Station



                                                                                                                                                                                                Ch ung
                                                                                                                                                                                                     g
                                                                                                                                                                                                  un
                                                                                                                                                                                                  T
        North Island Link                              39 Tai Wai Station                                   47 Long Ping Station
        Northern Link                                  40 Tin Shui Wai Light Rail Terminus                  48 Tin Shui Wai Station
                                                       41 Austin Station Site C                                                                                                       Cable Car
        South Island Line (West)                                                                            49 Kam Sheung Road Station                                                Ngong Ping 360
                                                       42 Austin Station Site D                             50 Pat Heung Maintenance Centre
                                                       52 Wong Chuk Hang Station                            51 Kwai Fong Site                                                 Lantau
                                                       53 Ho Man Tin Station
                                                                                                                                                                              Island
Major Regional Railway
Corridors Proposed in the                                                 Shenzhen
Stage 1 Study *                                                                                           W
                                                                                                       Lo Wu
                                                                                  Lok Ma
                                                                                  Chau
        Existing
        Northern Link
        Tuen Mun - Tsuen Wan Link
        Cross-boundary Spur Line                                                                      Hong Kong
        Hong Kong - Shenzhen Western
        Express Line Airport Rail Link
        Domestic Spur Line


* Stage 1 Public Engagement Consultation Document
of the Review and Update of the Railway Development
Strategy (RDS) 2000, undertaken by the Hong Kong
SAR Government



                                                                                              -6-
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                                                                                                           LOHAS Pa
                                                                                                                 Park
Scope of     From the           Transport at       Global                 Management             Strategic         Climate           Performance and
the Report   CEO                Its Best           Presence               Drivers                Priorities        Change            Supporting Information




              Management
              Drivers
              Our organisational stewardship is an organic process that relies on a set
              of management frameworks to guide development. These frameworks
              for risk management and stakeholder engagement encompass the many
              systems, policies and work practices employed for operational excellence
              and long-term organisational sustainability. Strong governance maintains
              the integrity of these frameworks while their built-in resilience to change
              promotes the culture of continuous improvement.


              OPERATIONAL EXCELLENCE
              We are a process-driven organisation that employs strong                sustainability drives workplace decisions. These interlinked
              governance combined with leadership and the motivation                  frameworks determine and prioritise business issues on
              to deliver operational excellence. We utilise well-established          a continuous basis and allow the timely allocation of
              management frameworks supported by specific processes                   management resources to bring about the most efficient
              and systems that drive, measure and report performance on               and effective value solutions.
              an ongoing basis. The Enterprise Risk Management (ERM)
              framework facilitates the monitoring and oversight of a                 This year, discussions within the Strategic Priorities section
              broad range of corporate, divisional and project risks across           address our understanding of related key issues and their
              all businesses. Within this framework, risks and related                consequences, how we are managing them and the actions
              issues and potential opportunities are identified, prioritised,         taken to mitigate the impacts. 
              owned, reported on and managed to best value. The second
              framework, the Sustainable Competitive Advantage (SCA)
              model, builds on the risk management process with the
              addition of the dynamics of stakeholder engagement and
              our unique corporate VMV identity. The model’s purpose
              is to capture and ensure that the business case for




                The Enterprise Risk Management Framework
                                                                                                                                   An animated diagram
                  RISK                                                                           MONITOR AND REPORT                of the SCA model
                                                                                                                                   processes can be found
                  Top 10 + Hot Spots                                                                  The Board (annually)         on our sustainability
                                                                                               Audit Committee (annually)          microsite.
                                                                                          Executive Committee (6 monthly)


                  Top 30                                      Enterprise Risks                   Enterprise Risk Committee
                                                               E1, E2, E3, E4                                    (3 monthly)



                                                                 Business
                                                                   Risks                                       Business Units
                  Divisional Risks                                                                              (Hong Kong,
                                                                                   Railway
                                                   Project                       Operations                   mainland China
                                                    Risks                        Safety Risks                  and overseas)




              In-depth discussions of the Enterprise Risk Management strategy and processes are included in our 2011
              Annual Report, www.mtr.com.hk/eng/publications/index


                                                                    -8-
Sustainability Management Cycle

                                                                                                                                           Continuous
                                                                                                                                         Improvement



   INPUTS                                                      SUSTAINABLE COMPETITIVE                     OUTCOMES
                                                                   ADVANTAGE (SCA)
   Engagement                                                     (prioritisation of issues)
    • Customer, employee, supply chain surveys
    • Shareholder engagement
    • Professional/governmental advisory bodies
    • Individual stakeholder group discussions
    External standards
    • Regulatory compliance
                                                                            Risk                           Shared value
                                                                         Management
    • International standards: ISO, OHSA, PAS                                                              Risk management initiatives
    • Guidelines: FTSE, SAM , GRI, AccountAbility,
      BS 8900:2006                                                                                         Stakeholder programmes
    • Benchmarking: UITP, CoMET, CDP                                                                       Asset management
                                                                  VMV
    Corporate initiatives
                                                                                                           Organisational development
    • Policies and codes
                                                                                                           Reporting
    • Governance manuals                                                                                   • Annual financial report
    • Enterprise Risk Management                                                                           • Sustainability report
                                                                         Engagement                        • GRI
    • Integrated management systems
    • Corporate issues management
    • Corporate responsibility
    Resources
   • Financial                • Manufactured
   • Natural                  • Social
   • Human




                                                                                                                                         Improvement




   Application of AccountAbility Principles (AA1000AS)

   INCLUSIVITY                                                             MATERIALITY                     RESPONSIVENESS




                     Sustainability Management                                           Outcomes are our business performance, comprising the
                     The diagram illustrates our organisation’s sustainability           initiatives and programmes devised to address, mitigate
                     management process. Its purpose is to identify and                  or even avoid the impacts or potential impacts related to
                     demonstrate the connectivity and continuous flow between            issues. Implementation is closely monitored for effectiveness
                     and amongst the many influences, tools and resources                of purpose and efficiencies of resources allocated. Results
                     discussed within this report and how they are used to evolve        support the goal of continuous improvement and feedback
                     the sustainability of the organisation.                             into the cycle for further management consideration.

                     Inputs encompass the universe of stakeholders, tools and            The sustainability management process is dynamic and
                     resources used in the process. This universe is inclusive,          resilient to change, inherently able to respond in a timely
                     encompassing all factors and influences that affect our             manner and with the appropriate mechanisms. Its strategic
                     business.                                                           objective is to deliver the co-generated development of
                                                                                         the corporation and society.
                     The Sustainable Competitive Advantage (SCA) model
                     serves as the filter that considers all inputs and, through the     AccountAbility Principles Application
                     processes of risk management and stakeholder engagement,            The application of the AccountAbility Principles parallels the
                     organises a matrix that defines the materiality of a particular     sustainability management process. The diagram reflects
                     issue and prioritises it for action. See pages 11 and 12 for this   where each principle comes into play in the process. 
                     prioritisation process. Use of the model guides allocation of       Because of this relationship, when applying the principles to
                     management and resources, which underpin each output’s              GRI reporting, they become inherent to the management
                     development and implementation. The model is further                discussions of performance.
                     explained on our sustainability microsite, www.mtr.com.hk/
                     eng/sustainability. The VMV represents our unique culture
                     that influences how the outcomes are structured and
                     implemented. 


                                                                            -9-
Scope of     From the           Transport at       Global              Management            Strategic       Climate            Performance and
the Report   CEO                Its Best           Presence            Drivers               Priorities      Change             Supporting Information




              CORPORATE GOVERNANCE
              The well-established governance framework for organisational        development. Our Corporate Responsibility Board Committee
              performance expectations serves us well. However, we                provides the communication channel that allows for Board
              acknowledge that governance needs to grow and maintain              involvement and for the timely and appropriate actions to be
              responsiveness to organisational needs while adhering to            implemented across the company.
              the ‘think global, act local’ philosophy. This year, for example,
              we recognised the emerging challenges in respect to new             The annual Corporate Governance Report details the
              regulations in our global operations centres and the increasing     structures and procedures that drive our governance systems
              compliance factors across all operations. The introduction          and hierarchy. The 2011 report outlines the year’s activities,
              of the enhanced governance framework for subsidiaries               the Board’s actions and the several protocols that ensure the
              and affiliates last year is moving the agenda forward. Better       high standards of governance we subscribe to. The report
              management, transparency and co-ordination of business              is published on our corporate website as part of the annual
              decisions within group companies are being observed in              financial report, www.mtr.com.hk/eng/publications/index
              the context of expectations and levels of reporting and
              compliance within the individual company. Of particular
              progress with trade unions in Europe and Australia has been
              engagement, which is a key component of the strategy to
              promote inclusion of the workforce. 

              A cross-organisation review of governance regarding new
                                                                                    We acknowledge
              regulations such as the Competition Bill in Hong Kong and             that governance needs
              the UK Bribery Act is in progress. Internal frameworks for
              adequate procedures and due diligence competencies are
                                                                                    to grow and maintain
              targeted. A new anti-bribery corporate policy, for example, is        responsiveness to 
              in the making to guide ethical behaviour and practices. We
              have also distributed compliance manuals and are conducting
                                                                                    organisational needs
              seminars in such areas as data privacy, IP management and             while adhering to the
              PRC state secrets to augment the rapidly changing operating
              environments, in particular in mainland China. The goal is to
                                                                                    ‘think global, act local’
              have all relevant managers versed in the necessary and most           philosophy.
              up-to-date legal guidance for business activities and conduct.

              Through the governance framework, we have active Board
              attention and participation in the company’s sustainable


              POLICIES AND CODE OF CONDUCT
              Our corporate policies and Code of Conduct define work              The Code serves as a working model for our franchises to
              practices and how we grow as an organisation. Policies span a       facilitate adaption of Code principles to specific markets. As a
              broad range of activities covering sustainability development,      baseline, all subsidiaries are required to comply with relevant
              business ethics, safety, employment and human resources             local laws and regulations and give consideration to local
              practices, environmental and biodiversity stewardship and           cutlures and existing frameworks as part of their individual
              the expectations of conduct in the workplace. We have listed        version of the Code. A Chinese-language version of the Code
              those polices relevant to sustainable development on our            is issued to all wholly owned subsidiaries in mainland China. 
              sustainability microsite.                                           Consistent throughout are the MTR values of integrity, respect,
                                                                                  ethics and personal conduct. 
              The Code of Conduct is the baseline in corporate conduct.
              The Code covers a wide spectrum of business conduct                 Corporate responsibility continues to gain momentum. In
              and ethical behaviours, including corruption, bribery,              2011, we commissioned an independent study to examine the
              discrimination, employment practices, health and safety,            broader demands of society for responsible corporate actions
              our responsibilities to the community and relationships with        and the opportunities we can focus on that are within our
              different stakeholders and our employees. The Code applies          operating capabilities. The objective is to generate shared
              to all employees in Hong Kong and entails further briefings         value. The study will be completed in 2012 and presented for
              and renewed sign-on every two years to remind employees             consideration by management and their further action.
              of their individual responsibility and commitment. Breaches
              of the Code are taken seriously with immediate disciplinary
              action taken and, if necessary, further punitive procedures.
              The Code, which is supplemented by the Corporate
              Guidebook for All Staff and the Corporate Guidebook for
              Managers, is reviewed on a regular basis to keep it timely
              and in pace with organisational and regulatory changes and
              employee expectations. The Code is available on line at
              www.mtr.com.hk/eng/publications/index

                                                                   -10-
Materiality

  STRATEGIC PRIORITIES                                       Graph A                                                                                             Graph B
                                                                                                                   Impact*
   1    Resources Management                                 Business continuity                                                                       Influence of interests
   2    Customer Services                    Critical1         1                                                                                                           3
        Health and Safety                                                                                                                                            7
   3                                                               3   6
                                                                   2                                                                                                       6
   4    Environmental Management                                            4    7                                                                                         2
                                                                                                               8
   5    Supply Chain Sustainability                                                                                                           1
   6    Sustained and Dynamic
        Engagement                                                           5                                                                5
   7    Societal Development                           l
                                             Substantial2                                                                                                  4
   8    Climate Change


  Material issues are defined as those               t
                                             Important3
  issues of highest concern to the
  corporation and to stakeholders.
  They are identified and assessed                                                                                                 8
  through the processes of risk
                                                              Corporation                                                                                      Stakeholders
  management and stakeholder
  engagement. For the corporation,
  prioritisation is made according to                         Likelihood of impact on                                                                          Importance to
  the likelihood and potential impact
  of issues affecting business               * Absolute measurement of impact for the corporation and stakeholders refers to a dissimilar scale. Relative placement of issues is
  continuity. For stakeholders,               shown along the same axis to demonstrate the principle of assessment.
  prioritisation is made in relation to
  the level of stakeholder interest in
  issues and the potential influence         Graph C                                 Impact

  or impact these interests have.

  Issues are grouped into three
  categories: ‘Critical’, ‘Substantial’
  and ‘Important’. Issues in the
  ‘Critical’ sector are prioritised for
  mitigation or avoidance of the             Critical1
  impact assessed and to bring the                                                                                                2          3                  HIGHLIGHTED
  highest level of environmental and
  social benefits.                                                               8
                                                                                                                                                                ISSUES
  From the sustainability                              l
                                             Substantial2
  development perspective, we have
  organised the spectrum of issues
  fielded into the eight strategic
  priorities charted in the graphs                   t
                                             Important3
  opposite and discussed in this                                                                                                                                  Importance to
  report. For examples of particular                                                                                                                              stakeholders
  material issues within these
  priorities, refer to the safety and
  priority business risks performance
                                                              Likelihood of
  tables on pages 20 and 37 of this                           impact on corporation
  report.

  Climate change is an exception in          Cube = Universe of issues
  prioritisation, being neither a critical   (1) Issues are reviewed and monitored at Board level and take top priority in management actions. Discussed in this report and
  nor a significant risk to the business,        in our sustainability microsite.
  nor of primary concern to our major        (2) Issues are reviewed and monitored by senior management with appropriate action taken. Discussed in our sustainability microsite.
                                             (3) Issues are reviewed and monitored and action is taken at business unit level. Generally not included in sustainability reporting.
  stakeholders. It is included as a
  strategic priority because it
  represents the opportunity for             Graphs A and B illustrate where the eight priority issues are positioned in
  industry leadership and the
                                             relation to the corporation and to our major stakeholders. These graphs
  potential for developing best
  practices.                                 combine in a further step (Graph C) to create a concise picture of the
                                             priorities. With this, management can clearly understand where to allocate
                                             resources most efficiently and where commercial decision making can be
                                             most effective along the value chain.
 An animated version of                      To illustrate this materiality process and the thinking behind it, we use
 the risk management
 and stakeholder
                                             Customer Services, Health and Safety and Climate Change as case studies.
 engagement processes                        We link these discussions to components of the Sustainability
 with further discussions
 can be found on our                         Management Cycle chart on page 9 to give context to the underlying
 sustainability microsite.
                                             management processes used.

