Synergistic Integration of ESG Across Life Essentials: A Comparative Study of Clothing, Energy, and Transportation Industries Using CEPAR^® Methodology

Abstract

This study conducts a comparative assessment of the environmental, social, and governance (ESG) integration strategies of three leading companies in Hong Kong—H&M Group, China Gas Company Limited (Towngas), and MTR Corporation Limited (MTR)—each operating in distinct sectors with unique sustainability challenges and opportunities. The analysis adopts the Challenge–Evaluation–Planning–Action–Review (CEPAR^®) framework developed by the International Chamber of Sustainable Development to examine how these companies identify and evaluate ESG-related risks, formulate action plans, implement sustainability initiatives, and refine their strategies. The findings reveal H&M’s strong emphasis on sustainable fashion, with a target of using 100% sustainable materials by 2030 and reducing greenhouse gas emissions by 56%. Towngas faces the complex challenge of transitioning from fossil fuels to cleaner energy and is investing in zero-carbon technologies to meet regulatory standards and stakeholder expectations. MTR focuses on sustainable urban development and efficient mass transit, prioritizing community engagement and reducing environmental impact. This study underscores the importance of sector-specific ESG approaches tailored to a company’s operational context. It also demonstrates how ESG integration is enhanced by proactive planning, transparent reporting, and alignment with long-term corporate values. By showcasing both successful practices and areas requiring further attention, this research contributes to the broader discourse on sustainable business practices in Hong Kong. Moreover, it provides actionable policy implications for government agencies and regulatory bodies. The insights gained can inform strategic decision-making across sectors and support the development of a more sustainable, resilient, and inclusive economy aligned with Hong Kong’s long-term climate and governance goals.

1. Introduction

The concept of environmental, social, and governance (ESG) was first introduced in the landmark study in 2004 called “Who Cares Wins: Connecting Financial Markets to a Changing World” [1]. Since then, the concept has transitioned from a niche concern to a central element of corporate strategies. The signing of the Paris Climate Agreement and the establishment of the United Nations Sustainable Development Goals (SDGs) in 2015 have further contributed to the evolution of ESG criteria, thus providing businesses with a global framework for sustainable development [2]. In recent years, ESG considerations have become increasingly vital in corporate strategies and investment decisions. As awareness of sustainability issues increases worldwide, companies in various sectors are recognizing the need to integrate ESG factors into their business models. This shift is influenced by multiple factors, including regulatory pressure, increased investor expectations, and changing consumer demands. Moreover, businesses are about to understand that sustainable practices not only mitigate risks but also enhance long-term resilience and value creation.

The significance of ESG is widely acknowledged, and its incorporation into corporate strategies is essential in meeting the ever-increasing stakeholder demands for sustainability. ESG considerations have therefore ascended to the forefront of corporate priorities. Yet, many companies still face substantial challenges in effectively integrating ESG into their operations and decision-making processes. The complexity of ESG issues, together with the different contexts and specific challenges of different industries, underscores the need for a structured approach to ESG integration.

Evaluating ESG integration and its performance across the clothing, energy, food, and transportation sectors is essential for several reasons. First, these industries have a profound impact on environmental sustainability, social equity, and economic resilience. Hence, their responsible practices become crucial for mitigating climate change and promoting sustainable development. The clothing sector, for instance, is notorious for its resource-intensive processes and generation of waste, while the energy sector significantly contributes to greenhouse gas emissions (GGEs). Additionally, the food and transportation industries are vital for public health and quality of life. It is because the industries influence everything from air quality to access to essential services. By evaluating ESG performance, stakeholders—including consumers, investors, and policymakers—can identify best practices, promote accountability, and drive improvements that align with global sustainability goals. Ultimately, robust evaluations of ESG allow for transparency and encourage companies to adopt responsible practices that benefit society and the planet, thus ensuring a more sustainable future for all.

ESG considerations involve a wide range of non-financial performance indicators, such as the environmental impact of a company, management of its employees and communities, and the effectiveness of its governance structures [3]. However, current ESG reporting methods have been criticized for the lack of effective tools and standardized approaches that stakeholders or professionals can adopt and evaluate any underlying ESG-related issues [4]. This paper utilizes the Challenge–Evaluation–Planning–Action–Review (CEPAR^®) methodology, developed by the International Chamber of Sustainable Development (ICSD) [5]. The CEPAR^® methodology provides a systematic framework for organizations to strategically integrate ESG principles into their operations. The paper is intended to examine the ESG integration strategies of three prominent companies: the H&M Group, Hong Kong and China Gas Company Limited (Towngas), and MTR Corporation Limited (MTR). These companies are particularly relevant because they each show varying degrees of success and challenges in their ESG initiatives. They exemplify the key sectors within the four essential and fundamental needs: clothing, energy (as a component of food and everyday life), and transportation.

The H&M Group represents the clothing sector. Their fast-fashion model has raised significant concerns around their environmental sustainability practices and social responsibility. While H&M has implemented various initiatives that promote sustainable practices, the company also grapples with the challenges inherent in the fast-fashion industry, such as excessive waste, environmental degradation, and resource consumption. An analysis of H&M would provide insights into how a major player in the apparel sector navigates the complexities of ESG integration. Towngas operates within the energy sector and is an important provider of gas for cooking in Hong Kong and overall gas-related services. As a major utility provider in Hong Kong, Towngas faces significant challenges related to GGEs and the pressure to transition to cleaner energy sources. Despite efforts to improve sustainability, the company still faces substantial hurdles in aligning its operations with evolving environmental standards. This analysis of Towngas highlights the critical role that energy plays in supporting the overall quality of living. It provides insights into the difficulties that traditional energy companies face in transitioning to more sustainable practices to meet regulatory and consumer expectations. Finally, the MTR represents the transportation sector as a key player in public transit in Hong Kong. The commitment of the MTR to sustainable mobility and community engagement positions the MTR as a front-runner in promoting eco-friendly transportation solutions. However, the company also faces challenges related to environmental impacts and social inclusivity. Examining the MTR shows how transportation systems can effectively contribute to urban sustainability while addressing the needs of diverse communities. Adopting the CEPAR^® methodology, organizations can contribute to the achievement of the United Nations SDGs and realize long-term sustainability. The emphasis of the model on stakeholder engagement, data-driven decision-making, and continuous improvement aligns with the growing demand for transparent and accountable sustainability practices, especially as the global investment landscape continues to shift towards ESG-focused strategies [6,7].

Focusing on H&M, Towngas, and the MTR within these four fundamental human needs, this paper reveals the nuances of ESG performance across these critical industries and performs a comprehensive analysis of their ESG integration strategies. Each company has a unique perspective on its successes and challenges toward improving sustainability within its respective sector. This comparative study also reveals best practices and areas for improvement applicable not only to the companies under study but also to the government and policymakers who are dedicated to advancing sustainable development.

2. Theoretical Framework

2.1. Evolution of ESG

The concept of ESG is rooted in the broader field of corporate social responsibility (CSR) and sustainable business practices. However, ESG represents a more structured and quantifiable approach to sustainability by focusing on specific ESG factors that can be measured and integrated into investment decisions and corporate strategies.

The environmental aspect of ESG encompasses issues such as climate change, resource depletion, waste, pollution, and deforestation. The social aspect includes labor practices, product safety, data protection, diversity and inclusion, and community relations. On the other hand, the governance aspect covers areas such as corporate board composition, executive compensation, audit committee structure, and bribery and corruption policies.

Recent literature has highlighted the integral role of carbon emissions mitigation within ESG strategies, especially as organizations seek to align with net-zero targets. Tripathy [8], using panel data from emerging economies, found that strong ESG performance is statistically associated with reduced CO₂ emissions—particularly in sectors with high environmental impact. The findings support the claim that ESG integration not only aligns with regulatory and reputational objectives but also contributes directly to decarbonization pathways. In the Chinese context, Li et al. [9] further emphasize that ESG-driven practices significantly lower carbon emission intensity (CEI) but caution that factors such as climate policy uncertainty and disparities in digital capacity can moderate these outcomes. These empirical insights reinforce the relevance of carbon accountability within ESG and support our selection of carbon reduction as a shared material focus across the clothing, energy, and transportation sectors.