                                                                                      -11-
Priority Stakeholders 2011

                                                                                                       STAKEHOLDER PRIORITISATION

                                                                                                       We map our major stakeholder groups
                                                                                                       as a significant step in the stakeholder
                                                                                                       engagement process. A review of
                                                                                                       their positioning and the assignment
                                                                                                       of internal ownership are undertaken
                                                                                                       annually by the Corporate
                                                                                                       Responsibility Steering Committee.

                                                                                                       This analysis determines how different
                                                                                                       stakeholder groups interface with the
                                                                                                       corporation and consequently indicates
                                                                                                       the needed levels of resources allocated
                                                                                                       to their management. This provides a
                                                                                                       measurement of risk mitigation as well
                                                                                                       as opportunities for the development
                                                                                                       of more effective engagement
                                                                                                       initiatives across the company.

                                                                                                       The chart on page 29 lists our major
                                                                                                       stakeholder groups in 2011. We include
                                                                                                       the major platforms of engagement
                                                                                                       and identify the issues of most
                                                                                                       importance to them during the year.




          2                                             3                                             8

                  Service
         Customer Services                                        Safety
                                                       Health and Safety                             Climate Change
                                                                     safety      priorit      both
                                                       Health and safet y is a priorit y to both               chang          exception the
                                                                                                     Climate change is an exception to the
                        financial
         underpin our financial livelihood and         our business         our stakeholders
                                                       our business and our stakeholders.                      engagement-based
                                                                                                     risk and engagement-based analysis for
          icence               For sta     lders,
         licence to operate. For stakeholders,         It has a significant impact on our
                                                                significant impact                      ateriality. Und                anal
                                                                                                     materialit y. Under systematic analysis,
          ransport        aily necessity However,
         transport is a daily necessit y. However,      icence
                                                       licence to operate and is a shared
                                                                             and          are           ran          important         Potential
                                                                                                     it rank s as an impor tant issue. Potentia l
           xpectations                 This poses
         expec tations drive choice. This poses        issue amongst all business units.
                                                              among                    units.        impacts            considered critical
                                                                                                     impacts are not considered critical to
              challen       balancing
         the challenge of balancing business           For stakeholders,
                                                       For stakeholders, health and safet y is
                                                                                          safety       perational continuit         regulator
                                                                                                     operational continuit y and regulator y
           osts against delivery competitive
         costs against delivery of competitive                                  factor services
                                                       viewed as a deciding factor in services         omp                         establish
                                                                                                     compliance has yet to be established.
         services,            money           all-
         services, value for money and the all-        choice and
                                                       choice and a given when engaging                      sta      lders and
                                                                                                     While stakeholders and the public  blic
         important travel experience..
         important trave experience                    professionally with the organisation.
                                                       pro essionall              organisation.                concern
                                                                                                     express concern about climate change,  ange,
                                                               actors populate        inputs the
                                                       Such factors populate the inputs to the              pressin
                                                                                                     more pressing issues such as poor air
         Customer services          critica
         Customer services is a critical issue
                                                       sustainability management process,
                                                       sustainability                    process,      uality           priority
                                                                                                     qualit y are their priority..
           iven       interdependence transpor t
         given the interdependence of transport
                                                       inc         sta      lder
                                                       including stakeholder engagement
         provision         its patrona Takin
         provision and its patronage. Taking                                                         Our position                 chang
                                                                                                     Our position on climate change as a
                                                         xercises               safet interests;
                                                       exercises to measure safet y interests;
         int ccount our stakeh
         into account our stakeholder                                                                strategic priority stems
                                                                                                     strategic priority stems from our vision
                                                       regulator y compliance, international
                                                       regulator compliance,
           xpectations capture
         expec tations captured through rough                                                               international ead and
                                                                                                     as an international leader and our
                                                       standards, enterprise
                                                       standards, enterprise risk andand
                          exercises, compl
         engagement exercises, compliance                                                                                   trans ort its
                                                                                                     commitment to be transpor t at its best.
                                                         enc mar ing und rstand
                                                       benchmarking to understand the scale    sca
                     Operating reement
         with the Operating Agreement                                                                         pro          buildin
                                                                                                     As we progress in building new rail
                                                           impacts;           Corporate Safet
                                                       of impacts; and the Corporate Safet y
                       nsi eratio
         and the consideration of current                                                                        refurbishing operating
                                                                                                     lines and refurbishing operating
                                                       Policy      ich gui
                                                       Polic y, which guides management
                  asp
         social aspirations and those of future                                                        ssets,               the impact
                                                                                                     assets, we consider the impact of
                                                       practices.
                                                       pract ces
         generations of users, how and at what                                                       climate            and       potential
                                                                                                     climate change and the potential
         level service                     decisive.
         level of service we deliver is decisive.                                                      onsequences
                                                                                                     consequences to future organisational
                                                            Sustainable Com etitive
                                                       The Sustainable Competitive Advantage
         From           perspective,          cost
         From a risk perspective, this is a cost                                                     sustainabilit y and the cit y’s liveabilit y.
                                                                                                     sustainabilit             cit liveability
                                                               drives safety materiality
                                                       model drives safet y materiality
                    benefit analysis. Outcomes
         against benefit analysis. Outcomes                                                          Takin action
                                                                                                     Taking action now in areas we can
                                                                                 differentiated
                                                       assessment. It pulls the differentiated
              seen suc                 enhanced
         are seen in such areas as enhanced                                                            ontro                   avoid
                                                                                                     control to mitigate or avoid climate
                                                       interests       inputs
                                                       interests and inputs to a common
         staff            improved station
         staf f training, improved station                                                           change impact pushes us to innovate
                                                                                                     change impact pus
                                                       measurement            ran        critica
                                                       measurement point, ranked as critical.
           nvironments
         environments and facilities, closer                                                               urther                  practices. The
                                                                                                     and fur ther develop best practices. The
                                                       Res                           outcomes,
                                                       Response is in the form of outcomes,
          onnectivity between            community
         connectivit y between the communit y                                                            bon Assessment Pro
                                                                                                     Carbon Assessment Protocol is a clear cle
                                                                 safety programmes
                                                       such as safet y programmes for ourour
                    system and important socia
         and our system and, importantly, social                                                                        strategy.
                                                                                                     example of this strategy.
                                                       supply chain, passenger education,
                                                       suppl           passenger education,
         inc            rough       services
         inclusion through our services..
                                                       sta skills enh ncement
                                                       staff skills enhancement and asset
                                                       improvement.
                                                       improvement.




                                                                      -12-
                   CULTURE OF CONTINUOUS IMPROVEMENT
                   We work under the culture and management approach of               incremental. The ongoing rail asset improvement programme
                   continuous improvement. The objective is to establish              sustains such improvement efforts with the adoption of new
                   achievable short-term targets, motivate staff and improve          technologies and best practices that improve performance.
                   work practices and systems that generate measurable and
                   progressive improvement. With this approach, we are realistic      The BS8900:2006 Guidance for Managing Sustainable
                   and focused, fostering efficiencies and agility in our work        Development serves as a measurement tool for how we are
                   practices.                                                         matching the ability of our business to achieve its longer-
                                                                                      term viability with society’s own expectations for meeting
                   This approach utilises performance targets with a strong sense     its present and future needs. We have utilised this standard
                   of certainty, usually within a 12-month time frame. This enables   since 2007 to track organisational performance in key areas of
                   a continued efficiency in resource allocation, appropriate         sustainability development. We recently developed a specific
                   work methodologies and priority in management attention.           set of key performance indicators to apply this standard
                   In our rail operations, for example, three-plus decades of         to our rail projects business unit from 2012. The five-year
                   continuous improvement has successfully optimised the              performance chart is on page 38 of this report.
                   network’s operating efficiency and our demand-side energy
                   consumption to the point where improvements are now




                                                                                                             CORE
                                                                                                             COMPETENCIES
                                                                                                             Our track record and expertise in rail
                                                                                                             asset improvement and rolling stock
                                                                                                             maintenance give us the leading
                                                                                                             edge in securing new opportunities
                                                                                                             in mainland China and overseas
                                                                                                             markets. Adopting our core
                                                                                                             competencies in asset management
                                                                                                             and customer services delivery to
                                                                                                             our operating franchises anchors our
                                                                                                             business strategy in these markets.




CONTINUOUS
IMPROVEMENT
Always seeking a better way to
work, improving customer services,
optimising operating efficiencies,
acquiring new skills and adopting
new technologies underscore our
work culture.




                                                                     -13-
Scope of     From the            Transport at        Global                 Management              Strategic       Climate            Performance and
the Report   CEO                 Its Best            Presence               Drivers                 Priorities      Change             Supporting Information




              Strategic
              Priorities
              The strategic priorities addressed in this report are largely the product
              of a series of stakeholder engagement exercises and internal risk
              management reviews and assessment. The constant interaction between
              these two, combined with changing external influences, leads us to the
              understanding of how, where and on what issues management must
              focus to maintain sustainability of the organisation.


              RESOURCES MANAGEMENT
              Economic viability, like sustainability development, anticipates           In relation to our business approach for self-sustained
              best use of resources. As with many global industry colleagues,            operations, we are examining possible development
              we are exploring previously untapped opportunities in                      opportunities attached to current and future railway projects.
              resources with a view to optimising allocation and expenditure.            At the same time, we are devising new interpretations to
              This is changing how we look at our businesses, assets and                 our rail plus property model in mainland China to include
              supply chain.                                                              wholly owned development of property, as seen with our
                                                                                         recent property project in Shenzhen. We are also expanding
              Capturing the value from resource use drives the four core                 our organic growth model internationally to consider new
              areas of our economic activity – rail operations and related               franchises and alternatives in rail investment for future
              services, new rail project development, property development               expansion.
              and management and international businesses. Wide-ranging
              plans are in progress with select new or enhanced initiatives              These many strategies, engagements and policy efforts are
              introduced during the year.                                                underpinned by the fundamental recognition of how our
                                                                                         own economic viability is interlinked with the sustainable
              Stakeholder engagement is expanding to better position                     development of the societies we operate in. The Transport
              the right services in the right markets. While safety and                  at Its Best chapter and the Customer Services and Societal
              reliability are the foundations of our railway services across all         Development sections of this chapter add further insight into
              our markets, service levels are in tune with local stakeholder             this linkage and our prudent use of resources for organisational
              expectations. This gives rise to a spectrum of passenger                   sustainability.
              services from more iconic and visible signage in stations to
              social media streaming on trains.                                          The Resources Management section in our sustainability
                                                                                         microsite elaborates on the specific performance and events
              We are implementing life-cycle thinking in asset optimisation              undertaken during the year to support responsible resources
              when developing new rail projects. The trade mix and station               use in development. 
              retail configuration is under revision to leverage space and
              rental value. In property, a series of pilot programmes in
              investment and managed properties is testing technologies
              and systems for better energy efficiency, in particular, in
              back-of-house areas not previously captured. And, through
              flexibility in our contract specifications we are encouraging
              our contractors, partners and the supply chain to offer
                                                                                         As with many global 
              innovative solutions that extend responsible resource use                  industry colleagues, we 
              beyond our immediate sphere of influence.
                                                                                         are exploring previously 
              At the same time, we are designing sustainability                          untapped opportunities 
              development and our economic future. Recognising that
              we build and operate assets that have a 100+-year life span                in resources with a view 
              and serve several generations of users, we are developing                  to optimising allocation
              our new rail lines to target future resource use in operations.
              The reduction in the network’s carbon footprint through                    and expenditure. This is 
              controlled management of embodied carbon and the                           changing how we look 
              energy optimisation in future operations will contribute to
              society’s low carbon future. Similar in thinking, new residential          at our businesses, assets 
              developments will achieve BEAM Plus Gold certification in                  and supply chain.
              environmental performance in their design, construction
              and operations.

                                                                     -14-
                                                                                                        EnErgy
                                                                                                        OptimisatiOn
                                                                                                        Energy optimisation is a priority
                                                                                                        in all aspects of the London
                                                                                                        Overground’s asset refurbishing
                                                                                                        programme. More than £260 million
                                                                                                        has been invested in commissioning
                                                                                                        the fleet of new trains specifically
                                                                                                        designed to meet the needs of
                                                                                                        passengers while maintaining our
                                                                                                        commitment to best environmental
                                                                                                        practices. Using our core
                                                                                                        competencies in rolling stock
                                                                                                        management developed from our
                                                                                                        Hong Kong experience, the new
                                                                                                        generation of electric trains use,
                                                                                                        amongst other technologies, braking
                                                                                                        regeneration to optimise energy use.
                                                                                                        Specification of this technology
                                                                                                        can provide up to 20% savings on
                                                                                                        energy consumption compared to the
                                                                                                        obsolete steam-powered fleet that
                                                                                                        was replaced.




                 Sustainable development gives rise        our own business sustainability             the stress point. Our obligation is to
                 to the enhanced economic, social and      development and reflect society’s           ensure our social contract or licence
                 environmental value a business brings     sustainable development.                    to operate aligns with society’s own
                 to its stakeholders and broader society                                               sustainable development journey.
Insight          now and in the future. A primary driver   Delivery to the value chain can be
-                of this value delivery is the effective   seen across the spectrum of our
                                                           management actions. At strategy
Resources        utilisation of available resources or
                 capitals (financial, social, human,       level, our rail plus property model
Management:                                                establishes a viable framework for
                 manufactured and natural) in business
The Business     decisions.                                sustainable urban development. It
Case for                                                   pays the capital costs to build a rail      The challenge is to find
Sustainability   Responsible consumption of capitals       line, which then allows for competitive
                                                                                                       places where the 
                 is directed through a management          fare pricing (social capital and
                 approach that takes into consideration    value increases) in operations. With        social, natural, human
                 risk and benefit to the value chain.      the development of new rail lines,
                 Within our organisation, the              optimising natural capital increasingly
                                                                                                       and manufactured 
                 Sustainable Competitive Advantage         drives the financial investment             capitals can merge with
                 model guides this approach. It enables    decisions in procurement. Demand
                 timely decisions that lead to measured    will escalate as regulations and            the financial in capital 
                 efficiency of resource deployment,        society’s expectations in regards to        deployment to promote 
                 prioritisation of management and the      carbon emissions and environmental
                 ability to minimise non-productive        stewardship influence asset                 our own business
                 performance and wastage at early          development and future maintenance.
                 stages.                                   At the operating level, the continuous
                                                                                                       sustainability development
                                                           improvement work ethic drives                and reflect society’s 
                 This approach inherently considers        efficient resources deployment.
                 prioritisation and balance of resource    Manufactured capital introduces new
                                                                                                       sustainable development.
                 use, with financial capital consumption   technologies to incrementally optimise
                 being the traditional baseline of         network energy consumption. Cross-
                 management decisions. The challenge       capital investment in safety maintains
                 is to find places where the social,       our licence to operate.
                 natural, human and manufactured
                 capitals can merge with the financial     Beyond action, we recognise that the
                 in capital deployment to promote          end value of capital deployment must
                                                           exceed the efficiency levels of today
                                                           in order to maintain organisational
                                                           sustainability. Costs of all capitals are
                                                           increasing as demand worldwide is at




                                                                   -15-
Scope of     From the                 Transport at           Global           Management                Strategic           Climate             Performance and
the Report   CEO                      Its Best               Presence         Drivers                   Priorities          Change              Supporting Information




              CUstOmEr sErViCEs
              Engaged customers determine organisational livelihood.                       The London Overground joint venture, working within a
              We pointedly design services that evolve with aspirations                    mature transport market, for example, has moved from
              and enhance the travel and retail experience. We deliver                     ranking eighth amongst the 19 UK rail-operating companies
              safe and reliable operating standards beyond performance                     in 2007 when the franchise started, to the top position in
              levels required by government and our own more stringent                     2011 and 2012 since our takeover. This has been achieved
              Customer Service Pledge targets.                                             through the network’s asset refurbishment programme
                                                                                           geared to bring better efficiencies in environmental and social
              Gauging the expectations pulse is our challenge. The delivery                performance. These improvements are enhanced by refreshed
              of the right services to a particular market designed to evolve              competencies training that motivate staff to take pride in
              with society is as much a social as an economic decision.                    their work. 
              The application of our Sustainable Competitive Advantage
              (SCA) model guides the decision process. Through solicitation                In mainland China, the transfer of MTR best practices, modified
              of local perceptions, issues and expectations of services                    to suit local operating conditions, has proven to be the most
              combined with a detailed risk management analysis of the                     productive approach. We determined the need to observe
              related business issues, we can define the appropriate levels of             passenger behaviour carefully and maintain a constant
              services and resource allocation.                                            dialogue with users to provide the services best suited to this
                                                                                           market. For example, overcrowding in trains is an issue that
              In Hong Kong, for example, our customer experience                           can have a negative impact on passenger behaviours.  We are
              management programme aligns with the decision framework.                     introducing network and train frequency changes and better
              The customer experience takes into consideration the                         station passenger traffic control. At the same time, we are
              voices of customers and our frontline staff and is supported                 educating users on basic passenger safety practices to ensure
              by a touch point analysis of where and how passengers                        appropriate use of the network. 
              interact with our services. The programme enhances the
              corporate value chain in that it guides our asset improvement                We tap industry best practices as a means to learn, share
              programme as well as enhancing staff customer-service skills.                and continually improve our services. We participate in the
                                                                                           Community of Metros (CoMET) annual benchmarking exercise
              Sustainable services anticipate expectations. With five new                  (page 41) and often exchange experiences with individual
              rail lines coming into operation in Hong Kong by 2020, we are                operators. We also undertake visits and sharing sessions with
              scenario planning to accommodate the additional passenger                    other operators to learn best practices and how they manage
              loads and the corresponding systems’ reliability and capacities              service issues such as overcrowding, passenger rage and
              needed. Critically, service planning is undertaken with the                  misuse of services. 
              deliberate strategy of building in resilience to evolving
              customer expectations. A fully wired network capable of                      The Customer Services and Customer sections on our
              expanding to accommodate new advances in social media                        sustainability microsite further discuss the many programmes
              technologies or the flexibility in train design to adopt new air-            and initiatives undertaken during the year that address how
              conditioning technologies would be typical of our planning.                  we are managing service performance and working to keep
                                                                                           our customers engaged.
              Leveraging these experiences with the view to application
              into other markets is an MTR core competency and a means to
              influence sustainability development in our overseas markets.




                MTR Passenger Numbers                                                       Market Shares of Franchised
                    Intercity
                                                                                            Public Transport in Hong Kong
                    Buses
                                                                                                MTR
                    Cross-boundary service
                    Airport Express                               2011                          Buses

                    Light rail                       2010         Total                         Mini-buses
                    Domestic service                 4,635        4,872                         Trams and ferries                       3.1
                                                                                  10
                                    9                                             126
                                  118                               285
                                                     274                          32                  3.3
                                      31                            451
                                                     433                                                                              15.0

                                                                                                   15.1                                               45.4
                                                                                                                                             2011
                                                                                                                     44.3
                                                                                                          2010
                                                     3,770         3,968
                                                                                                                                 36.5
                                                                                                  37.3


                 WEEKDAY AVERAGE
                 THOUSANDS                                                                    PERCENTAGE (%)



                                                                           -16-
art Of traVEl

The Stockholm Metro stations make
unique cultural statements that have
attracted international interest
and applause. Each station hosts a




                                                                                                             Photo: Hans Ekestang
large-scale permanent installation
by Swedish artists, giving travellers
a different perspective on mass transit
stations and new meaning to the
art of travel.




                                                                         COnnECting tO
                                                                         thE fUtUrE
                                                                         Keeping pace with services for the
                                                                         younger generation starts with
                                                                         communicating in their space. The
                                                                         Hong Kong network is ‘connected’
                                                                         to accommodate social media
                                                                         innovation. We share the social
                                                                         space through the MTR Mobile app,
                                                                         Facebook and the new Tell Us Your Story
                                                                         page on our sustainability microsite.




                      rapiD
                      rEspOnsE
                      Safety and convenience of passengers
                      is a service priority. The rapid response
                      unit and programme were established
                      in 2011 to manage communications
                      and assist passengers in the event
                      of train services disruption. LCD
                      screens, large-scale pull-down maps
                      and alerts through social media
                      support the dedicated 60-member
                      team who manage station traffic flows
                      and provide personal assistance to
                      affected travellers.




                                                                  -17-
Scope of          From the            Transport at        Global        Management   Strategic       Climate             Performance and
the Report        CEO                 Its Best            Presence      Drivers      Priorities      Change              Supporting Information




                     CUstOmEr
                     CarE
                     The small details distinguish service
                     excellence. From small aids such
                     as non-slip strips on platforms and
                     brighter, more iconic signage to
                     installation of public amenities in
                     stations, we observe, listen and act to
                     enhance the customer experience.




sOCial
inClUsiOn
Community inclusion underpins our licence to operate.
Through fare promotions and concessionary travel discounts,
we extend rail accessibility to a spectrum of social groups
including students, the elderly and the disabled. In 2011,
some HK$1.7 billion was allocated for this purpose.




                                                                                                  fiVE-star
                                                                                                  sErViCE
                                                                                                  A good shopping experience brings
                                                                                                  customers back. Seeing needs from
                                                                                                  the customer’s perspective is behind
                                                                                                  the thoughtful services we offer in our
                                                                                                  shopping malls. Well-appointed rest
                                                                                                  stations and amenities, a comfortable
                                                                                                  and fresh air ambience and even
                                                                                                  prams for the little ones are a small
                                                                                                  part of our five-star service offerings.




                                                                     -18-
hEalth anD safEty
Safety is in our corporate DNA. It is a Board-level led agenda                    During 2011, safety took on a more significant risk profile with
strictly governed by formal policy and well-established                           the construction of new rail projects. Work on the South Island
procedures. The 2010–2012 Corporate Strategic Safety Plan                         Line (East) and the Kwung Tong Line Extension has begun,
drives our focus to fit with the changing profile of the company.                 bringing to a total of four out of the five new rail projects that
Under this plan, safety management takes into consideration                       are under concurrent construction. By 2014, an estimated
the different levels of risk inherent in the nature and maturity                  14,000 contractor workers will be employed on the 70 MTR rail
of our businesses, such as in our international rail operating                    project sites across Hong Kong. The scale and complexity of
franchises or with external business partnerships in property or                  works and programme demand and receive the focused and
rail development. Safety is contractual, cultural and works with                  disciplined approach that saves lives and reduces accidents.
local competencies.




 Construction Industry Accidents
        Hong Kong construction industry average
                                                                                  We are taking a holistic
        MTR contractors - Hong Kong project construction
        (railway extension projects)                                              approach to drive safety
   08
                                                    2.05                          from four strategic start 
                     0.42
                                                1.82                              points – culture,
   09
                0.13                                                              work site, protocol and
   10
                                              1.74                                compliance... We believe
                 0.22
   REPORTABLE ACCIDENTS PER 100,000 MAN HOURS                                     that safety is everyone’s 
   Data for 2010 is the latest industry figures available from the Occupational
   Safety and Health Branch, Labour Department of the HKSAR Government.           responsibility. 


We are taking a holistic approach to drive safety from four                       As work progresses, our challenge is to continually promote
strategic start points – culture, work site, protocol and                         personal involvement in safety at all levels. Personal awareness
compliance. This involves mindset, work practices, performance                    to prevent accidents is our goal. Numerous site-specific
and contractual obligation. Bold steps are in progress. We                        campaigns continually drive the safety message, such as the
have tightened the annual contractor reportable accidents                         new worker buddy system, random spot checking for high-risk
target (0.4 to 0.3/100,000 man hours) in our railway extension                    work methods, in particular rigging, and near miss reporting.
projects. This is a significant step that challenges us to be                     The recent ’Don’t Walk By’ campaign seeks to improve site
better as both an organisation and an industry partner. Our                       conditions and eliminate needless minor accidents.
zero fatalities target remains non-negotiable. Regrettably,
two contractor fatalities occurred during the year. Both were                     In 2011, we did not achieve our contractor safety targets for
immediately reviewed for cause and action was taken to                            Hong Kong rail projects. This was mainly attributable to the
prevent similar or related accidents on other sites.                              increase in inexperienced labour and the increased activities
                                                                                  associated with the commencement of construction works on
In April 2012, we established the Construction Worker Life                        two new lines. We also experienced increased safety risks with
Insurance Scheme. This scheme covers all construction                             major civil works in progress, which are entering more difficult
workers employed on MTR sites. We (and the government                             construction stages.
for the Express Rail Link and the Shatin to Central Link) fund
the scheme, which provisions a payout of HK$200,000 in                            We are working closely with our contractors to increase
the event of a construction worker's death, whether for                           the training and supervision of new workers, improve site
a work-related reason or otherwise. We are addressing a                           conditions and implement the new safety initiatives. 
market concern that, particularly in light of the age of many
                                                                                  Worker Wellness
construction workers in Hong Kong and because of the nature
                                                                                  Hong Kong’s aging construction workforce requires a new
of their work, finds workers struggling to buy life insurance
                                                                                  approach to keeping workers healthy. Nurses are stationed
and therefore reluctant to join or return to the industry.
                                                                                  on all sites to monitor workers’ physical conditions as well
We believe that safety is everyone’s responsibility. Our                          as chronic conditions that affect job performance. Ongoing
partnering approach communicates expectations while                               site inspections ensure proper working conditions, rest areas,
encouraging best performance. We have introduced initiatives                      amenities and changing facilities. As good as such practices are,
that financially reward performance beyond targets. Several                       our challenge is one that goes beyond sites. Sustainability of a
new protocols have been implemented at all levels of                              stable and healthy workforce is difficult when long hours and
management to instil the safety culture and provide a means                       gruelling construction programme schedules are the norm. 
to measure, share and improve. These include formal safety                        To attract and retain the needed younger generation of talent,
audits, regular safety conferences, monthly risk reviews,                         a step change in industry practices and project programming
practical safety officer training, monthly inspections by senior                  is needed. We are putting this case forward to industry bodies
management and the sharing of information with contractor                         and to government where the planning of local mega-
partners. Most importantly, the continual training and reward                     infrastructures is incubated. The Infrastructure Development:
campaigns at the work site give workers a sense of personal                       Alternative Thinking insight on page 28 gives our position on
gain and new skills acquisition.                                                  this issue.

                                                                    -19-
   Scope of                   From the                     Transport at                Global                      Management                      Strategic               Climate                     Performance and
   the Report                 CEO                          Its Best                    Presence                    Drivers                         Priorities              Change                      Supporting Information



 performance against Quantitative safety targets 2011
 indicator                                                                                                                                                                 2009                  2010                 2011
 passenger and                  Fatality                         Bus                                                              Target                                       0                     0                      0
 public safety –                                                                                                                  Performance                                  1                     0                      0
 hong Kong                                                       Heavy rail                                                       Target                                       0                     0                      0
 operations                                                                                                                       Performance                                  0                     0                      0
                                                                 Light rail                                                       Target                                       0                     0                      0
                                                                                                                                  Performance                                  3                     1                  1(1)
                                No. of injuries    Bus                                                                            Target                                    9.50                 10.60               10.07
                                requiring                                                                                         Performance                              11.16                  7.51                 7.05
                                hospitalisation    Heavy rail                                                                     Target                                    7.70                  7.65                 7.65
                                per 100 million                                                                                   Performance                               7.56                  7.94               9.38(2)
                                passenger journeys Light rail                                                                     Target                                   11.00                 14.50               13.78
                                                                                                                                  Performance                              15.33                 12.30                 7.44
 staff safety                   Fatality                         Corporate support functions                                      Target                                       0                     0                    0
                                                                                                                                  Performance                                  0                     0                    0
                                                                 Operations Division                                              Target                                       0                     0                    0
                                                                                                                                  Performance                                  0                     0                    0
                                                                 Projects Division                                                Target                                       0                     0                    0
                                                                                                                                  Performance                                  0                     0                    0
                                                                 Property Division                                                Target                                       0                     0                    0
                                                                                                                                  Performance                                  0                     0                    0
                                                                 Property Division –                                              Target                                       0                     0                    0
                                                                 subsidiaries in mainland China                                   Performance                                  0                     0                    0
                                                                 China and International                                          Target                                       0                     0                    0
                                                                 Business Division                                                Performance                                  0                     0                    0
                                Lost time injuries               Corporate support functions                                      Target                                    0.13                  0.13                 0.10
                                per 100,000                                                                                       Performance                               0.16                  0.12                 0.26
                                man hours                        Operations Division                                              Target                                    0.54                  0.56                 0.49
                                                                                                                                  Performance                               0.52                  0.48                 0.42
                                                                 Projects Division                                                Target                                    0.15                  0.10                 0.10
                                                                                                                                  Performance                               0.04                  0.10                 0.05
                                                                 Property Division                                                Target                                    0.48                  0.45                 0.41
                                                                                                                                  Performance                               0.21                  0.20                 0.15
                                                                 Property Division –                                              Target                                    0.48                  0.45                 0.41
                                                                 subsidiaries in mainland China                                   Performance                               0.04                  0.00                 0.00
                                                                 China and International                                          Target                                     0.31                  1.35                 0.94
                                                                 Business Division                                                Performance                                0.32                  0.85                 0.55
 Contractor                     Fatality                         Hong Kong MTR network                                            Target                                        0                     0                    0
 safety                                                                                                                           Performance                                   1                     0                    0
                                                                 Hong Kong project construction –                                 Target                                        0                     0                    0
                                                                 railway extension projects                                       Performance                                   0                     0                  2(3)
                                                                 Hong Kong property development                                   Target                                        0                     0                    0
                                                                 and investment projects                                          Performance                                   7                     0                    0
                                                                 Hong Kong property investment                                    Target                                        0                     0                    0
                                                                 and management                                                   Performance                                   0                     0                    0
                                                                 Property investment and management                               Target                                        0                     0                    0
                                                                 in mainland China                                                Performance                                   0                     0                    0
                                                                 China and International                                          Target                                        0                     0                    0
                                                                 Business Division(4)                                             Performance                                   0                     1                    0
                                Reportable                       Hong Kong MTR network                                            Target                                     0.21                  0.34                 0.25
                                accidents                                                                                         Performance                                0.33                  0.12                 0.21
                                per 100,000                      Hong Kong project construction –                                 Target                                     0.45                  0.40                 0.30
                                man hours                        railway extension projects                                       Performance                                0.13                  0.22                 0.41
                                                                 Hong Kong property development                                   Target                                     0.58                  0.52                 0.47
                                                                 and investment projects                                          Performance                                0.23                  0.21                 0.20
                                                                 Hong Kong property investment                                    Target                                     0.30                  0.27                 0.25
                                                                 and management                                                   Performance                                0.12                  0.16                 0.17
                                                                 Property investment and management                               Target                                     0.30                  0.27                 0.25
                                                                 in mainland China                                                Performance                                0.00                  0.00                 0.00
                                                                 China and International                                          Target                                     0.50                  0.50                 0.50
                                                                 Business Division(4)                                             Performance                                0.02                  0.07                 0.07
(1) A private vehicle jumped the red traffic signal and collided with the train, resulting in the driver’s death.
(2) The increase was due mainly to improper passenger behaviour, including behaviour in escalator use, operation of train carriage doors and tripping or falling between the platform and the train when boarding or alighting.
(3) One contractor worker fatality was due to the movement of a steel drill rod by a crawler crane and the other was due to a piece of rock falling from the tunnel side wall.
(4) Covers only Melbourne Metro, Shenzhen Metro Line 4 and Beijing Metro Line because of different performance indicators used in other franchises.