The fashion and textiles industry has increasingly embraced ESG integration strategies to address sustainability challenges, comply with regulatory requirements, and meet growing consumer demand for ethical practices. Environmental strategies have focused on the adoption of sustainable materials, such as recycled polyester, organic cotton, and plant-based leather alternatives, alongside innovations in circular fashion, including rental, resale, repair services, waterless dyeing, and zero-waste production techniques [10,11]. Social initiatives have emphasized fair labor practices, diversity and inclusion, and community engagement, with brands auditing supply chains for ethical labor conditions and investing in local communities [12,13]. Further, governance efforts have prioritized transparency and accountability, with companies adopting frameworks like the Global Reporting Initiative (GRI) and leveraging blockchain technology for supply chain traceability [14,15]. Consumer engagement has also evolved, with eco-labeling, education campaigns, and collaborations with NGOs, which put their ESG efforts into the spotlight [16]. Despite these advancements, challenges exist, such as greenwashing and the high costs of scaling sustainable practices, which require continued innovation and collaborations [10,17]. Leading examples include the commitment of Kering to reduce its environmental impact by cutting its CO₂ emissions by 40% by 2025, the pioneering use of vegan materials at Stella McCartney, and the “Move to Zero” campaign of Nike, which targets carbon neutrality [18,19,20]. Overall, the integration of ESG by the industry reflects a transformative shift toward sustainability, even though further efforts are necessary to address systemic challenges and achieve sustained effects.

2.2. CEPAR^® Methodology

The CEPAR^® methodology builds on several established frameworks in risk management and project planning. The method draws inspiration from the Ethical Decision-Making Framework of the CFA Institute, the six-step financial planning process of the Financial Planning Standard Board, and the four-step risk management process [21].

The CEPAR^® model consists of five key phases:

• Challenge: identifying and defining ESG-related issues and opportunities.
• Evaluation: evaluating the materiality and impact of identified challenges.
• Planning: developing strategies and action plans to address ESG issues.
• Action: implementing planned strategies and monitoring progress.
• Review: reflecting on outcomes and identifying areas for improvement.

This framework provides a structured approach to analyzing how companies integrate ESG considerations into their business practices and decision-making processes. The framework aligns with the principles of continuous improvement and iterative problem-solving, thus recognizing that ESG integration is an ongoing process rather than a one-time initiative. In the context of this paper, for the clothing industry, CEPAR^® guides the adoption of sustainable materials, circular fashion initiatives, and transparent supply chain practices to mitigate the fast-fashion industry’s environmental and social risks while aligning with UN SDGs. The energy industry could leverage CEPAR^® to navigate energy sector challenges, prioritizing carbon reduction through hydrogen innovation and renewable integration, balancing regulatory compliance with customer demands. Finally, the transportation sectors could apply CEPAR^® to enhance urban mobility sustainability, optimizing rail energy efficiency, and fostering inclusive infrastructure development.

The CEPAR^® methodology enables businesses to mitigate risks, capitalize on opportunities (e.g., green financing and consumer loyalty), and advance systemic sustainability transitions. Its adaptability positions CEPAR^® as a valuable tool for sector-specific innovations and cross-industry benchmarking, accelerating progress toward a resilient, low-carbon future. While the CEPAR^® methodology provides a structured and iterative approach to ESG integration—emphasizing stakeholder engagement, phased decision-making, and continuous review—it is not the only analytical tool available. Recent studies in the ESG literature have employed diverse frameworks to assess corporate sustainability challenges. For instance, regression-based econometric models are used to examine the statistical relationship between ESG variables and firm performance or risk exposure, such as in the work of Peliu [22], who analyzed the influence of governance and CEO profiles on liquidity risk. Multi-criteria decision-making (MCDM) methods like the Analytic Hierarchy Process (AHP) and TOPSIS have also been applied to prioritize ESG issues based on stakeholder preferences and impact severity. Additionally, disclosure analysis techniques—such as content analysis of sustainability reports and ESG scoring based on the OECD guidelines [23]—are widely adopted to evaluate transparency, reporting quality, and ESG policy implementation. These approaches provide quantitative benchmarking, complementing the strategic, sector-adaptable lens offered by CEPAR^®. We adopt CEPAR^® here not as an exclusive tool but because its practical orientation aligns with the operational realities of the case companies and supports structured, action-oriented reflection across divergent sectors.

While the CEPAR^® methodology provides a structured and actionable path for ESG integration, its implementation may present limitations, particularly for smaller firms. The model’s five-phase structure assumes a relatively high degree of organizational readiness, demanding dedicated ESG capacity, stakeholder engagement, data systems, and cross-functional coordination. As Wong, Hui, and Yip [5] acknowledge, while CEPAR^® is sector-adaptable, it may be most practical for companies with established sustainability teams and reporting infrastructure. Reimsbach et al. [24] further point out that ESG frameworks often overestimate firms’ internal ability to navigate complex stakeholder expectations and reporting norms, especially where institutional maturity is low. Moreover, Eccles and Stroehle [3] argue that structured ESG tools can become overly compliance-driven if not adequately scaled to company size and sectoral reality. In light of these considerations, future adaptations of the CEPAR^® model may benefit from developing tiered or modular versions tailored to SMEs and firms in early ESG adoption stages.

Figure 1 presents a visual representation of the CEPAR^® methodology, a structured framework for ESG integration developed by the International Chamber of Sustainable Development. The model is organized into four iterative steps—Challenge, Evaluation, Planning and Action, and Review—each guiding organizations through a systematic process of identifying ESG-related issues, assessing their materiality, formulating adaptive strategies, and evaluating outcomes. The figure emphasizes the ethical dimension of decision-making and the importance of flexibility in planning, ensuring that ESG actions remain responsive to evolving stakeholder expectations and regulatory landscapes. This visual serves as a practical roadmap for applying the CEPAR^® approach across diverse corporate contexts.

2.3. Theoretical Underpinnings

The CEPAR^® methodology is grounded in several theoretical perspectives: the stakeholder theory, resource-based view (RBV), institutional theory, and systems thinking.

The stakeholder theory was developed by Freeman [25], who posited that companies should create value for all of their stakeholders and not just the shareholders. The CEPAR^® methodology incorporates this perspective by encouraging companies to consider the impacts of their actions on a wide range of stakeholders throughout the ESG integration process.

The RBV of a firm [26] allows companies to gain a competitive advantage through unique resources and capabilities. In the context of ESG, effective integration of sustainability practices can be viewed as a valuable organizational capability.

The institutional theory is used to explain how organizations respond to institutional pressure, including that related to ESG [27]. The CEPAR^® methodology recognizes the role of institutional factors in shaping ESG challenges and responses.

Finally, the systems thinking principles are aligned with the CEPAR^® approach, which recognizes the interconnected nature of ESG issues and the need for holistic solutions [28].

Figure 2 illustrates the conceptual framework that underpins this study’s analytical flow. It begins by situating this research within the context of global ESG drivers and foundational ESG dimensions, followed by the identification of sector-specific ESG challenges and their carbon emission implications. These elements collectively inform the central research question guiding this study. The framework then positions the CEPAR^® methodology as the lens through which comparative ESG integration is examined across the fashion, energy, and transportation sectors. The sequence concludes with a synthesis of findings and implications for policymaking, stakeholder engagement, and future ESG research. This figure not only provides a visual roadmap for this paper but also reinforces the theoretical coherence between global trends, methodological design, and practical insights.

3. Methodology

3.1. Research Design

This study employs a comparative case study approach by applying the CEPAR^® methodology to examine the integration of ESG in H&M Group, Towngas, and the MTR. The case study method is particularly suitable for this research work, as it allows for an in-depth examination of ESG integration within the specific context of each company [29].