                                                                                                              -20-
WOrKEr
WEllnEss
With the average construction
worker on our sites nearing 45, age-
related issues are now part of worker
health and wellness management.
Professional health workers are
stationed on all sites to check, monitor
and advise individual workers on
overall fitness and any chronic or
age-related conditions such as high
blood pressure or stress.




                                                                                         gOOD
                                                                                         nEighbOUr
                                                                                         When managing the 70 work sites across Hong Kong, being
                                                                                         a good neighbour makes sense. Being visible and available
                                                                                         strengthens community relationships. Our contractors
                                                                                         are part of our approach, taking an active role on the ground
                                                                                         with safety and environmental protection programmes.
                                                                                         Most important to the current stages of construction
                                                                                         is managing our activities to ensure minimal impact on
                                                                                         daily life.




sitE amEnitiEs

Regular site checks are undertaken to inspect contractors’ programmes for proper
site amenities and work schedules. Workers are allocated regular breaks during
shifts. Service amenities and changing facilities are easily accessible and maintained
to expected standards. All workers are issued appropriate attire and all equipment
is systematically checked and maintained to ensure functionality and worker safety.



                                                                            -21-
Scope of            From the              Transport at   Global        Management   Strategic    Climate   Performance and
the Report          CEO                   Its Best       Presence      Drivers      Priorities   Change    Supporting Information




   managing safEty
   ExpECtatiOns
   As our contractors’ workforce swells
   to over 14,000 across some 70 sites in
   the next few years, workplace safety
   takes on a whole new meaning when
   managing our supply chain expectations.
   Programmes at all levels of management
   and supervision are in action to ensure
   safety is practised – from contractual
   safety risk exposure to site equipment
   integrity. Most important is the human
   factor in safety. We focus on individual
   worker awareness, the key area identified
   for accident prevention.
   On-site meetings that encourage good
   practices, experience sharing and good
   working conditions are part of the
   daily safety diet. Workers are briefed
   on expectations and rewarded for best
   practices. All workers are trained and
   mentored in work tasks, in particular, in
   high safety risk areas. Potential hazards
   and accidents from other sites are
   discussed with both workers and their
   contractor employers to avoid similar
   incidents across projects.
   We recently established the Construction
   Worker Life Insurance Scheme for all
   our rail projects, which for the first time
   addresses a core industry shortcoming.
   It fills the gap in securing a life insurance
   scheme that covers worker accidents on-
   site or otherwise. This has been a factor
   in workers’ reluctance to join or return
   to the industry because of the impact on
   families in the event of a fatality.




                                                                    -22-
                   EnVirOnmEntal managEmEnt
                   Our environmental management reflects how we best                     Used at scale, these initiatives improve resource management
                   approach and balance the use of our natural resources                 significantly. Most public areas in our managed and owned
                   for sustainability development. The self-developed                    properties, for example, are fitted with water and energy
                   Environmental Management System (EMS) guides resource                 saving technologies. Eight of the nine train depots are
                   use, waste reduction and management initiatives specific              equipped with or have systems in place for water recycling
                   to our businesses. Utilising the culture of our Enterprise Risk       and waste management. We undertake regular indoor air
                   Management framework and the guidelines provided by our               quality monitoring in all our stations and owned buildings,
                   ISO 14001 certification, the system takes into consideration          as well as dust monitoring at our construction sites. 
                   aspects that promote environmental value, compliance                  Performance consistently meets and often exceeds the
                   risks, the responsiveness to change and the setting of                compliance minimum.
                   contractual targets to achieve continuous improvement
                   in operations, as well as influencing the future
                   environmental footprint.

                   Performance is managed through several programmes and
                   initiatives focused on the specific environmental impacts of
                   our operations, such as noise, waste, water and air quality. 




Five-Year Key Environmental Data
ISSUE                                                                                     2007                2008            2009            2010            2011
GHG Emissions      Total (tonnes CO2-e)                          Corporate-wide         675,560         1,097,151          1,161,431    1,178,776        1,215,354

Electricity        Total (MWh)                                   Operations
Consumption                                                      • Heavy rail           780,673         1,290,278          1,297,006    1,314,659        1,323,795
                                                                 • Light rail and bus         –            46,738             47,020       49,660           52,019

                                                                 Total                  780,673         1,337,016          1,344,026    1,364,319        1,375,813

                   Per revenue car km                            Operations
                   (KWh/car km)                                  • Heavy rail              5.68                4.86             4.85           4.82            4.83
                                                                 • Light rail and bus         –                5.20             5.25           5.18            5.12

                                                                 Total                     5.68                4.87             4.86           4.83            4.84

Waste Generation   Metals recycled (tonnes)                      Operations               1,650               2,035           3,208           2,784           3,020

                   Spent oil recycled (litres)                   Operations              36,212              75,910          88,164        94,780         106,980

                                                                 % Total                   100                 100              100            100             100

Water Usage        Water consumption (m )   3
                                                                 Operations             347,771           766,157           860,386       836,877         887,378




                     Water Consumption                                                    Electricity Purchased
                          Total                                                                   Railway operations
                          Property investment and management                                      Property investment and management
                          Railway operations                                                      Corporate support functions
                          Railway extension projects                                              Project site offices
                          Corporate support functions


                                                                2011                                                                      0.23
                                                                  Total                                                                1.44
                                                               2,126,388
                                                                                                            0.16

                                  2010                                                                1.46
                              1,899,032                                     1,095,937                                             21.37
                                                                              887,378


                                            970,260                                                 21.65                                 2011
                                            836,877
                                                                                                            2010
                                                                              119,800                                                                 76.96
                                                70,993                                                             76.73
                                                                               23,273
                                                20,902




                       CUBIC METRES (m3)                                                    PERCENTAGE (%)



                                                                               -23-
Scope of     From the           Transport at        Global              Management              Strategic          Climate              Performance and
the Report   CEO                Its Best            Presence            Drivers                 Priorities         Change               Supporting Information




              In-house, several initiatives drive our corporate environmental        retrospectively. We are the first property developer in
              footprint management. Campaigns to save paper and water,               Hong Kong to mandate this voluntary standard. We are also
              as well as to reduce energy consumption in offices and sites,          extending certification to our rail stations with the testing of
              are well established. As a founding member of the Hong Kong            BEAM Silver on the future West Kowloon rail terminus, a part of
              Green Purchasing Charter, we subscribe to best procurement             the national high-speed train network and our most ambitious
              practices and specify that our supply chain do the same.               station build to date. As our survey on supplier awareness
              The results of a recent contractor and supplier survey                 has demonstrated, we believe these specifications will have
              demonstrate the increased awareness amongst our frequently             a significant impact on the supply chain for properties and
              appointed contractors and suppliers of using environmental             buildings in Hong Kong. 
              best practices. This survey is detailed in the Supply Chain
              Sustainability section.                                                Our environmental management is forward thinking in terms
                                                                                     of stakeholder engagement. With parallel construction of
              Of current material interest to stakeholders is the                    five rail lines on more than 70 sites across Hong Kong, several
              environmental management of our rail construction projects.            communities are disrupted by noise, dust, traffic flows around
              While we have set out stringent targets in our Environmental           sites and the general inconvenience attached to construction
              Impact Assessment statements submitted to regulators and               sites. Proactive campaigns inform and listen to local sentiment.
              within our contracts, the challenge, like safety management,           All complaints or issues are logged and analysed and timely
              is on-site practice. Expectations are shared and training              follow-up actions are taken with appropriate parties. Our
              undertaken across all sites to elevate awareness, especially in        contractors significantly contribute to engagement efforts
              noise, dust and surrounding environments management, in                with visibility and availability within these communities for
              particular trees. It is a continuing challenge. In 2011, we found      future works and environmental actions currently being taken.
              that a contractor had over-pruned two trees at one of our rail
              sites. To encourage better observation of best practices, our          Pre-planning and site technologies are also harnessed to
              in-house construction teams are now trained in basic tree              the fullest for impact avoidance or mitigation and for best
              management to drive work practices that will avoid this type           efficiency. Noise envelopes, dust covers and site-based water
              of action in the future.                                               management programmes are used across all sites. Excavated
                                                                                     waste treatment and transport systems are site specific and
              In our external markets, compliance with local environmental           designed to minimise both traffic disruption and waste, either
              regulations is mandatory for all operations. Best practices            for reuse or landfill. New technologies such as the internally
              however remain our target, such as the achievement of ISO              developed wireless ANDANTE system installed in the 26 km
              14001 in our mainland China managed properties.                        Express Rail Link enables automatic site monitoring via
                                                                                     strategically placed noise measurement equipment and CCTV.
              We take an environmental leadership position in the planning           This cost and manpower-saving system for noise quality is
              of Hong Kong’s liveability. All new residential developments           expected to feature in all future rail projects in Hong Kong.
              tendered from 2010 require our development partners to
              achieve BEAM Plus Gold certification. This standard commits
              developers to reducing the environmental impacts
              within a building’s life cycle and ensures that environmental
              considerations are integrated at inception, rather than




                                                                                      bEam
                                                                                      CErtifiCatiOn
                                                                                      Certification under the BEAM standards is a significant leap
                                                                                      in best environmental practice in Hong Kong. Focusing on the
                                                                                      pre-construction stages and operations of a building, BEAM
                                                                                      certification promotes better planning, application of higher
                                                                                      quality standards and the more thoughtful use of resources
                                                                                      in development and operations of a structure. Consideration
                                                                                      is also given to the ambient environment in end use.
                                                                                      We are the first company in Hong Kong to require the BEAM
                                                                                      Plus Gold certification in our property developments (covering
                                                                                      developments from 2010 onwards). We are breaking ground
                                                                                      in the rail industry with the first application of BEAM
                                                                                      certification to the development of a rail terminus building.
                                                                                      In March 2012, in partnership with the property developer,
                                                                                      we achieved BEAM Plus Gold Certification (Provisional
                                                                                      Assessment) for the Austin Station residential developments.
                                                                                      This is the highest rating issued to date since the official public
                                                                                      launch of the BEAM Plus certification, this site being amongst
                                                                                      the first in Hong Kong to achieve this status.
                                                                                      Detailed information on certification and standards are
                                                                                      available online from the HKGBC, www.hkgbc.org.hk



                                                                    -24-
WatEr
managEmEnt
Our train depots employ rigorous
programmes to manage and recycle
water usage. Pipe leakage is regularly
checked to avoid waste and recycled
water continues to find new purposes.
Our challenge is to keep pace with the
growing visibility of climate change
impacts and the introduction of new
technologies and systems that can
be adopted as we refurbish or build
new assets.




                                                bEst
                                                praCtiCEs
                                                Contractual obligation and regulatory
                                                compliance serve as our baseline in
                                                best site practices. The agenda is
                                                to minimise disruption and impacts
                                                caused by construction activities and
                                                to reward best efforts. Managing
                                                people and community impacts is a
                                                priority for the environment and site
                                                activities interface. Work practices
                                                that manage the dust, noise, traffic
                                                and waste attached to our sites are
                                                independently audited and regularly
                                                reviewed for improvement.
                                                We reward our contractors for best
                                                practices. The bi-annual Quality,
                                                Safety and Environmental Awards
                                                recognises their innovation, work
                                                and implementation of practices
                                                at the work site.




trEEs

Trees are a challenging but rewarding
factor in our rail construction
responsibilities. We have moved
stations and have altered alignments
to ensure that our natural heritage
is preserved for future generations.
Dedicated nurseries care for some
2,000 trees, which are scheduled for
replanting once rural construction
activities are completed. In all areas
adjacent to our sites, old trees and
our city’s unique tree walls are
carefully looked after and monitored
by an independent consultant.




                                         -25-
Scope of            From the             Transport at   Global        Management   Strategic    Climate   Performance and
the Report          CEO                  Its Best       Presence      Drivers      Priorities   Change    Supporting Information




   nOisE managEmEnt
   in VirtUal timE
   The Automatic Noise Data Management
   E-system (ANDANTE) uses a network of
   CCTV and noise and weather monitoring
   equipment at 35 locations across the
   Express Rail Link (XRL). The purpose is to
   monitor the magnitude of noise created
   by current and future construction
   activities by railway operations.
   ANDANTE is technology innovation
   at its best. The system uses automatic
   monitoring and is supported by a
   technology platform that allows access
   by authorised parties through a spectrum
   of IT devices including smart phones
   and tablets. The system automatically
   alerts users to noise level breaches while
   the CCTV allows visual confirmation of
   source. All data is stored and immediately
   accessible for use. The system provides
   substantial savings in manpower and
   costs for site monitoring works and
   improves information sharing amongst
   project parties.
   The ANDANTE system is a powerful
   tool for the construction industry and
   universally, the first of its kind for site
   noise management. It introduces a
   step change in accepted systems for
   environmental monitoring and auditing
   of rail projects. With its already successful
   pilot use over two years, this tool is
   expected to be included in all future rail
   projects we undertake. With anticipated
   growing use on sites, we encourage its
   adoption in all infrastructure projects in
   Hong Kong.
   In 2012, ANDANTE was awarded the
   Certificate of Merit in the Best Green ICT
   Award category under the annual Hong
   Kong ICT Awards scheme.




                                                                   -26-
                     sUpply Chain sUstainability
                     The competition for skills, materials and products continues         With rail product fabrication now largely located in developing
                     to shift to developing economies, in particular to Asia,             economies, industry shared knowledge suggests the
                     creating both challenges and opportunities for services and          continuing and proactive involvement in quality assurance and
                     products. For us, actively developing sustainability within          control. While our baseline in all supply chain management is
                     our supply chain is the continuous re-engineering of supplier        to ensure manufacture in a safe and environmentally friendly
                     relationships and our internal management approach to                manner, measures are in place with our contractors
                     contracts, quality standards and risk management.                    to further enhance mainland China factories’ capabilities to
                                                                                          meet quality standard specifications. 
                     With new rail projects spend exceeding HK$25 billion annually
                     over the next four years, project development is a business          Recognising that our new railway systems need higher levels
                     of its own determination. Global participation is a given.           of quality control, we have established a regime covering
                     Efforts are attracting many leading international brands,            enhanced quality specification and defined accountability
                     bringing to Hong Kong the needed expertise, ethics and               for inspection and testing and we are continually improving
                     sustainable best practices from which we can learn. Contract         its effectiveness, as well as maintaining strategic oversight
                     strategy is similarly maturing to facilitate broader risk sharing,   for manufacturing. We support this programme with internal
                     collaboration amongst contactors and better efficiencies             teams or with agents appointed by contractors to undertake
                     across the parallel works in progress. For example, bundling         quality inspections and assurance programmes at factories
                     of contracts where feasible consolidates design and optimises        when needed. Our purpose is not to direct but rather to
                     economies of scale. We have introduced rigorous carbon               educate and promote the growth of skills and capacity within
                     emissions management of embodied carbon, partnering                  the suppliers’ manufacturing processes. This approach is
                     with our supply chain to develop skills and more appropriate         raising standards at source factories, benefiting their internal
                     contractual targets.                                                 processes and, by default, bringing continual improvement
                                                                                          to China’s rail industry in small but consistent steps.



                                                                                           QUality frOm
                                                                                           thE start
                                                                                           Quality of product and the integrity of the fabrication
                                                                                           process are principal areas of concern common to production
                                                                                           in developing economies. Our approach is to educate and
                                                                                           share best practices while at the same time ensuring that
                                                                                           our specifications are met. Expert quality teams, including
                                                                                           our own staff, work with the manufacturer when and where
                                                                                           needed. With this approach, we have factory floor access
                                                                                           and, at the same time, provide the training and skills transfer
                                                                                           for overall industry advancement.




nExt gEnEratiOn
in stanDarDs
To achieve the quality standards required for Hong Kong operations, the
fabrication of our next generation of trains calls for a close working relationship
with contracted mainland China manufacturers. These trains specify advanced
technologies and design standards that ensure safety, long-term serviceability and
environmentally friendly manufacture and operations. With the first train delivered
and in service, having achieved such stringent specifications establishes for us the
supply chain advancement that gives confidence to future rail product production
in mainland China.


                                                                           -27-
  Scope of       From the           Transport at       Global                Management             Strategic         Climate            Performance and
  the Report     CEO                Its Best           Presence              Drivers                Priorities        Change             Supporting Information




                  Our edge to building competencies is our well-established               We recently completed development of the protocol for
                  and widely regarded partnering practice. We believe                     the life cycle carbon assessment in railway projects. This
                  partnering brings life to a project by fostering teamwork               breakthrough industry methodology provides the tools
                  and project complexity appreciation amongst participants.               to measure embodied and operational carbon emissions
                  Partnering works across the hierarchy of the supply chain, from         of a railway line. By understanding where and how carbon
                  major contractors to the on-site sub-subcontracted workers.             emissions arise, we can target, manage and, importantly,
                  We use the tools and the communication platforms that                   mitigate or eliminate the impact of emissions across a rail
                  bring best results – contract sessions, management meetings,            line’s life of more than 100 years.
                  site toolbox talks, work reward campaigns and specialist
                  training. We share expectations up front and conduct                    promoting supplier sustainability Development
                  regular performance assessments to glean knowledge and                  During 2011, we undertook a survey of over 3,000 of our
                  disseminate best practices to other teams and projects. We              suppliers to gauge awareness of corporate responsibility
                  invite relevant contractors to join our communities of practice         within our supply chain. The survey covered relevant topics
                  and allow them to share in our division’s knowledge platform,           such as targets, conflict of interests, hazardous waste and
                  iShare.                                                                 corporate policies. These covered the social, environmental
                                                                                          and governance areas of their businesses. This survey is a
                  risk management                                                         follow-up to our 2005 survey, which introduced and fielded
                  With the delivery and parallel scheduling of work on five new           CSR practices amongst 32 of our top suppliers at that time. 
                  rail projects over the next seven years, risks are more complex,
                  move across projects, demand the skilful integration of                 The near 30% reply rate to this most recent survey gives
                  resources to keep to programme and involve the co-ordinated             us interesting insight into the state of the market as well
                  effort to mitigate large-scale risks. Traditional risk practices        as behaviour of our suppliers. While awareness of the
                  have been revisited and our approach extends to                         UN Guidelines for Consumer Protection was quite low in
                  co-operation amongst our supply chain partners to help                  general, it emerged that our regular suppliers have a better
                  ensure sustainable project delivery.                                    understanding of CSR overall. In comparing the two surveys,
                                                                                          we also found that those parties who were regular suppliers
                  While we understand that suppliers only give us what is                 to the corporation practised a higher commitment to CSR
                  required, we are taking the lead through the change in                  and have pushed the agenda down to their subcontractors. 
                  thinking and approach to contracts where it proves most                 Our conclusion is that our approach as a partner in continuous
                  opportune. Life cycle has entered contract vocabulary,                  improvement and through allocation of CSR-related
                  principally in the areas of specification, safety, buildability         specifications in contracts means that we are having an
                  and carbon footprint. In our rolling stock contracts, for               increasingly positive impact and influence on best corporate
                  example, we design in the maintainability of assets during              responsibility practices of our supply chain.
                  operational life to optimise energy usage and cost savings
                  in maintenance. We require contractors to adhere to new,
                  more stringent targets in safety design and the on-site safety
                  and health of workers. These are augmented by reward
                  mechanisms for performance beyond targets. We have also
                  split larger contracts and bundled others to understand and
                  manage scope better and to secure higher quality in design
                  and delivery.



                  Sustainable infrastructure considers            availability and the responsible               stimulates the investment to secure
                  the long-term implications of social,           deployment of those resources.                 the innovation, advanced technologies
                  environmental and economic                      This requires rethinking public policy,        and the consistent quality and
                  impacts created. Intrinsic value to             urban planning priorities and,                 standards needed as projects increase
Insight           society, programme and resource use             importantly, project development               in cost, scale and risk.
-                 necessarily lead its development.               practices.
                                                                                                                 The corporation is considering this
Infrastructure                                                    We start by encouraging the market,            alternative to guide development of its
                  Current thinking, driven by
Development:      outdated planning and work practices            matching resources, adjusting speed            own rail projects post-2015, when the
Alternative       that perpetuate the boom/bust                   of programme delivery and prioritising         next phase of rail projects is confirmed.
Thinking          cycle of infrastructure development,            the type of project to be developed.           With economic feasibility established
                  is counterproductive to society’s               Consideration must be given to                 using these suggested changes, this
                  own sustainable development.                    building a stable local workforce,             approach can serve as a blueprint for
                  An alternative approach views                   the industry professions and the               wider infrastructure development
                  infrastructure development as a social          supply businesses that deliver projects.       within Hong Kong.
                  contract that matches broader societal          Attracting the talent requires a
                  aspirations with the sustainable                paradigm shift in embedded practices
                  development of the local infrastructure         and attitudes. Skills training, work–
                  professions, industries and supply              life balance and, most importantly,
                  chain. Tough decisions from the public          a professional career path are the
                  and private sectors are needed and              growing expectations beyond the
                  incentives must be established                  standard competitive pay package.
                  for paced and continuous growth                 The promise of continuous growth and
                  tempered by choice of project, resource         demand in the supply chain services

                                                                          -28-
                  sUstainED anD DynamiC EngagEmEnt
                  Stakeholder engagement is a dynamic and evolving process,              appreciation of immediate business concerns and points
                  driven by the understanding of thinking globally while acting          to emerging trends and issues that influence behaviours
                  locally. While different in style and methodology, engagement          and choice. While we are maturing this process and have
                  is a systematic and measurable process. It allocates ownership         benefitted from its use, we recognise the need to formalise
                  and requires reporting of purpose, programme skills                    stakeholder engagement as an organisational governance
                  development and outcome to ensure appropriate allocation               tool that universally drives rather than simply supports
                  of resources and efficacy of exercise. It leads to the                 sustainability development.



stakeholder Expectations
stakeholder       main Expectations 2011                                                 Engagement Vehicles
regulators        • Regular reporting on compliance with Operating Agreement             • Environmental Impact Assessment statements
                  • Submission of required documents for approvals on new railway        • Regulatory compliance reports
                    and property construction                                            • Legislative Council meetings
                  • Legal compliance in operations, projects and property                • Advisory panels on transport and urban planning
                  • Observe town planning regulations and guidelines with due
                    consideration of community aspirations
investors         • Return on investment                                                 • Investor road shows and meetings
                  • Progressive dividend policy                                          • Annual and interim reporting
                  • Financial stability                                                  • Annual General Meeting
                  • Growth where opportune                                               • Shareholder hotline and email
                  • Good governance                                                      • Special announcements
staff             • Competitive remuneration                                             • Staff consultation committee meetings
                  • Job security                                                         • Divisional/departmental meetings
                  • Career and professional development                                  • Trade unions
                                                                                         • Staff surveys
                  • Personal development
                                                                                         • Recruitment drives
                  • Performance recognition
                                                                                         • Annual performance appraisal
                                                                                         • Skills training, people development, career guidance
                                                                                         • Intergrated Staff Development Programme, Leadship Pipeline
                                                                                         • Information mediums: Intranet, in-house magazine, corporate
                                                                                           general information (CGI), corporation notice (CN)
passengers and    • Safety and reliability in services                                   • Customer surveys
Customers         • Value for money in fares                                             • In-station personal assistance
                  • High standards in travel environment                                 • Customer loyalty clubs, promotions through Internet
                  • Response to evolving aspirations                                     • Social media and in-station communication mediums
business          • Contract opportunity for new rail projects                           • Industry meetings, conferences, job fairs, road shows
partners,         • Fair treatment                                                       • Partnering programmes, contract and site meetings, seminars
Contractors and   • Continued partnering activities
suppliers
Community         • Community respect in construction activities                         • Community liaison, vested interest group meetings
                  • Social aspirations incorporated into new rail lines and properties   • Public announcements, press releases
                  • Environmental protection                                             • Social media, MTR website
                  • Societal inclusion
Environment       • Sustainable management of the environment                            • Natural resource consumption
                  • Optimisation of natural resource use                                 • Protective measures and equipment
                  • Innovation to protect natural environments and biodiversity          • Risk assessments
                  • Restoration of key natural resources impacted by operations




                                                                                                                 nEW minDs
                                                                                                                 fOr nEW linEs
                                                                                                                 New Lines New Minds is a
                                                                                                                 transformation programme that
                                                                                                                 enables our rail projects staff to
                                                                                                                 work intelligently with daily
                                                                                                                 challenges and to create step change
                                                                                                                 improvements. The programme
                                                                                                                 focuses on three principal areas: How
                                                                                                                 we develop our people, how we forge
                                                                                                                 trusted partnerships and how we
                                                                                                                 execute project delivery effectively.
                                                                                                                 The goal is to develop individual
                                                                                                                 creativity, encourage innovation and
                                                                                                                 promote collaboration both within
                                                                                                                 and beyond the company.


                                                                           -29-
   Scope of                From the              Transport at           Global           Management                Strategic           Climate                Performance and
   the Report              CEO                   Its Best               Presence         Drivers                   Priorities          Change                 Supporting Information




                            The two independent stakeholder panel sessions held in late
                            2009 and early 2011 provide critical insight into this potential
                            agenda. Invited Hong Kong opinion and business leaders
                            tabled their views on our opportunities for leadership and                Early engagement is a 
                            their expectations of our visibility and actions. They also took
                            into consideration our performance improvement from year                  hallmark of our relations 
                            to year. Generally, our actions and external perceptions of us            with the community... 
                            continue to align, leaving some small gaps in how and what
                            we engage on for further consideration. With the conclusion               This is an important step 
                            of these sessions we are moving forward. Stakeholder                      in maintaining our grass-
                            engagement is now extending its universe and deepening
                            its understanding of social expectations and perception                   roots support, minimising 
                            of responsible leadership in both the rail and property                   disruptions to programme
                            development industries. Our first step is to foster distributed
                            leadership in sustainability development, taking it beyond the            and securing the co-
                            CEO remit. We are also introducing further communication                  operation of the local 
                            programmes to skilfully engage communities and vested
                            social groups on rail project progress.                                   political constituents.