3.2. Data Collection

Data were collected from a variety of different sources to ensure a comprehensive understanding of the ESG approach of each company. These sources include

• Company reports, including sustainability, annual, and other publicly available corporate documents;
• Corporate websites, including information from official company websites, press releases, and policy statements;
• Third-party ESG ratings based on reports from ESG rating agencies to provide an external perspective on the ESG performance of the companies under study;
• News articles and industry reports, media coverage, and industry analyses to provide context and identify any controversies or notable ESG-related events.

3.3. Data Analysis

The collected data were analyzed with the CEPAR^® framework. Each company was systematically examined in the following areas:

• The ESG challenges that the company faced (Challenge phase);
• Evaluation and prioritization of the ESG challenges (Evaluation phase);
• Formulation and planning of strategies to address ESG issues (Planning phase);
• Implementation and action plans to address ESG issues (Action phase);
• Review and adjustment of the ESG approach (Review phase).

This structured analysis allows for a systematic comparison across the three companies, thus highlighting similarities and differences in their approaches to ESG integration.

To enhance the empirical significance of the findings and reinforce the credibility of our comparative assessment, we have incorporated stakeholder impact maps and the quantitative ESG performance indicators of the respective industry (

Table 1. Stakeholder impact map and preferences of major stakeholders for greenhouse gas emission reduction strategy in clothing industry.

Material Issue	Nature	Shareholders	Customers	Govt/NGO	Local Businesses	Local Community
Short-term goals	Reduce greenhouse gas emissions (climate impact)	Invest in renewable energy/low -carbon technology (financial)	Reduce greenhouse gas emissions (financial)	Reduce carbon emission (climate impact)	Renewable technology that would lower costs (financial)	Cleaner environment, fewer negative climate issues (climate/environmental impact)
Long-term goals	Eliminate carbon intensity (net-zero emission) technology (financial)	Invest in renewable energy/zero-carbon	Eliminate carbon intensity (net-zero emission)	Support H&M to achieve carbon neutrality by 2045 (net-zero emission)	Successful business (financial)	Investing in large-scale wind farm to enable the transformation of renewable energy market (climate/environmental impact and financial)
Positive impact	Meet carbon neutrality by 2045 (climate/environmental impact)	Enhance ESG performances of H&M (both climate/environmental impact and financial)	Enhance ESG performance (climate/environmental impact and financial)	Government devises policy to support companies to meet carbon neutrality by 2045 (financial)	Attract more customers who care about sustainability (financial)	Provides more job opportunities and economic growth: Investing in renewable energy/low-carbon technologies can stimulate local economic growth and create more new job opportunities (financial).
Negative impact	Carbon reduction technology may increase environmental burden, e.g., solar panel disposal, raw material depletion, wildlife interactions, land use, and habitat disruption, etc. (environmental impact)	Technological obsolescence: technology may become outdated or replaced in the future (financial)	Renewable energy /Greenhouse gas emission reduction technology imposes cost to customers (financial)	Enforce policy for companies to invest more to eliminate greenhouse gas emission, when companies may be struggling financially to completely eliminate their reliance on traditional energy/fuel use (environmental impact and financial)	Technological/ renewable energy innovation and competition: may result in pricing pressure, market share reduction, and need for companies to continuously innovate to stay ahead (financial)	Large-scale renewable energy projects may lead to opposition from local community due to concerns over land use (social)

and

Table 2. Quantitative ESG performance indicators of fashion/textiles sector (e.g., H&M Group).

Indicator	Value/Target	Source/Benchmark
% of sustainable or recycled materials	85% in 2023; target: 100% by 2030	H&M Sustainability Report 2024
GHG emissions reduction (Scopes 1–3)	22% reduction since 2019; target: 56% by 2030	H&M Climate Transition Plan 2024
Renewable energy use in operations	95% in 2023; target: 100% by 2030	H&M Group Annual Report 2024
Water consumption reduction	14% reduction from 2022 baseline	H&M Sustainability Metrics 2024
Circular fashion participation (garment collection)	20,000 tons collected globally in 2023	Ellen MacArthur Foundation Circularity Report

for fashion industry;

Table 3. Stakeholder impact map and preferences of major stakeholders on carbon reduction and strategy for enhancing energy efficiency.

Material Issue	Nature	Shareholders	Customers	Govt/NGO	Local Businesses	Local Community
Short-term goals	Reduce carbon intensity (environmental impact)	Invest in low-carbon technology (financial)	Reduce carbon intensity and more energy efficient (financial)	Reduce carbon intensity (environmental impact)	More energy-efficient technology to lower cost (financial)	Better environment, fewer adverse climate issues (environmental impact)
Long-term goals	Eliminate carbon intensity (net-zero emission)	Invest in zero-carbon technology (financial)	Eliminate carbon intensity (net-zero emission)	Support the company to reach carbon neutrality by 2050 (net-zero emission)	Successful business (financial)	Energy independence: enhanced by reducing reliance on fossil fuel imports, such as investing in large-scale solar panels to produce hydrogen (environmental impact and financial)
Positive impact	Meet carbon neutrality by 2050 (environmental impact)	Enhance ESG performances of companies (both environmental impact and financial)	Enhance ESG performances of themselves (both environmental impact and financial)	Govt may devise policy to help companies meet carbon neutrality by 2050 (financial)	Attract more customers (financial)	Job creation and economic growth: Investing in low-carbon technologies often stimulates local economic growth and creates new job opportunities (financial).
Negative impact	Carbon reduction technology may increase environmental burden, such as raw material depletion, solar panel disposal, wildlife interaction, land use, and habitat disruption, etc. (environmental impact)	Technological obsolescence: technology may become outdated or be replaced in the future (financial)	Carbon reduction technology may impose costs on customers (financial)	Force companies to invest more to eliminate carbon, while the companies may struggle financially to completely eliminate reliance on fossil fuels (environmental impact and financial).	Technological competition leads to pricing pressure, reduced market share, or the need for continuous innovations to stay ahead (financial).	Large-scale renewable energy projects may face opposition from local communities due to concerns over land use (social).

and

Table 4. Quantitative ESG performance indicators of energy sector (e.g., Towngas).

Indicator	Value/Target	Source/Benchmark
Scope 1 emissions (customer combustion)	1.49 million tonnes CO2 (2023)	Towngas Annual Report 2024
Scope 1 emissions (production)	0.34 million tonnes CO2 (2023)	Towngas Sustainability Report
Hydrogen content in gas mix	~50% H2 in distributed gas	Towngas Technical Disclosure
Renewable energy integration (pilot)	Solar-powered hydrogen refueling stations	EcoCeres/Towngas Pilot Projects
Biofuel production (via EcoCeres)	100,000+ tonnes of HVO/SAF annually	EcoCeres ESG Disclosure 2024

for energy industry; and

Table 5. Stakeholder impact map and preferences of major stakeholders on carbon reduction and strategy for enhancing energy efficiency in transportation industry.

Stakeholder	Customers	Employees	Investors	Regulators	Suppliers	Community	Nature
Short-term goals	Reliable and efficient transportation services	Job security	Profitability	Compliance with regulations	Timely payments	Noise reduction	Biodiversity conservation
Comfortable and safe travel	Safe work conditions	Dividends	Safety standards	Fair procurement practices	Community engagement	Carbon reduction
Long-term goals	Sustainable and resilient transport infrastructure	Career growth and development	Sustainable financial performance	Environmental stewardship	Long-term partnerships	Sustainable urban development	Ecological balance
Reduced environmental impact	Work–life balance	Long-term value creation	Community engagement	Sustainable supply chain	Reduced pollution	Climate resilience
How company contributes to goals	MTR invests in energy-efficient trains and stations	MTR promotes employee well-being and safety	MTR’s commitment to ESG principles enhances investor confidence	MTR adheres to safety and environmental regulations	MTR supports local suppliers	MTR invests in noise barriers and green spaces.	MTR invests in green infrastructure
Provides reliable and timely services	Offers training and advancement opportunities	Strategic investments in sustainable projects	Participates in community consultations	Encourages ecofriendly sourcing	Participates in community events	Reduces carbon emissions through energy-efficient operations
How company negatively impacts goals	Service disruptions due to maintenance or system failures	High-stress work environment	Financial losses due to operational inefficiencies	Regulatory fines for non-compliance	Unfair procurement practices affecting supplier viability	Construction disruptions affecting residents	Land use changes affecting natural habitats
Overcrowding during peak hours	Labor disputes affecting operations	Negative impact on reputation affecting stock value	Legal disputes affecting reputation	Supply chain disruptions	Environmental impact during expansion projects	Energy consumption during operations

and

Table 6. Quantitative ESG performance indicators of transportation sector (e.g., MTR Corporation).

Indicator	Value/Target	Source/Benchmark
GHG emissions per passenger-km	28.5 g CO2/passenger-km (2023)	MTR Sustainability Report 2024
Renewable electricity usage	42% of total electricity (2023); target: 60% by 2030	MTR Climate Strategy 2024
Energy efficiency improvement	12% reduction in energy use per train-km since 2018	MTR Energy Audit 2024
Accessibility compliance (stations)	100% of stations barrier-free	MTR Annual Report 2024
ESG risk rating (Sustainalytics)	19.8 (Low Risk)	Sustainalytics ESG Risk Ratings 2024

for transportation industry). These visual tools synthesize complex ESG performance data—such as greenhouse gas emission targets, renewable energy commitments, and stakeholder preferences—thus supporting clearer interpretation of each company’s ESG strategies. Following the growing emphasis on data-driven sustainability research [23,30], we adopted a mixed-methods approach by integrating qualitative content analysis with quantitative visual indicators. These additions align with recent literature, which underscores the importance of graphical representations in enhancing ESG transparency, benchmarking corporate progress, and facilitating stakeholder engagement [31,32]. By presenting these data-driven insights through visual means, we aim to improve the accessibility and analytical depth of our findings while preserving the integrity of the CEPAR^® methodology.

To complement the qualitative insights derived from the CEPAR^® methodology, the quantitative ESG performance indicators across the fashion, energy, and transportation sectors (Table 2, Table 4 and Table 6) include metrics such as greenhouse gas (GHG) emissions reduction targets, renewable energy adoption rates, and material sourcing benchmarks. By drawing on third-party ESG databases, company sustainability reports, and international performance standards, these indicators provide empirical anchors that support and contextualize our comparative analysis. Table 2, Table 4 and Table 6 in Section 4, Section 5 and Section 6 present these KPIs alongside each case study to help visualize sector-specific ESG performance and reinforce the validity of our findings.

To further strengthen the empirical rigor and comparability of our analysis, we have also included quantitative ESG metrics such as CO₂ emissions per functional unit, renewable energy usage rates, and third-party ESG risk ratings. These indicators are presented in Table 2, Table 4 and Table 6, aligned with the clothing, energy, and transportation sectors, respectively. For example, we report H&M’s Scope 1–3 emissions reduction target (56% by 2030), Towngas’s Scope 1 customer-side emissions (1.49 million tonnes CO₂ in 2023), and MTR’s low-risk ESG rating of 19.8 from Sustainalytics. These additions are informed by company sustainability reports and internationally recognized ESG databases (e.g., Sustainalytics [33], MSCI [34], and Moody [35]). We also drew on recent guidance from Moody’s ESG Score Predictor and the OECD to ensure a consistent benchmarking framework. By integrating these metrics, this study bridges the gap between qualitative assessment and quantitative benchmarking, enabling a more robust and comparative cross-sector ESG evaluation.

3.4. Limitations

It is important to note the limitations of this study. The analysis is primarily based on publicly available information. This research may not capture all aspects of the internal ESG processes. More importantly, this study focuses on three specific companies only. The researchers are not in a position to define the ESG aspects of other businesses and sectors. And as such, the findings may not be generalizable to the population at large.

4. Case Study: H&M Group

4.1. Company Overview

H&M Group is a Swedish multinational clothing company known for its fast-fashion clothing for men, women, youth, and children. Founded in 1947, H&M has grown to become one of the world’s largest fashion retailers, with operations in 79 markets and over 4000 stores in 2024. Their business model is based on offering fashion and quality at the best price in a sustainable manner.

H&M has been actively integrating ESG strategies into its operations, which positions the company as a leader in sustainable fashion. The company has made significant strides in environmental sustainability. H&M is committed to using 100% recycled or sustainably sourced materials by 2030. In 2024, they were using 89% [36] such materials in their products, including organic cotton, recycled polyester, and Tencel [36]. H&M has also embraced circular fashion through initiatives like garment collection programs, whereby customers can return used garments for recycling, and invested in textile recycling technologies to create closed-loop systems [37]. Furthermore, the company aims to achieve net-zero emissions by 2040, having reduced its carbon footprint by 22% since 2019. H&M is transitioning to renewable energy across its operations and supply chain [36]. Their use of lower-energy processes can significantly reduce energy consumption. Changing processes can also drive energy efficiency, for example, adopting dope dyeing or using waterless dyeing. To achieve net-zero, targets are set to reduce the absolute Scope 1, 2, and 3 emissions by 56% by 2030, and 90% by 2040, against a 2019 baseline [38].

Child workers are found in almost every industry, which has resulted in a number of denotations of child labor [39]. In particular, the troubling issue of child labor is a socio-economic reality in Bangladesh. This issue is immense and cannot be ignored. To eradicate this problem, child-centered educative sensitivity and awareness are essential at the political, community, and family levels [40]. In their exploratory study, Lau and Chan [41] pointed out the increasing problem of insufficient wages for the hard work of children in Asia. The observations were made after discussing the issue with educators and fashion industry experts. They suggested that companies need to understand their role in corporate social responsibility. The fashion industry has a history of discrimination, unfairness, and social injustice that range from the cotton plantations of the slave trade to the lack of opportunities that current female graduates face in the industry [42]. To this and on the social front, H&M has prioritized fair labor practices through its Fair Living Wage Strategy and conducted regular audits and collaborated with suppliers to ensure safe work conditions and fair wages [12]. H&M has also promoted diversity and inclusion within its workforce and marketing campaigns by setting targets to increase gender diversity in leadership roles and ensure equal pay [43].

Inclusivity is the practice of providing equal opportunities and representation for people of different identities. Diversity practices are important because they respect differences in race, ethnicity, gender, sexual orientation, etc. [44]. Diversity and inclusivity in fashion are not merely about size and fit. They also include physical ability, gender, and age. Fashion has neglected the disabled and elderly, who have minimal representation in commercial campaigns and fashion shows. Dreska [45] concluded that implementing diversity, equality, and inclusion (DEI) has an overall positive impact on brand image and the financial performance of fashion apparel companies. In a study on the state of DEI in fashion, three case studies (Victoria’s Secret, Nike, and H&M) show a shock in stock prices after press releases on either DEI implementation or negative publicity [45]. H&M, like Nike, saw a shock to both its trading and stock prices resultant of claims of racism around an image used for their jumper in 2018. Dreska [45] noted that in January of 2018, H&M landed in controversy when customers spotted a young black male model on the British H&M site wearing a sweatshirt with the phrase “coolest monkey in the jungle”. This occurred on the weekend leading up to January 8th, and by Monday, news outlets began releasing articles about the racial controversy along with an apology from H&M. Trading volume increased by 13.4 million shares since the previous close, and the stock price fell by 2.6%.

Furthermore, current perceptions of DEI in the fashion industry were surveyed with over 1000 industrial employees by McKinsey & Company. The research has demonstrated that the majority of the respondents (78%) believe that their company values the diversity that people bring to the workplace [46].