                              Total Staff Strength                                                     Global Staff Distribution
                                  Station commercial business                                              Hong Kong
                                  China and international business                                         Australia
                                  Property and other businesses                                            China
                                  Corporate management and support department                              Sweden
                                  Projects                                                                 Others
                                  Offshore employees
                                                                             2011                                                                       0.1
                                  Operations
                                                                2010        Total
                                                            20,501         21,295
                                                                                             144                       0.1
                                               144                            1,282          179
                                               212              1,291         1,486                                                                    8.1
                                                                1,362
                                                                              2,109
                                                                                                                                                 6.6
                                                                1,794

                                                                                                                    8.9                  17.4
                                                                6,672         6,851                           7.0                                       2011
                                                                                                            16.5       2010                                       67.8
                                                                                                                                67.5

                                                                9,026         9,244


                               EMPLOYEES                                                                 PERCENTAGE (%)




                            During 2011, the more significant engagement efforts of the               roots support, minimising disruptions to programme and
                            year focused on issues material to business continuity across             securing the co-operation of the local political constituents. 
                            all business units. Of particular interest was the dialogue
The online discussions
                            with Hong Kong regulators in conjunction with new housing                 Engaging staff is a universal challenge. With over 30% of our
in the Sustained and
Dynamic Engagement          policies and the changes in environmental and property                    staff located outside Hong Kong, we increasingly deal with a
section cover the           development guidelines. The impact of these changes has                   broad spectrum of cultures and communication platforms. 
many engagement                                                                                       Employee issues, however, remain largely the same – working
efforts with our
                            led to serious reviews across the industry, often resulting in
major stakeholders          confusion on how overall development will proceed in the                  conditions and practices, remuneration, rights and benefits
undertaken during           future. Maintaining open dialogue and building consensus is               and training and career opportunities. Our starting position is
the year. Visit our                                                                                   consistent yet local when putting engagement into practice.
sustainability microsite    bringing both opportunity and resolution on many issues. 
for these discussions.      Further details on this issue are found in our microsite online           At the onset, we comply with local labour regulations and
                            discussions.                                                              closely align with the International Labour Organisation’s
                                                                                                      (ILO) Labour Standards in all locations. When engaging staff,
                            Early engagement is a hallmark of our relations with the                  practices focus on the most effective methodologies that
                            community. In new rail projects, for example, our community               build mutual trust and consensus. Labour unions in Europe
                            engagement process is moving on-site where programmes                     and Australia for example, with their traditional influence,
                            and actions, often involving our contractors, inform and                  require regular senior management dialogue to avoid the
                            educate local residents about forthcoming construction                    potential impact of industrial action.
                            activities. This is an important step in maintaining our grass-

                                                                                      -30-
                                                                                       a lEap
                                                                                       in training
                                                                                       The LEAP (Leading for Excellence,
                                                                                       Actions for Pride) programme tests
                                                                                       our rail operations staff teamwork
                                                                                       and ingenuity in challenging
                                                                                       situations. This new initiative seeks
                                                                                       to transform both individuals and the
                                                                                       rail operations unit to think beyond
                                                                                       the familiar and routine. Six key areas
                                                                                       of focus aim to improve operations
                                                                                       through management by design
                                                                                       rather than by reaction.




yOUng hanDs
at WOrK
A community recruitment event
organised for people living in Tin
Shui Wai presented residents there
with the opportunity to seek better
jobs within their own districts. Some
full-time and part-time frontline
staff were successfully hired. For
many of the younger hands, this is
their first employment with a large
organisation and the opportunity
to begin a career path. While
employed, they are given free travel
privileges on the MTR network. This
job benefit serves to inspire and
encourage their sense of adventure
and affords them the opportunity
to explore Hong Kong to its fullest.




                                        WalKability

                                        Societies increasingly ’occupy’ public policy, voicing choice in their urban future.
                                        We recognise that co-generation of this future is a powerful tool to realising desired
                                        liveability and the sustainable development of societies and cities themselves.

                                        In late 2011, we participated in an independent study of the ’walkability’ of Hong
                                        Kong and its contribution to MTR station access and the future liveability of our
                                        city. The purpose of the study is to see how Hong Kong’s urban centres can change
                                        to accommodate rising aspirations for accessible transport (with a specific focus
                                        on the walking experience), good aesthetics and healthy living amidst very high
                                        population density. It assesses how changes at policy level can be accommodated
                                        given the need to solicit consensus at both local and territorial levels.

                                        This study encompasses a number of areas that affect the urban living experience.
                                        These include high density flows of both traffic and people on streets, the need for
                                        pedestrianisation, district level pedestrian planning, access to the harbour front,
                                        bicycle parking and management, roadside air and noise pollution, nuisances and
                                        safety and security.

                                        With collection of information, inclusion of the appropriate stakeholders and
                                        input from local experts, the study's final report intends to give a clear assessment
                                        of issues as well as the opportunities to bring about a more sustainable direction in
                                        public policy with regard to the walkability of Hong Kong.




                                              -31-
 Scope of       From the           Transport at         Global                Management              Strategic        Climate           Performance and
 the Report     CEO                Its Best             Presence              Drivers                 Priorities       Change            Supporting Information




                 sOCiEtal DEVElOpmEnt
                 Societal development is of strategic interest to our                      mainland China’s high-speed rail network was our wake-up
                 organisation because of the nature of our business. We are a              call. The publicity and unexpected opposition prompted in-
                 community asset that provides public transport services to                depth review of the impact that societal interests and vested
                 millions of people each day. How society develops through                 groups have on us, in particular the rural villages and younger
                 its collective aspirations and expectations shapes what we do             generation, who champion the environment, heritage and
                 and how we determine our sustainable future.                              liveability of Hong Kong. We are rebuilding that trust to ensure
                                                                                           intergenerational continuity of our business and the sharing of
                 Because societies independently evolve at their own pace and              the common goal of a sustainable Hong Kong. 
                 rhythm, the agility to respond and lead at the same time is the
                 challenge. Our experience and competencies in the design,                 Our agenda is evolving. We need to better anticipate such
                 construction and operations of mass transit systems provide               underlying aspirations and analyse how they are influencing
                 a reservoir of expertise and responsiveness to the evolution              our inter-linked futures. More focused engagement is in
                 of social expectations. Our continuous improvement culture                progress with conscious efforts to align aspirations in our new
                 guides response and our Sustainable Competitive Advantage                 rail lines to local communities and the new voices we serve. 
                 model provides the appropriate balance between aspirations                Further discussions are taken up in the Sustained and Dynamic
                 delivery and resources expenditure.                                       Engagement section of this report and in the Community
                                                                                           page on our sustainability microsite.
                 Leading is a more complex agenda, which leaves little room
                 for mistakes. Our future is a collective vision created by
                 consensus. City planners map the transport grid and urban
                 development, tapping our expertise, as with the government’s
                 recent Rail Development Strategy 2000 Update and the Hong
                 Kong Planning Vision and Strategy 2030 reports. Building the
                 planned railways and properties to deliver ‘liveability’ is our
                                                                                           Society votes with its voice
                 leadership opportunity in this set agenda. Asset development              and its feet. Being a self-
                 is now increasingly led by environmental best practices
                 and carbon footprint reduction. The many initiatives that
                                                                                           sustaining organisation, 
                 bring this to life are cited in our Climate Change chapter and            soliciting constant buy-in
                 Environmental Management section of this report.                          is vital to organisational
                 Society votes with its voice and its feet. Being a self-sustaining        development and 
                 organisation, soliciting constant buy-in is vital to organisational       economic viability. 
                 development and economic viability. Integrity of our services
                 combined with active stakeholder engagement has over
                 time built the public confidence in our licence to operate. 
                 However, maintaining that trust is an ongoing challenge that
                 we have not always managed to the best outcome. The local
                 public reaction to the future rail link (Express Rail Link) to



                 The parallel consideration and                    integration between transport and               rail plus property model exemplifies
                 integration of transport and town                 lifestyle. Stations become transport            this transport- orientated development
                 planning advance new land use models              and community hubs for commercial               strategy.
                 for 21st-century urban development                and leisure activities. The nodal
Insight          needs. Acknowledging desired                      development design allocates low                As we expand into external markets,
-                speed and accessibility, sustainable              carbon, environmentally productive              this strategy is open to adaptation
                                                                                                                   that respects local land rights and
Connecting       rail transport redistributes land use             open spaces between centres. These
                 through expansive networks that                   can capture community aspirations               development constraints. In mainland
Transport and                                                                                                      China, where rail assets belong to
                 create broad connectivity linked by               and promote usage such as those
Town Planning    a system of centres and sub-centres.              devoted to long-term climate change             the state, new models for rail and
                 This combination of high regional                 adaptation and mitigation strategies.           property synergies are being tested.
                 connectivity and distant station                                                                  With success, such new models can be
                 spacing translates into denser, more              The co-development approach to                  developed across markets that foster
                 nodal urban development that                      the properties attached to the rail             self-sustaining railways in developing
                 simultaneously creates opportunities              entitles the transit entity control of          economies while delivering on societal
                 for high-quality open spaces between              the land and development uses of the            aspirations.
                 centres.                                          rail, while attracting private financing
                                                                   alternatives secured through land
                 Such transit-orientated urban planning            use rights. Commercialisation of these
                 synergises patronage with the social              rights offsets the capital cost of rail
                 and commercial activities within                  development and offers additional
                 station proximity, producing seamless             income streams in property ownership
                                                                   and management. The corporation's


                                                                           -32-
       CarbOn assEssmEnt
       prOtOCOl
       The Life Cycle Carbon Assessment
       protocol is a self-developed system that
       establishes an internal procedure to
       predict, track and assess the carbon
       footprint during and at different stages
       of a rail project delivery and subsequent
       operations. This importantly allows
       for identified reduction of the carbon
       footprint at critical stages in project
       delivery.

       The protocol gives due consideration to
       both the embodied carbon of materials
       used in development and the energy
       consumed during operations. Embodied
       carbon is the total carbon emissions from
       the manufacturing of a product, covering
       material extraction, transport and
       processing activities. It is particularly
       relevant in construction and constitutes
       an important part of the carbon footprint
       of the built environment.

       With life cycle assessment now possible,
       the objective is to achieve overall carbon
       emissions reduction across the life of a
       rail asset. This encompasses upstream
       GHG emissions, including the embodied
       carbon, and the downstream elements
       involving the end of life treatment and
       final disposal of the system components.
       Considering the 100+-years of rail asset,
       we do not presently include end of life
       treatment in our modelling, however
       preparations are in place to do so. With
       this clear understanding of how carbon
       is invested in a project, design and
       materials can be engineered to mitigate
       or avoid carbon emissions.

       In looking at the broader application,
       city planners have an effective tool
       through which both infrastructure
       projects and buildings can be prioritised
       for development according to a carbon-
       based assessment scale. In the future, this
       will play an important role in achieving
       low carbon targets for cities.




-33-
Scope of     From the               Transport at        Global               Management                Strategic              Climate             Performance and
the Report   CEO                    Its Best            Presence             Drivers                   Priorities             Change              Supporting Information




              Climate
              Change
              Climate change is a global issue that continues to stir international
              debate and demands for action. While not enough progress has been
              made at scale, individual initiatives borne by social groups and businesses
              are the drivers to needed solutions. We support the solution agenda
              by approaching climate change as an opportunity to demonstrate our
              industry leadership and as a means to develop best practices further.

              While climate change risks do not currently pose a significant              Our carbon strategy therefore translates almost exclusively to
              impact on our operations, we position it as a strategic priority            managing emissions incurred through our electricity demand.
              for our organisational sustainability. Expectations from
              industry stakeholders, interest groups and the global business              Energy and utilities are the largest non-salary expenses related
              community create the call for its inclusion in strategy.                    to our Hong Kong operations. Aggressive investment in
              Increased regulatory developments in all our operating                      energy optimisation has been integral to business strategy for
              markets and future accessibility and cost of resources pose                 over three decades. We are now at the stage in rail operations
              potential risks. Combined, these place climate change on                    and property business where improvement is incremental,
              the corporate radar for action.                                             often involving the introduction of new technologies or
                                                                                          processes as they come to the market. The recently completed
              We have established the Climate Change and Biodiversity                     programme undertaken in co-operation with the Clinton
              policies to enact best practices in the mitigation and                      Climate Initiative at Olympic Station, for example, provides
              adaptation to impacts. At the same time, we commit to                       a working model and contractual template for improving
              developing our business to minimise the negative effects of                 energy efficiency in air-ventilation systems and in heat
              future operations.                                                          reduction through application of thermal film on outdoor
                                                                                          windows. 
              For us, climate change actions principally focus on our energy
              demand management. In Hong Kong, energy supply is subject                   Benchmarking with international operators indicates that
              to a unique regulatory framework, the Scheme of Control,                    setting of more ambitious targets beyond such incremental
              which places control of supply-side GHG emissions into the                  improvements on an already highly energy efficient rail
              remit of two electricity suppliers. Within this framework, their            network requires significant investment in areas that do not
              emissions will, at best, be reduced through fuel mix changes                necessarily lend themselves to a better rail system, nor would
              in natural gas, coal and nuclear for the foreseeable future.                significant carbon efficiencies be gained.




                Greenhouse Gas Emissions Inventory (tonnes CO -e) Hong Kong Operations                      2



                CATEGORY                                                                     SCOPE                    2009                2010               2011
                Fuel − rail operations and maintenance and in-house support                        1                  6,001               5,441              5,473

                Fuel − feeder bus service                                                          1                 19,048              18,173            18,518

                Refrigerants                                                                       1                 14,397              14,194            15,552

                Electricity − railway operations                                                   2                863,918             856,302           892,023

                Electricity − property management and investment                                   2                233,898             240,655           246,275

                Electricity − headquarters                                                         2                 15,120              14,014            15,139

                Electricity − project site offices                                                 2                     0                2,197              3,093

                Water consumption and sewage treatment                                             3                  1,036               1,104              1,241

                Waste disposed to landfill − railway operations and extension projects             3                  5,543              24,131            16,331

                Corporate paper use                                                                3                  1,102               1,033                381

                Business travel − staff flights                                                    3                  1,368               1,532              1,327

                Total                                                                                           1,161,431           1,178,776         1,215,354




                                                                         -34-
                                                                                               In addition to managing demand-side carbon emissions,
                              Electricity Efficiency Ratio of                                  we have implemented numerous preventative measures
                                                                                               concerning the environment and biodiversity, such as tree
                              Rail Assets                                                      management on all sites, and ensure the highest standards
                                                                                               when managing sensitive ecological systems in areas such as
                                                                                               the wetlands adjacent to our operations in rural areas.

                              6
                                                                             2011
                                                                                               The opportunity to secure a significant step towards the low
                                                                             4.83
                                                                         per revenue car km    carbon future comes with our new rail projects development.
                                                                           (KWh/car km)        We have internally developed a four-part protocol that
                                                                                               provides the methodology and measurement processes
                              5                                                                for carbon emissions assessment and prediction in the
                                                                                               construction and operation of a railway line. This is a
                                                                                               breakthrough for the rail industry and is set to provide new
                                                                                               insights into how carbon can be best mitigated across the life
                              4
                                                                                               of a rail line. Consideration is given to the embodied carbon
                                                                                               of civil works and rolling stock manufacture, as well as the
                                                                                               estimated energy consumption incurred during operation.
                                                                                               We are in progress to establish a measurement system for
                                                                                               embedded carbon in electrical and mechanical works.
                                      07        08        09        10          11




                             Rail-based transport delivers the best       taken by the International Association     The recognition and measurement
                             energy optimisation across public            of Public Transport (UITP) in advocating   of the rail transport carbon-saving
                             transport sector modes. It brings            the role of rail transport within the      agenda could provide further
                             significant carbon emissions avoidance       Conference of the Parties (COP) to the     opportunity for overall urban
Insight                      by promoting mode shift (avoidance of        United Nations Framework Convention        planning. With the capacity to transfer
-                            private vehicle trips), road congestion      on Climate Change (UNFCCC).                the assessment method to other
Carbon-                      relief (improved fuel efficiency) and,                                                  infrastructure projects, urban planners
                             significantly, a land-use multiplier         The corporation has taken this carbon      can prioritise projects, including rail,
Crediting Rail                                                            dialogue a step further with the recent
                             (compact land use that allows                                                           on a carbon-based assessment scale.
Transport                    alternatives in social, environmental        development of a carbon assessment         This opens the broader dialogue on
                             or economic purposes).                       protocol. This protocol introduces a set   cities’ carbon reduction targets and
                                                                          of tools to predict and track embodied     how best to plan for them according to
                             The derived financial benefits or            carbon in development and to measure       carbon intensities.
                             carbon-saving rewards of such                carbon emissions in the operations of
                             emissions avoidance have yet to be           a rail line. By understanding how much
                             established within a mechanism               carbon is invested in a project, we can
                             recognised under the formalised              engineer design and materials that
                             global climate change agenda.                reduce the carbon footprint across the
                             Industry participants, including the         life of a rail asset. This furthers the
                             corporation, support the initiatives         directive of carbon mitigation or
                                                                          avoidance on a project-by-project basis.