Community engagement is defined as the inclusion of community members in solving complex issues. It is a powerful means of promoting equitable decision-making among community members and stakeholders. Research has shown that consumers have an overall positive attitude towards products that claim to be sustainable. By applying key community engagement principles, the fashion industry can continue to undergo systemic, powerful transformation [47]. H&M gives back to communities outside of its core business. The company supports marginalized, underprivileged, and vulnerable groups of people as well as initiatives that focus on the climate and nature. Through focused strategies and partnerships, H&M has committed to creating fair and equal work conditions in its supply chain [48].

For the fashion industry, transparency means sharing information about supply chains, business practices, and their associated impacts on workers, communities, and the environment. Garcia-Tores et al. [49] highlighted the mutually reinforcing relationships among tractability, transparency, and cross-sector collaboration for effective, sustainable supply chain management in the fashion–apparel industry. In terms of governance, H&M emphasizes transparency and accountability by publishing detailed sustainability reports that align with the GRI and engages in third-party audits to ensure credibility [50].

ESG compliance does not mean only having an awareness of environmental impacts and addressing social issues inside the company. The compliance also means showing concern for global problems, being active in solving them, and staying relevant in the investment markets [51]. It is essential for organizations to manage risk and stay competitive. Integrating ESG goals into a corporate strategy includes short- and long-term compliance business practices. To ensure ESG compliance, a company should appoint a chief sustainability officer to establish company-wide ESG goals and work with compliance teams. Turning to H&M, its board includes members with expertise in sustainability, and a dedicated Sustainability Committee oversees the ESG goals and compliance [52]. Ho [53] conducted a case study on H&M and examined the strategies and practices of their product designs, purchasing, manufacturing, transportation, retail operations, and product usage and recycling. It was found that H&M has addressed sustainability issues through the efficient use of resources and a reduction in toxic substances. Examples of eco-friendly practices include using organic, recycled, biodegradable, or recyclable materials, less water, and environmentally friendly dyes.

For businesses, blockchains offer enhanced supply chain transparency, reduced counterfeiting, and improved sustainable management [54]. Blockchains are transparent, secure, and decentralized ledgers, store smart contracts and are reliable networks for sustainable supply chain management. Kouhizadeh et al. [55] provided a comprehensive overview of barriers to adopting blockchain technology to manage sustainable supply chains. The results of their exploratory study showed that supply chain and technological barriers were the most critical barriers among both academics and industry experts. H&M has adopted blockchain technology to enhance supply chain transparency and is an active member of Cascale (formerly the Sustainable Apparel Coalition), with members collaborating to improve industry standards [14].

Consumer engagement is another critical aspect of the ESG strategies of H&M. Customer experience (CX) strategies are essential for companies like H&M to attract and retain customers, build brand loyalty, and adapt to changing consumer preferences. By prioritizing CX, H&M has become a leader in the highly competitive fashion retail industry [56]. Khitous et al. [57] point out the benefits that customers seek to engage with various coexisting product-oriented and use-oriented product-service systems (PSSs) in the fashion industry. Their quantitative study among 477 customers in Belgium revealed that customer engagement with PSSs in the fashion industry was not only a function through which customers expect economic, pragmatic, cognitive, personal, hedonic, and societal benefits but also a function of their gender and age. They further suggested that fashion companies should leverage expected benefits and demographics when developing and communicating PSSs. H&M uses eco-labels to provide detailed information on product sustainability, including material composition and environmental impact [58]. To reduce the impact of various materials on the climate, nature, and people, H&M aims for 100% of its materials to be either recycled or sustainably sourced by 2030 and 30% recycled materials in 2025 [59].

Through educational campaigns and in-store initiatives, H&M encourages responsible consumption and recycling, while partnerships with non-government organizations (NGOs), governments, and other brands enhance its ESG efforts, such as its collaboration partnership with the Ellen MacArthur Foundation on circular fashion [60,61]. For the possible addition of value to textile waste materials, Suen et al. [61] examined the re-use of waste materials with no environmental impact by reusing or regenerating fibrous materials to form a closed loop in the textile waste life cycle. They revealed different means to transform cellulosic textile materials into value-added products of cellulosic glucose, cellulase, etc. Despite these advancements, H&M still faces challenges, including allegations of greenwashing, with critics accusing the company of misleading sustainability claims. In terms of greenwashing, a watchdog group found that the scorecards used only average the environmental impact of the types of textile, rather than giving the full environmental impact of the manufacture and sale of a particular finished piece of clothing [62]. H&M has made commitments to the Netherlands Authority for Consumers and Markets (ACM) to remove sustainability-related labels from their products and websites. The ACM found that H&M uses sustainability claims such as “Conscious” and “Conscious Choice” without explaining what they mean or providing a description of the sustainability benefits of the products [63].

Fashion transparency means sharing information about supply chains, business practices, and their associated impacts on workers, communities, and the environment. The lack of visibility of supply chains creates exploitative and unsafe work conditions and allows environmental issues to thrive while obscuring those who are responsible for the issues and have the power to redress them [64]. Jestratijevic et al. [65] conducted a quantitative study with four consecutive fashion transparency indices (2017–2020) to identify disclosure strategies for transparency in sustainability reporting in the fashion industry. They found four approaches to disclosure: measurable, ambiguous, policy-only, and secretive strategies. The disclosure was identified to be disproportionally distributed between 30% of brands as transparency leaders and 70% of brands as transparency laggards. The latter, therefore, has an unsatisfactory disclosure approach. H&M is working to improve transparency to address these concerns [66]. Additionally, the cost and complexity of scaling ESG initiatives across a global supply chain remain significant hurdles, thus requiring continued investment in innovation and partnerships [10]. The survey results of Lau et al. [67] revealed that returns on investment, logistics, delays, and imports were the most affected areas in the international business challenges in the supply chain.

H&M is making substantial progress in ESG integration, with a strong focus on sustainable materials, circular fashion, fair labor practices, and supply chain transparency. While challenges such as greenwashing allegations and scalability persist, the company continues to innovate and collaborate to achieve its sustainability goals. This is an integrated way for the fashion industry to meet the desirable objectives, especially after the COVID-19 pandemic, as Chan et al. [41] have expanded the acceleration of the adoption of sustainability principles by the pandemic in the fashion industry. A holistic approach that integrates the resources and effort of stakeholders is essential to address environmental and social problems caused by unsustainable practices in the supply chain.

4.2. CEPAR^® Analysis: H&M

The fashion industry is a significant contributor to global environmental degradation and social inequities, thus necessitating strong sustainability strategies. H&M, as a major player in the fast-fashion sector, has committed to ambitious ESG goals, including transitioning to 100% recycled or sustainably sourced materials by 2030 and achieving net-zero emissions by 2040.

However, the company faces significant challenges in scaling its initiatives, ensuring supply chain transparency, and addressing greenwashing allegations. This paper employs the CEPAR methodology to analyze the ESG performance of H&M and propose strategies for improvement.

4.2.1. Challenges

As a global fashion retailer, H&M faces multifaceted challenges, such as environmental, social, and governance challenges in achieving its ESG goals. Their environmental challenges include high water consumption, waste generation, and carbon emissions of the fashion industry, which are exacerbated by the fast-fashion model of H&M [68]. The transition to 100% recycled or sustainably sourced materials by 2030 also remains a challenge, with only 84% of materials meeting this criterion in 2023 [69]. Also, achieving net-zero emissions by 2040 requires significant investment in renewable energy and supply chain decarbonization.

Their social challenges are managing the complexities to ensure fair wages and safe work conditions across a global supply chain, particularly in regions with poor labor regulations [12], diversity and inclusion initiatives that require measurable outcomes and more diverse representation in leadership roles [70], and community engagement programs that require long-term investment and collaboration with local stakeholders.

The governance challenges of H&M include greenwashing allegations, which have undermined its credibility, and thus require greater transparency and accountability on its part [66]. Supply chain traceability, due to the complexity and scale of its operations and aligning with ESG strategies with ever-changing regulatory frameworks, such as the Sustainable Product Initiative of the EU, requires continuous adaptation efforts [71].

There are a number of risks that H&M faces, including climate/financial, supply chain, policy, and market dynamics risks, to quote a few.

The climate/financial risk is mainly the environmental impact of H&M. It can adversely affect consumer perception, ESG performance, and sales if customers switch to more sustainable brands. On the other hand, supply chain risk is the difficulty of ensuring responsible and sustainable practices throughout its complex global supply chain. H&M also faces policy risks with the ever-changing environmental regulations and incentives, which may impact its operations, so staying compliant is essential to them. Finally, there is market dynamic risk, whereby competition from brands with ambitious sustainability targets may capture the market of H&M. In these circumstances, H&M shall differentiate itself through innovation and communication.

4.2.2. Evaluation

Currently, the performance of H&M shows progress but also gaps. To repair this, H&M has implemented a comprehensive materiality assessment process to evaluate and prioritize its ESG challenges. The company engages with various stakeholders, including customers, employees, suppliers, industry peers, NGOs, and policymakers, to identify and evaluate material issues. The key material issues identified include environmental and social sustainability, governance, and compliance.

H&M prioritizes eco-friendly materials, sourcing organic and recycled options while exploring innovative alternatives. The company aims to reduce its climate footprint by addressing GGEs (Scopes 1, 2, and 3), water usage, and waste generation. At the end, H&M recognizes the significant impact of its climate footprint on climate change and customer satisfaction. H&M has made advancements in sustainable materials and circular fashion but struggles with scaling initiatives globally [72]. Reliance on fossil fuels and high water consumption remain significant barriers to improving their performance [68].

H&M evaluates its supply chain for risks and opportunities by implementing responsible sourcing policies and promoting transparency to enhance sustainability. The Fair Living Wage Strategy and supply chain audits reflect its commitment to fair labor practices, although implementation gaps are still present [12]. Its diversity and inclusion initiatives, however, lack measurable outcomes and leadership representation [70].

Finally, aligning with the Climate Action Plan of Sweden, H&M is striving for net-zero emissions by 2045, thus demonstrating its commitment to regulatory compliance and governance. Sustainability reporting and blockchain-based supply chain transparency are strengths, but greenwashing allegations highlight the need for more accountability on the part of H&M [62]. The governance structure of its Sustainability Committee could benefit from external stakeholder input to enhance credibility [72].

Nevertheless, H&M is committed to sustainability. First and foremost, there is double materiality, whereby H&M focuses on reducing emissions and resource use. This reflects H&M’s high financial and social/environmental impacts. Double materiality is shown in two ways: 1. through its alignment with the Sustainability Accounting Standards Board (SASB) standards and 2. responding to stakeholders. The former aligns with the SASB standards in terms of “Materials Sourcing & Efficiency”, “Supply Chain Management”, and “Product Quality & Safety”.

In terms of stakeholder impact, H&M recognizes the growing demand from investors and customers for transparent emissions disclosures and proactive environmental practices. Its sustainability initiatives and ESG performance indicators are shown in Table 1 and Table 2.

Beyond environmental and sourcing targets, H&M’s commitment to ethical labor practices is expressed through its Fair Living Wage Strategy and multi-tiered audit system aligned with the Fair Labor Association [73]. The company engages third-party organizations and trade unions to address wage transparency and worker voice, while recent policy revisions emphasize gender equity in factories. Internally, H&M continues to strengthen leadership diversity, setting measurable goals for gender representation and inclusive recruitment. On governance, its Sustainability Committee—operating under board oversight—ensures public accountability through GRI-aligned disclosures and third-party verifications, responding to past criticism around transparency and greenwashing. These efforts reflect an evolving application of human rights due diligence (HRDD), particularly in high-risk sourcing regions.

4.2.3. Planning

To address the challenges reflected in the previous sections, H&M has established ambitious targets to demonstrate its proactive approach toward ESG integration. They aim at energy consumption and renewable energy, climate footprint reduction, impactful climate action, biodiversity and agriculture, sustainability goals, and contribution to SDGs.

In terms of energy consumption and renewable energy, H&M strives to reduce energy consumption and increase its use of renewable energy. The company has raised the percentage of recycled and sustainably sourced materials in its collections to 85% in 2023, with a goal of 100% by 2030.

H&M provides financial support for projects that reduce GGEs across its value chain. In 2023, the company achieved a 22% reduction in GGEs. The results are closer to its science-based target of a 56% climate footprint reduction (Scopes 1, 2, and 3) by 2030. And in fact, this becomes one of the most ambitious commitments in the fashion industry.

The Green Fashion Initiative of H&M has promoted the collaborative financing solutions for impactful climate projects. In partnership with DBS, the largest bank in Southeast Asia, H&M has launched a collaborative financing tool to facilitate supply chain decarbonization in the apparel sector. Additionally, H&M is co-investing in a large-scale wind farm in Bangladesh, led by the Global Fashion Agenda, to transform the renewable energy market.

H&M is one of 17 companies that are piloting the Science Based Targets Network validation process for nature. The company is conducting projects to accelerate the transition to regenerative agriculture for materials like cotton and wool. It was able to achieve a 14% reduction in freshwater consumption from its 2022 baseline, thus surpassing its 2025 target of 10% a few years early.

H&M has defined measurable sustainability goals focused on reducing carbon emissions, water usage, and waste generation. These goals align with international standards and best practices. They include the United Nations SDG 7: Affordable and Clean Energy, SDG 9: Industry, Innovation, and Infrastructure, SDG 12: Responsible Consumption and Production, SDG 13: Climate Action, and SDG 17: Partnerships for the Goals.

To summarize, H&M has adopted the following ESG strategies. In terms of environmental strategies, H&M is accelerating its renewable energy adoption by partnering with suppliers to implement clean energy technologies; expanding circular fashion initiatives, such as garment collection programs and advanced recycling technologies; and setting interim targets for waste reduction and water efficiency. As for social strategies, H&M has strengthened supply chain transparency through frequent audits and detailed disclosures of their suppliers; enhanced diversity and inclusion by setting measurable targets for leadership representation; and expanded community engagement programs in high labor dependency regions. With respect to governance strategies, H&M strives to improve sustainability reporting transparency to address greenwashing allegations; strengthen its Sustainability Committee by incorporating external experts and stakeholders; and collaborate with industry peers and NGOs to standardize ESG metrics and improve traceability.

4.2.4. Action

H&M has implemented a comprehensive initiative to enhance its ESG performance and is committing significant resources towards sustainability and responsible practices across its value chain. The following strategies of ESG actions are recommended:

First, H&M should

• Partner with renewable energy providers to achieve 100% renewable energy in its supply chain by 2030;
• Launch consumer education campaigns on garment recycling and incentivizing participation;
• Invest in research and development (R&D) for innovative materials use and the realization of waterless dyeing technologies.

Second, it should also

• Conduct annual third-party supplier audits and publish the results;
• Implement training programs to improve labor conditions and fair wage compliance;
• Expand H&M Foundation initiatives in education and healthcare and implement employee training programs focused on renewable energy and greenhouse gas reduction;
• Ensure that employees are equipped with the skills necessary to support sustainability effort;
• Increase transparency by publicly disclosing sustainability efforts, supply chain practices, and labor standards to its stakeholders, such as publishing annual sustainability reports and sharing supplier lists to keep shareholders informed;
• Engage with worker rights organizations, NGOs, and industry associations to gain insights and co-develop solutions by participating in multi-stakeholder initiatives to address ESG risks.

Finally, the governance actions of H&M should

• Include publishing a road map to address greenwashing allegations and improving transparency;
• Establish a stakeholder advisory board to provide ESG strategy input;
• Join industry coalitions, such as the Sustainable Apparel Coalition, to advocate for standardized reporting;
• Collaborate with suppliers to improve labor conditions and promote responsible sourcing through capacity-building programs and training initiatives;
• Establish rigorous auditing processes to evaluate the work conditions, labor standards, and environmental practices of suppliers, including regular inspections and independent third-party audits.