                             We are undertaking the first steps to practical resources         as the backbone of public transport. We support and are
                             management in a contract for the West Island Line, focusing       responding to government's Review and Update of the Second
                             on using the protocol as an evolution and continuity of           Railway Development Study (RDS-2U) on best development
Carbon Disclosure
                             existing practices and systems. The protocol’s adaption into      of railways for domestic and cross-boundary transport. 
Project
The company
                             our Design Standard Manual and with the potential inclusion       Due consideration is also given to relieving congestion and
participates in the annual   into statutory Environmental Impact Assessment statements,        minimising bottlenecks in the current operating network.
Carbon Disclosure            we commit our supply chain to rigorous energy efficiency
Project to benchmark                                                                           This study will determine which future railway projects best
the robustness of our        targets within contract.
tracking and reporting                                                                         support the transport and urban development expansion
systems on climate           rail transport advocacy                                           plans in Hong Kong and the Pearl River Delta region. We
change. Participation
                             We pointedly engage in the climate change dialogue where          present sound justifications and convincing arguments that
in this benchmarking
exercise is also an          our voice and activities can be leveraged to most positive        cohesive transport infrastructure needs to place society’s
important means to           effect. Internationally, we support rail as the low carbon        sustainable development at the forefront of planning.
learn international best
practices and improve
                             transport solution through UITP and other industry bodies
our internal emissions       and platforms. We share best practices and benchmark with
management. In 2011,         our peers to continually improve initiatives across industry. 
we maintained top
disclosure scores for the    We also host several international delegations to study our
Asia ex-Japan Global 500     rail plus property model as a leading 21st-century sustainable
Companies. However,
                             urban planning model that gives due consideration to
our position changed
slightly due to a change     mitigation and adaption to climate change impacts.
in measurement metrics
used by the project.         In Hong Kong, we actively work with government,
                             stakeholders and city planners to continue to promote rail


                                                                                     -35-
Scope of     From the           Transport at       Global             Management              Strategic       Climate           Performance and
the Report   CEO                Its Best           Presence           Drivers                 Priorities      Change            Supporting Information




              performance and
              supporting information
              We disclose our social, economic and environmental performance as
              a key component of our stakeholder communications strategy and as
              a supporting management dialogue to complement our annual financial
              report. We have been reporting our performance for over a decade and
              with each report seek to improve scope and depth of coverage. We frame
              discussions to reflect our sustainability business case and, increasingly, in
              the context of the expanding footprint of our operations.
                • Priority Sustainability Business Risks and                        • Economic Contribution
                  performance 2011
                                                                                    • Independent Assurance Report
                • Maturity Matrix BS 8900:2006 Guidance for
                  managing sustainable Development                                  • CoMET Benchmarking Results 2010

                • Financial Performance                                             • Definitions



              We disclose our social, economic and environmental                   The financial and economic contribution data covered in this
              performance as a key component of our stakeholder                    report is extracted from the MTR Corporation Limited’s Annual
              communications strategy and as a supporting management               Report 2011. The data is prepared according to and aligns with
              dialogue to complement our annual financial report. We               the accounting policies of the company’s financial statements.
              have been reporting our performance for over a decade                We align with the company’s 2011 fiscal year except where
              and with each report seek to improve scope, clarity and              otherwise stated. Events and data of material value to readers
              depth of coverage. We frame discussions to reflect our own           occurring after the 2011 year-end and before publication of
              sustainability business case and, increasingly, in the context       this report are specified.
              of the impact we have on society’s sustainable development
              expectations for meeting its present and future needs.               The social and environmental data is aggregated internally,
                                                                                   from our business partners and from independent bodies. 
              We capture quantitative performance results using accepted           The external sources of such data are identified and stated
              standards and reporting measurements to assess the year-             where applicable and verifiable. Data presented on our
              on-year internal progress and to allow both industry and             business activities and operating franchises or subsidiaries
              broader corporate comparability. We also include multi-year          outside Hong Kong is indicated as such when stated,
              information to identify trends in performance over time that         principally in performance graphs and tables.
              are indicative of longer-term development achievements as
              well as shortcomings.                                                Although we are, in principle, confident of the integrity of
                                                                                   the non-financial data used in the report, we acknowledge
              basis of reporting                                                   that there are limitations that can cause a degree of
              When measuring and presenting our corporate sustainability           uncertainty, in particular, those that include accuracy and
              performance, we use selected recognised global and industry          sampling by environmental measuring equipment; and data
              standards or best practices. These include the GRI G3                sourced from external entities and/or business partners
              Sustainability Reporting Guidelines, the CoMET benchmarking          where the company has no controlling interest in projects or
              programme, BS 8900:2006 Guidance for Managing Sustainable            contracts. Our practice is to keep within a 5% range in variance
              Development and the World Business Council for Sustainable           and state within data tables where variance is applicable.
              Development/World Resources Institute’s GHG Protocol: A
              Corporate Accounting and Reporting Standard.




                                                                  -36-
 priority sustainability business risks and performance 2011
 The priority business risks and related annual performance measurements support our understanding of organisational sustainability. The KPIs in this table are
 material to development, many of which are included within the strategic priorities discussed in this report. These performance indicators also serve as inputs
 to the assessment process for the BS 8900:2006 Maturity Matrix table on page 38.
 As our sustainability journey continues to move towards a co-generated future with society and stakeholders, the BS 8900:2006 Maturity Matrix now reflects
 the more accurate and relevant progress in sustainability.


 priority business risk                                Key stakeholder              Key performance indicator                                          2009               2010                2011
 Economic                 Financial                    Government                   Operating profit before property                                    9,515             10,917              12,124
                          stability                    Shareholders                 developments, depreciation, amortisation
                                                       Business partners            and variable annual payment (HK$ million)
 social                   Maintaining                  Shareholders                 Passenger trips                                                      4.33                4.62              4.85
                          passenger                    Staff                        (weekday average in million)
                          numbers
                          Maintaining rail             Passengers                   Customer Service Pledge items achieved:
                          and other                                                 (a) Train service delivery (%)
                          transport services                                        • Island, Kwun Tong, Tseung Kwan O,                                  99.8                99.8               99.9
                          patronage                                                   Tsuen Wan, Tung Chung and
                                                                                      Disneyland Resort lines and
                                                                                      Airport Express
                                                                                    • East Rail Line                                                     99.9                99.9               99.9
                                                                                      (including Ma On Shan Line)
                                                                                    • West Rail Line                                                     99.9                99.9               99.9
                                                                                    • Light Rail                                                         99.9                99.9               99.9
                                                                                    (b) Passenger journeys on time (%)
                                                                                    • Island, Kwun Tong, Tseung Kwan O,                                  99.9                99.9               99.9
                                                                                      Tsuen Wan, Tung Chung and
                                                                                      Disneyland Resort lines
                                                                                    • Airport Express                                                    99.9                99.9               99.9
                                                                                    • East Rail Line                                                     99.9                99.9               99.9
                                                                                      (including Ma On Shan Line)
                                                                                    • West Rail Line                                                     99.9                99.9               99.9
                                                                                    (c) Train punctuality (%)
                                                                                    • Island, Kwun Tong, Tseung Kwan O,                                  99.7                99.7               99.7
                                                                                      Tsuen Wan, Tung Chung and
                                                                                      Disneyland Resort lines
                                                                                    • Airport Express                                                    99.9                99.9              99.9
                                                                                    • East Rail Line                                                     99.9                99.9              99.8
                                                                                      (including Ma On Shan Line)
                                                                                    • West Rail Line                                                     99.9                99.8              99.8
                                                                                    • Light Rail                                                         99.9                99.9              99.9
                                                                                    (d) Train reliability (revenue car-km/incident)
                                                                                    • Island, Kwun Tong, Tseung Kwan O,                            1,926,928          2,459,083            1,841,822
                                                                                      Tsuen Wan, Tung Chung and
                                                                                      Disneyland Resort lines and
                                                                                      Airport Express
                                                                                    • East Rail Line (including Ma On Shan Line)                  2,636,479           3,813,015           3,292,956
                                                                                      and West Rail Line
                          Developing and               Staff                        • Staff turnover rate (%)                                             2.0                 2.6                3.3
                          retaining staff                                           • Vacant posts filled internally either by                              –                  47                49
                                                                                      promotion or transfer (%)
                          Ensuring the health                                       (Expanded 2011 safety targets and performance presented on page 20)
                          and safety of passengers,
                          staff and contractors
 Environmental Breaches of statutory Government                                     Legal compliance (MTR Corporation) -                                     0                  0                1(1)
                          environmental                                             number of successful prosecutions
                          requirements
                                                       Contractors                  Legal compliance (contractors) -                                         2                  2                1(2)
                                                       Government                   number of successful prosecutions
                          Long-term energy             Shareholders                 Greenhouse gas emissions                                       1,161,431          1,178,776            1,215,354
                          supply without               Passengers                   (tonnes CO2 -e)
                          renewables                   Customers
                          (GHG emissions)              Suppliers
                                                       Community
                          Climate change               Staff                        Annual review of risk - the annual                              Review            Review                 Review
                          (response to                 Passengers                   review comprises a risk assessment                           completed        completed(3)            completed
                          climate change risks)        Customers                    and a continuous process of risk
                                                       Community                    management actions
                                                       Suppliers, Contractors
(1) The corporation was fined HK$15,000 for earthworks carried out in a conservation area. New permit issued to rectify site boundary.
(2) Contractor improperly disposed of construction waste and was fined HK$2,000.
(3) The result has been restated as the review of climate change risk for 2010 was performed in June 2011, subsequent to the release of Sustainability Report 2010 dated 28 April 2011.


                                                                                                 -37-
 Scope of               From the                   Transport at        Global                    Management           Strategic                  Climate                 Performance and
 the Report             CEO                        Its Best            Presence                  Drivers              Priorities                 Change                  Supporting Information



Maturity Matrix
BS 8900:2006 GUIDANCE FOR MANAGING SUSTAINABLE DEVELOPMENT

Principles                   Practices                                                                                                             2007     /         2009    /     2011

Inclusivity                  Stakeholder engagement
Integrity                    Key drivers
                             Leadership, vision and governance
                             Managing risk
Stewardship                  Sustainability development culture
                             Building capability
                             Key management issues
                             Environmental assessment
Transparency                 Review
                             Reporting


Societal expectations                                                             1                           2                              3                                4
                                                                         Compliance                                                                                    Best practice

The progressive steps from Compliance to Best practice are defined by sets of initiatives within the Materiality Map of the BS 8900:2006 Guidance
for Managing Sustainable Development, www.bsigroup.com



Maturity Matrix Performance 2007–2011                                                                                   Stakeholder
                                                                                                                        engagement
                                                                                                                                    4
                                                                                                         Reporting                                      Key drivers
          2007
          2008                                                                                                                      3

          2009
                                                                                                                                    2
          2010                                                                                  Review                                                                  Leadership, vision
          2011                                                                                                                      1                                   and governance




                                                                                        Environmental                                                                 Managing risk
                                                                                        assessment



The annual plotting of performance provides senior management                                    Key management                                         Sustainability
with a year-end snapshot of the effectiveness of management action                               issues                                                 development culture
and resource use.                                                                                                    Building capability




Selected Financial Performance
 TURNOVER                                                         FIXED ASSETS GROWTH                                              DEBT SERVICING CAPABILITY
    Other businesses                                                Service concession assets                                            Net debt-to-equity ratio (left scale)
    Property rental and management businesses                       Investment properties                                                Interest cover (right scale)
    Hong Kong station commercial business                           Other property, plant and equipment
    Railway subsidiaries outside Hong Kong
                                                                                                                                   60                                                        20
    Hong Kong transport operations
                                                                                                                                                                                  16.4
                                             2011                                                        2011
                                                                                                                                   45                                                        15
                   2010                      Total                                    2010               Total
                    29.5                     33.4                                     144.1              152.1
                                1.0                                                                                                30                                                        10
                                               3.2                                                         23.9
          0.9                                                                         21.5
                       3.0                     3.4
                       2.9                                                                                 51.5
                                                                                      45.3                                         15                                                         5
                                              12.3
                    10.1
                                                                                                                                                                                  11.9
                                                                                                                                   0                                                          0
                                                                                      77.3                 76.7
                    12.6                      13.5                                                                                      07         08           09           10       11

                                                                  HK$ BILLION                                                      PERCENTAGE (%)                                      TIMES



                                                                                              -38-
financial performance
issue                                                                                               2009       2010       2011

Profit and Loss    Turnover                                                                        18,797     29,518     33,423
account
(hK$ million)      Operating profit before property developments, depreciation,                     9,515     10,917     12,124
                   amortisation and variable annual payment

                   Depreciation and amortisation                                                  (2,992)     (3,120)   (3,206)

                   Profit on property developments                                                  3,554      4,034      4,934

                   Interest and finance charges                                                   (1,504)    (1,237)      (921)

                   Investment property revaluation                                                  2,798      4,074      5,088

                   Profit attributable to equity shareholders                                       9,639     12,059     14,716

                   Dividend proposed and declared                                                 (2,977)    (3,405)    (4,396)

balance sheet      Total assets                                                                   176,494    181,665    197,873
(hK$ million)
                   Loans, other obligations and bank overdrafts                                    23,868     21,057     23,168

                   Deferred income                                                                    167       605        403

                   Total equity attributable to equity shareholders of the company                106,387    117,150    128,859

financial ratios   Operating margin (including railway subsidiaries outside Hong Kong) (%)           50.6       37.0       36.3

                   Operating margin (excluding railway subsidiaries outside Hong Kong) (%)           53.5       54.9       55.2