4.2.5. Review

Continuous monitoring and evaluation are critical for monitoring the effectiveness of H&M’s ESG integration initiatives and making necessary adjustments. The following strategies are recommended for H&M.

In terms of environmental reviews, H&M should

• Track its progress toward the 2030 material goals and measure the impact of its circular fashion initiatives.
• Establish Key Performance Indicators (KPIs) and define specific KPIs to measure its progress toward its ESG objectives, thus ensuring that these metrics are aligned with its overall sustainability goals.

With respect to social review, H&M should

• Monitor labor conditions through audits and worker feedback surveys and evaluate diversity and inclusion programs by using representation metrics and employee satisfaction data.
• Conduct biannual audits to identify areas for improvement and ensure compliance with ESG standards and regulations, thereby reinforcing its commitment to responsible practices.
• Regularly communicate its performance to its stakeholders, which facilitates transparency and keeps all parties informed of the progress and challenges.

In terms of governance reviews, H&M should

• Evaluate its sustainability report credibility through third-party verification and stakeholder feedback;
• Review the performance of the Sustainability Committee and stakeholder advisory board by engaging both internal and external stakeholders in the review process to promote accountability and transparency. This involvement can provide diverse perspectives and insights.
• Insights gained from the review phase should guide future decision-making processes, thus enabling H&M to continuously enhance its ESG practices and adapt to evolving challenges and opportunities.

The CEPAR methodology highlights the strong commitment of H&M to sustainability, particularly in the use of sustainable materials, circular fashion, and fair labor practices. However, challenges such as greenwashing allegations, scalability issues, and reliance on fossil fuels underscore the need for targeted actions and continuous improvement. By implementing the proposed strategies and regularly reviewing its progress, H&M can enhance its ESG performance and reinforce its leadership position in sustainable fashion.

5. Case Study: Hong Kong and China Gas Company Limited (Towngas)

5.1. Energy Sector Overview

The Hong Kong and China Gas Company Limited, which is commonly known as Towngas, is a major utility provider in Hong Kong and mainland China. Founded in 1862, it is one of the oldest public companies in Hong Kong. Towngas primarily engages in the production and distribution of gas, water supply, and emerging environmentally friendly energy businesses [74]. In recent years, ESG factors have gained significant prominence in the business world. Companies in the various industries, notably energy companies, are facing the growing influence of ESG considerations on their operations and overall sustainability. This trend is particularly pronounced in energy companies that rely on coal and gas, as these sources are known contributors to GGEs and have significant environmental impacts. Several scholarly studies have shed light on the extent to which ESG factors are affecting energy companies, especially those that rely on coal and gas. Hawken et al. [75] examined the financial performance of energy firms and found that those with higher ESG scores outperform their peers in terms of risk management, cost of capital, and operational efficiency. This suggests that companies with better environmental practices and social governance are better positioned for long-term financial success. Moreover, Fahmy [76] examined the evolving regulatory landscape for energy companies and its impact on ESG integration. The study highlighted the importance of ESG concerns in shaping government policies and regulations, with a particular focus on reducing carbon emissions. As a consequence, companies that are heavily reliant on coal and gas face increasing scrutiny from regulators, investors, and stakeholders for their carbon-intensive operations. Furthermore, the transition towards renewable energy sources and the declining cost competitiveness of coal and gas have significant implications for the future of energy companies. A study by Trinks et al. [77] emphasized the need for energy companies, especially those that are still using coal and gas, to adapt their business models to align with the ESG goals. The authors suggested that by diversifying their energy portfolios and embracing renewable alternatives, energy companies can mitigate the risks associated with stranded assets and ensure long-term sustainability. Overall, these references show the growing importance of ESG factors in the energy industry, particularly for companies that are relying on coal and gas. Such companies face increasing pressure from stakeholders, changing regulatory frameworks, and a shifting energy landscape. In order to adapt, survive, and thrive in this rapidly evolving environment, these companies must actively engage in the transition towards more sustainable and low-carbon energy sources while embracing robust ESG practices.

5.2. CEPAR^® Analysis: Towngas

The following CEPAR^® analysis focuses on Towngas, which, like many other energy companies, uses naphtha, and is undoubtedly influenced by the growing importance of ESG factors in the sector. As discussed, these companies face increasing pressure from stakeholders, changing regulatory frameworks, and a shifting energy landscape. One significant challenge for Towngas is the environmental impact of its operations. Coal and gas are recognized as major contributors to GGEs, and as concerns over climate change intensify, Towngas must address these environmental consequences. The company will likely face demands from regulators and stakeholders to reduce its carbon footprint and adopt cleaner energy alternatives. Moreover, investment decisions and capital allocation strategies are increasingly influenced by ESG considerations. Studies have consistently shown that companies with better ESG performance tend to attract more investment and enjoy lower costs of capital [75]. This can be challenging for Towngas, as it may have difficulty securing funding for new projects or initiatives due to concerns about its carbon-intensive operations. Additionally, changes in market dynamics and customer preferences further highlight the need for Towngas to adapt. With the declining cost competitiveness of coal and gas compared to renewable energy sources, Towngas may face increasing pressure to transition towards more sustainable and low-carbon energy solutions [77]. Failure to adapt to this changing energy landscape could lead to stranded assets and potential financial risks for the company. On a positive note, embracing robust ESG practices can present growth opportunities for Towngas. By diversifying its energy portfolio and investing in renewable energy sources, Towngas can align itself with the global shift towards more sustainable solutions. This not only can mitigate risks associated with ESG factors but also open up new revenue streams and improve competitiveness in the energy market.

5.2.1. Challenges

There are a number of risks that Towngas faces. Examples are climate, supply chain, policy, and market dynamics risks.

In terms of climate risks, the Towngas gas composition consists of more than 50% methane, and therefore combustion processes of its consumers contribute significantly to Scope 1 emissions, thus negatively impacting climate change. For financial risk, Towngas emissions can adversely affect the carbon accounts of its customers, thus potentially harming their ESG performance and forcing them to switch over to lower-emission energy alternatives. As for policy risk, there is a growing trend in government policy that may lead to the phasing out of fossil-fuel-derived energy sources in the near future to achieve carbon neutrality by 2050. For this, Towngas will be forced to address. Finally, with respect to market dynamic risk, Towngas faces intense competition from other energy companies, such as China Light & Power and Hong Kong Electric, which are aggressively pursuing net-zero emission targets.

The following recommendations are made to support Towngas in reducing its carbon intensity, improving its affordability, and enhancing its social image, thus ultimately attracting more customers.

5.2.2. Evaluation

Towngas operates in an increasingly ESG-focused environment and faces the challenge of effectively integrating these factors into its corporate strategies. With increased stakeholder expectations and regulatory pressure and shifting market dynamics, Towngas must address complex ESG issues to ensure long-term sustainability and value creation. This includes investments in zero-carbon technologies and enhancing energy efficiency.

The combustion of Towngas energy by customers significantly contributes to Scope 1 emissions, which impacts climate and customer satisfaction, as it can diminish its own ESG performance. Many countries are taking steps to phase out fossil-fuel-derived gas utilities. For instance, the Dutch government has implemented a policy to phase out natural gas in residential heating by 2050. They are promoting alternatives like district heating, heat pumps, and hydrogen-based systems, with new homes being required to be gas-free since 2018 [78]. Similarly, Sweden is aiming for a fossil fuel-free heating sector by 2040, thus promoting renewable energy sources.

In Hong Kong, the Climate Action Plan 2050 outlines the ambitious plans of the government to achieve net-zero emissions by 2050, which may lead to a complete phase-out of the use of fossil fuels. Stricter emissions reduction measures could also increase energy costs, which would impact the prices of Towngas energy.