                   Non-fare revenue as a percentage of turnover (excluding railway subsidiaries      35.2       35.7       36.8
                   outside Hong Kong) (%)

                   Net debt-to-equity ratio (%)                                                      25.8       12.8       11.9

                   Interest cover (times)                                                             7.1       10.5       16.4



Economic Contribution
issue                                                                                               2009       2010       2011

financial           Turnover (HK$ million)                                                         18,797     29,518    33,423
performance
                    Profit attributable to equity shareholders (HK$ million)                        9,639     12,059     14,716

                    Return on average equity attributable to equity shareholders (%)                  9.4       10.8         12

interaction with    Number of staff                                                                20,150    20,501      21,295
hong Kong,
asian and global    Hong Kong transport operations
Economies            • Staff costs and related expenses (HK$ million)                             (3,387)    (3,398)    (3,637)
                     • Energy and utilities (HK$ million)                                          (1,020)   (1,067)     (1,110)
                     • Maintenance and related works (HK$ million)                                   (915)     (912)    (1,048)
                     • Stores and spares consumed (HK$ million)                                     (403)      (421)      (466)
                     • Total number of passengers - excluding intercity (million)                 1,503.7    1,605.2    1,687.5
                     • Share of franchised public transport in Hong Kong (%)                       42.6%      44.3%      45.4%

                    Interest expenses on borrowings (HK$ million)                                  (1,715)   (1,399)     (1,111)

                    Dividends proposed and declared (HK$ million)                                  (2,977)   (3,405)    (4,396)

                    Overseas tax paid (HK$ million)                                                    (3)        (4)     (154)

                    Government subsidy (HK$ million)                                                    0     12,252       638




                                                                        -39-
Scope of     From the              Transport at           Global                  Management               Strategic         Climate             Performance and
the Report   CEO                   Its Best               Presence                Drivers                  Priorities        Change              Supporting Information




              inDEpEnDEnt assUranCE rEpOrt
              What we found
              Based on the work performed and described in this report, nothing has come to our attention to that caused us to believe that
              1) the subject matter is not prepared, in all material respects, in accordance with the reporting criteria and 2) the information
              presented in the Report relating to the subject matter is not consistent with the findings of our work.


              to the board of Directors of mtr Corporation                                     engagement to obtain limited assurance whether any matters
                                                                                               come to our attention that causes us to believe that the
              What we did                                                                      subject matter does not comply in all material respects with
              We have been engaged by the Directors of MTR Corporation                         the reporting criteria. 
              to perform a limited assurance engagement over selected
              data reported in the Sustainability Report 2011 (the “Report”).                  Main procedures performed
                                                                                               The overall objectives of our procedures were to:
              Selected subject matter
              The selected data is the 2011 performance data as set out in                     • Assess whether the subject matter is prepared, in all material
              the tables titled “Performance Against Quantitative Safety                         respects, in accordance with the reporting criteria;
              Targets 2011”, “Greenhouse Gas Emissions Inventory” and
              “Priority Sustainability Business Risks and Performance 2011”                    • Read the Report to assess the consistency of the information
              on pages 20, 34 and 37 of the Report respectively (the “subject                    presented with the findings of our work.
              matter”). Definitions of the subject matter are on page 42.
                                                                                               Our work comprised the following limited procedures:
              reporting criteria
                                                                                               • Interviews with management and personnel in Operations,
              The subject matter are presented in accordance with the
                                                                                                 Property, Projects, China & International Business, Finance,
              Basis of Reporting as set out on page 36 of the Report (the
                                                                                                 Legal & Procurement, Human Resources & Administration
              “reporting criteria”). 
                                                                                                 divisions and Sustainability Development Department
              responsibilities                                                                   involved in providing information for inclusion in the Report
              PricewaterhouseCoopers                                                             in relation to the subject matter;
              It is our responsibility to express a conclusion on the subject
                                                                                               • Examination on a test basis of documentary evidence
              matter based on our work performed and to report our
                                                                                                 relating to the subject matter;
              conclusion solely to you, as a body, in accordance with our
              agreed terms of engagement and for no other purpose. We                          • Assessment of the relevant sections of the Report relating to
              do not assume responsibility towards or accept liability to any                    the subject matter to check for consistency with the findings
              other person for the contents of this report.                                      of our work.
              MTR Corporation
              The Directors are responsible for the preparation and
              presentation of the subject matter in accordance with the
              reporting criteria. This responsibility includes designing,
              implementing and maintaining internal control relevant to
              the preparation and presentation of the subject matter and
              applying an appropriate basis of preparation; and making
              estimates that are reasonable in the circumstances.

              What our work involved                                                           PricewaterhouseCoopers
              We conducted our work in accordance with the International                       Certified Public Accountants
              Standard on Assurance Engagements 3000 “Assurance
              Engagements Other than Audits or Reviews of Historical                           Hong Kong
              Financial Information”. This Standard requires that we comply                    29 June 2012
              with ethical requirements and plan and perform the assurance


              inherent limitations                                   restriction on use                                 limited assurance
              It is important to read the Report and selected        Our report is intended solely for use by the       In a limited assurance engagement the
              data in the context of the Basis of Reporting and      board of Directors of MTR Corporation in           evidence-gathering procedures are more limited
              limitations explained on page 36 of the Report.        connection with the Report and is not suitable     than for a reasonable assurance engagement,
              Social and environmental data is subject to            for any other purpose.                             and therefore less assurance is obtained than
              many more inherent limitations than financial                                                             in a reasonable assurance engagement. The
              data given both their nature and the methods                                                              procedures selected depend on the
              used for data determination, calculation or                                                               independent accountants’ judgment, including
              estimation.                                                                                               the assessment of the risks of material non-
                                                                                                                        compliance of the subject matter with the
              It is also important that, in order to obtain a                                                           reporting criteria.
              thorough understanding of the financial results
              and financial position of MTR Corporation, the
              reader should read the MTR Corporation Annual
              Report for the year ended 31 December 2011.


                                                                              -40-
 ComEt benchmarking results 2010

                             The corporation participates in the Community of Metros                               recognise the improvements made by our industry colleagues.
                             (CoMET) programme that annually collects data from large                              However, we have maintained our ranking amongst the top
                             metro system operators around the world to compare                                    three participants in three out of nine KPIs reported, most
                             performance in a number of common areas. The 2011 (data for                           notably in profitability. 
                             2010) benchmarking exercise included large metro systems
                             from 13 cities: Beijing, Guangzhou, Hong Kong, London,                                In safety, we improved significantly against our previous year’s
                             Mexico City, Madrid, Moscow, New York, Paris, Santiago,                               performance. For this safety ratio, qualifying participants
                             Shanghai, Sao Paulo and Taipei.                                                       are measured on data collected over 10 years of safety
                                                                                                                   performance. Measurement also includes suicides, which
                             The benchmarking process uses 36 Key Performance                                      are not currently included in our internal performance
                             Indicators (KPIs), which measure the performance through six                          measurements. Of the 14 participants included in the 2010
                             categories: growth and learning, customer, internal processes,                        safety ratio’s calculation, we ranked second highest in scoring.
                             safety and security, financial performance and environmental                          No one metro operator scored above 70% in this category.
                             performance. Being conducted over several years, trends can
                             be reliably identified. This helps identify which members are                         Our service costs standing declined in ranking, due to
                             changing their practices and shows what improvements are                              significant improvements by other participating metros. 
                             relatively achievable. Where clear differences or improvements                        However, under the CoMET methodology for measuring
                             in performance have been identified, detailed analysis is                             performance, we improved service costs by 5% for the year. 
                             carried out through case studies.                                                     In the cost per journey category, while we dropped slightly,
                                                                                                                   we improved 1% using their same methodology.
The Community of
                             Participation in the programme is a valuable industry activity. 
Metros (CoMET) is a          We learn and share with colleagues the best practices,                                We also recognise the slight drop in our energy consumption
programme of                 innovation and new technologies that are raising performance                          ranking. Under our internal Energy Steering Committee,
international railway                                                                                              we continuously optimise energy efficiencies within the rail
benchmarking,                bars. Through the many case studies on changes in
comprising a                 performance, we understand how response is structured                                 network and internally monitor our electricity consumption.
consortium of 14 metro       and how different metro operators work towards optimal                                 MTR’s electricity efficiency ratio has steadily improved over
systems from 13 cities
                             performance.                                                                          time, reaching only incremental improvements in the last
worldwide. Results
of the annual                                                                                                      few years. The graph on page 35 shows the year-on-year
benchmarking exercise        Analysing our results for 2010, we see a number of learning                           improvement performance.
are released in the
fourth quarter of the
                             areas to explore. Performance overall dropped slightly. In the
following year.              areas of decline or no change, we remain competitive and


    The results measured in the charts below are calculated based on MTR’s performance against best performance.
    The best performer within a particular category corresponds to a 100% achievement.

    PROFITABILITY                                                    COST PER JOURNEY                                           SERVICE COSTS
    Total commercial revenue                        2010             Operating costs per passenger journeys        2010         Operating costs per car km (US$ PPP)    2010
    per operating cost                                               (US$ PPP)
                                                   100%                                                            66.5%                                                62.9%
             95.2     100      100      100                                   89.8     71.9     73.6     71.8                           44.7    48.6    64.3     78.2

    80                                                               80                                                         80

    60                                                               60                                                         60

    40                                                               40                                                         40

    20                                                               20                                                         20

              06       07       08       09                                    06       07       08       09                             06      07      08       09



    SAFETY RATIO                                                     TROUBLE-FREE JOURNEY                                       CUSTOMER SERVICE
    Fatality per billion passenger journeys         2010             % Trains trips on time                        2010         % Passenger journeys on time            2010
                                                   64.9%                                                           99.9%                                                99.9%
             100      100      100      47.1                                  99.8     100      99.9     99.8                           99.9    99.9     100     99.9

    80                                                               80                                                         80

    60                                                               60                                                         60

    40                                                               40                                                         40

    20                                                               20                                                         20

              06       07       08       09                                    06       07       08       09                             06      07      08       09


    ASSET UTILISATION                                                STAFF EFFICIENCY                                           ENERGY CONSUMPTION
    Capacity km per route km                        2010             Car km per total labour hours                 2010         Total energy consumed per               2010
                                                   95.3%                                                           82.5%        passenger km                            55.2%
             97.7     98.1     100      94.4                                  62.1     65.9     60.4     78.2                            53.6    54.4  47.7      59.4

    80                                                               80                                                         80

    60                                                               60                                                         60

    40                                                               40                                                         40

    20                                                               20                                                         20

              06       07       08       09                                    06       07       08       09                             06      07      08       09



                                                                                                 -41-
 Scope of           From the       Transport at         Global                Management              Strategic          Climate            Performance and
 the Report         CEO            Its Best             Presence              Drivers                 Priorities         Change             Supporting Information



Definitions
China and international business      China and International Business includes the China and International Business Division in Hong Kong and our
                                      wholly or majority owned subsidiaries operating Shenzhen Line 4, Stockholm Metro and Melbourne Metro, as well
                                      as our minority owned affiliates operating London Overground, Beijing Metro Line 4 and Daxing Line.

Contractor staff reportable           Work-related injuries of contractor staff that resulted in more than three days’ sick leave.
accidents

Corporate support functions           Corporate Support Functions include the Finance Division, Human Resources and Administration Division, Legal
                                      and Procurement Division, Commercial and Marketing Division, Corporate Relationships Department and Internal
                                      Audit Department.

legal Environmental                   The number of successful environmental prosecutions in Hong Kong incurred by all contractors directly appointed
Compliance (Contractors)              by the corporation for the reporting year.

passenger fatality                    Number of passenger fatalities that have occurred in the MTR network in Hong Kong. Figure excludes suicides,
                                      attempted suicides, brawls between passengers and injuries due to passengers’ own medical conditions.

passenger injuries requiring          Injuries that require admission to hospital for observation or treatment immediately after an accident. Figure
hospitalisation                       excludes suicides, attempted suicides, brawls between passengers and injuries due to passengers’ 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. [Kwun Tong Line (KTL), Tsuen Wan Line (TWL), Island Line (ISL), Tseung Kwan O Line
                                      (TKL), Tung Chung Line (TCL), Disneyland Resort Line (DRL)], Airport Express (AEL), East Rail Line (ERL) and West Rail
                                      Line (WRL) passenger journeys on time calculated separately using same formula.

passenger trips                       Fare-paying passengers entering the railway network and boarding the bus. A passenger transiting between
                                      Tsim Sha Tsui station and Tsim Sha Tsui East station within 30 minutes using the same Octopus card is treated as
                                      an interchanging passenger whereby these two separate entries to the railway network are counted as one fare-
                                      paying passenger. The number of annual average passenger trips per weekday is reported.

property Development and              Property development and investment projects include the foundation, building, alteration and addition works for
investment projects                   the property developments at Austin, Che Kung Temple, Hang Hau, LOHAS Park, Tai Wai, Tseung Kwan O, Tsing Yi,
                                      Tsuen Wan West and Tuen Mun station, and Western Harbour.

railway Extension projects            Railway extension projects include all civil and electrical and mechanical works for Kwun Tong Line Extension,
                                      Shatin to Central Link, South Island Line (East), West Island Line and Express Rail Link (Hong Kong Section).

staff lost time injuries              Any work-related injuries of staff that resulted in one or more days’ sick leave being granted.

staff turnover rate                   Sum of 12-monthly turnovers calculated as number of voluntary staff resignations/total staff strength by month-
                                      end. Figure excludes temporary and casual staff, staff of UK Rugby Office and MTR Corporation subsidiaries, as well
                                      as staff leaving under the voluntary separation scheme.

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 (KTL, TWL, ISL, TKL, TCL & DRL), 3 for ERL
                                      and WRL, and 5 for AEL and Light Rail. Calculated monthly over operating period and then calculating the mean
                                      thereof. Punctuality of different train systems 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. (KTL, TWL, ISL, TKL, TCL & DRL & AEL) and (ERL and WRL) train
                                      reliabilities calculated separately using same formula.

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. (KTL, TWL, ISL, TKL, TCL,
                                      DRL & AEL), ERL, WRL and Light Rail train service delivery calculated separately using the same formula.

train trip                            Journeys 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.

Vacant posts filled internally        Number of job vacancies filled by internal candidates through job promotion or cross-departmental/sectional
                                      transfer. Figures exclude temporary and casual staff, staff of UK Rugby Office and MTR Corporation subsidiaries.

Waste Disposed to Landfill            Waste generated from railway extension projects, excluding waste from railway operations, property development
                                      projects and managed properties owned by the corporation.




                                                                          -42-
Project Management and Editorial: Streeter Strategic Ltd • Design: CoDesign Ltd • Photography: Leong Ka Tai • Photos page 2, 24, 27 (train): MTR Corporation

								
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