Additionally, competition from other energy companies, particularly those that focus on renewable electricity production, poses a significant threat to Towngas. In Hong Kong, the total Scope 1 emissions attributed to customers using Towngas were reported at 1.49 million tonnes of carbon dioxide in (year), which is considerably higher than the emissions from the production processes of Towngas itself (0.34 million tonnes). This discrepancy may prompt customers to shift to electricity provided by competitors like CLP for better ESG performance, thus showing the financial materiality of environmental risks for Towngas.

According to the double materiality assessment of Towngas, primary concerns include “Climate Resilience”, “Fossil Fuel Alternatives”, and “Greenhouse Gas Emissions”. These concerns align with the SASB Standards for Gas Utilities and Distributors, specifically regarding “Critical Incident Risk Management”, “Access & Affordability”, and “Business Model Resilience”. Addressing these issues is vital for both economic stability and enterprise value.

The priority of the challenges is ranked as follows: 1. climate impact, 2. competition, and 3. government policy. Stakeholders and investors are increasingly concerned about the implications of Scope 1 emissions. Actions on climate change and sustainability are influencing investor decisions, which lead to demands for transparency in emissions reporting and proactive environmental strategies. Stakeholders expect Towngas to demonstrate robust plans for carbon reduction and energy efficiency improvements. Table 3 and Table 4 are the stakeholder impact map and ESG performance indicators of Towngas and preferences of its major stakeholders on carbon reduction and strategy for enhancing energy efficiency.

From a social standpoint, Towngas has initiated workforce upskilling programs to prepare employees for hydrogen refueling infrastructure, an important step in a just energy transition. Community engagement remains underdeveloped but is improving through localized energy awareness initiatives. On governance, the company inherits SOE-linked structures, which offer long-term stability but can limit ESG responsiveness. The challenge lies in adopting more participatory ESG governance models, as recommended by OECD [79], including independent advisory panels and clearer disclosures. Transparency around emissions metrics has improved in recent years, though external assurance mechanisms remain limited.

5.2.3. Planning

To enhance its environmental performance and address the challenges identified, Towngas should adopt the following targets:

• Lowering its carbon intensity;
• Developing hydrogen technology;
• Integrating renewable energy sources, expanding the hydrogen market, and promoting energy efficiency technologies;
• Setting KPIs;
• Integrating renewable energy sources and contributing to SDGs.

In addition, Towngas should strive to significantly reduce its carbon emissions. Following the example of its competitors like the CLP, which has increased the proportion of natural gas in its fuel mix from less than 30% in 2019 to approximately 50% in 2020. Towngas can aim for a similar transition. This shift could lead to a reduction in carbon intensity to around 0.4 kg per unit of electricity, which favorably positions the company in a market increasingly focused on carbon reduction.

Towngas is currently extracting hydrogen from its gas mixture (50% H₂) by using pressure swing adsorption methods, but this process relies on fossil-derived fuels. The company should explore the feasibility of implementing carbon capture and storage (CCS) technologies to capture and store carbon from its gas production. Additionally, Towngas should consider investing in large-scale solar energy systems to produce green hydrogen through electrolysis, thus moving towards a more sustainable hydrogen production process.

Towngas should also increase its investment in bioenergy. Through its subsidiary, EcoCeres Inc., which specializes in converting bio-grease into biofuels such as hydrotreated vegetable oil (HVO) and sustainable aviation fuel (SAF). Towngas can work on scaling up these operations. The carbon credits earned from these initiatives can be utilized to offset its Scope 1 emissions.

Currently, hydrogen is being supplied to a niche market, primarily city buses. Towngas should explore opportunities to replace traditional energy sources with hydrogen in its pipeline system, with the aim of supplying hydrogen to all customers in Hong Kong in the future. It should also invest in energy-efficient technologies and equipment to enhance combustion efficiency and reduce carbon intensity in both its operations and those of its customers.

In setting KPIs, Towngas should aim for cost reduction and customer growth by tracking a reduction in hydrogen costs and an increase in the number of hydrogen customers.

To integrate renewable energy resources, Towngas is recommended to measure the increase in the proportion of gas or hydrogen sourced from renewable energy, for instance, replacing naphtha with biomass resources or producing hydrogen for vehicles from solar energy or biomass gasification. The percentage increase of Towngas and hydrogen derived from renewables will serve as a crucial KPI.

Towngas falls under the following SDGs: SDG 7: Affordable and Clean Energy, SDG 9: Industry, Innovation, and Infrastructure, SDG 11: Sustainable Cities and Communities, and SDG 13: Climate Action.

5.2.4. Action

There are five recommendations for Towngas. These include hydrogen initiatives, renovating liquefied petroleum gas (LPG) stations, producing renewable energy sources, engaging with the community, and training employees.

Towngas can collaborate with the government to install hydrogen refueling stations, which would attract customers from the transportation sector and reduce manufacturing costs. Obsolete LPG gas stations operated by ECO can be converted into hydrogen refueling stations, thus optimizing infrastructure and contributing to planning for future hydrogen pipelines. In terms of renewable energy sources, Towngas can identify sites for large-scale hydrogen production facilities powered by solar and wind energy to ensure sustainable operations.

As for community engagement, Towngas can invest in renewable energy infrastructures and collaborate with the local communities to address concerns and enhance stakeholder relations.

Finally, Towngas can enhance training programs to focus on hydrogen refueling skills and governance practices, with regular monitoring to ensure effectiveness.

5.2.5. Review

Regular reviews and monitoring are crucial for evaluating the effectiveness of ESG integration efforts and making necessary adjustments. Towngas should establish KPIs to measure progress toward its ESG goals and provide regular performance reports to stakeholders. Additionally, conducting biannual audits and assessments will help to identify areas for improvement and ensure compliance with ESG standards and regulations.

The review process should actively involve both internal and external stakeholders to promote transparency and accountability. Insights gained from this phase will be invaluable for informing future decision-making processes, thus enabling Towngas to continually enhance its ESG practices.

In conclusion, Towngas, as an energy company that heavily relies on using coal and gas, faces significant challenges in the current ESG-focused business environment. Addressing environmental concerns, meeting changing regulatory requirements, and adapting to the shifting energy landscape, such as carbon-free energy, are crucial for its long-term sustainability. By actively engaging in the transition towards more sustainable and low-carbon energy sources while embracing robust ESG practices, Towngas can position itself for success in the face of changing stakeholder expectations and emerging business opportunities.

6. Case Study: MTR Corporation Limited

6.1. Context of ESG in Transportation Industry

The transportation industry is undergoing a transformative shift as it grapples with escalating ESG demands driven by climate change, societal expectations, and regulatory oversight. As a major contributor to global GGEs—accounting for approximately 24% of energy-related CO₂ emissions worldwide—the sector faces immense pressure to decarbonize [80]. Below, we explore the key ESG trends that shape this industry.

6.1.1. Environmental Trends

Regulatory frameworks are tightening globally, with ambitious targets aimed at curbing emissions. In Europe, the EU 2019/1242 mandates a 15% reduction in CO₂ emissions for heavy-duty vehicles by 2025 and a 30% reduction by 2030, relative to 2019 levels [81]. This aligns with the goal of the European Green Deal in reducing transport emissions by 90% by 2050 to achieve climate neutrality. Beyond Europe, nations like China and the United States are introducing similar policies, such as subsidies for electric vehicle (EV) adoption and stricter fuel efficiency standards.

Technological innovation is a cornerstone of this transition. The adoption of EVs is accelerating, with Bloomberg NEF [80] projecting that EVs will account for 62% to 86% of global car sales by 2030, fueled by advancements and declining costs in battery technology [80]. In logistics, alternative fuels like hydrogen and biofuels are gaining traction, while digital tools—such as real-time monitoring, Internet of Things (IoT)-enabled fleet management, and AI-driven route optimization—are reducing fuel consumption. For example, platooning technology, where trucks travel in close formation to reduce drag, can cut fuel use by over 7% [82]. Additionally, the introduction of Scope 3 emissions reporting under the International Financial Reporting Standards (IFRS) S2 and the Corporate Sustainability Reporting Directive (CSRD), effective as of 2024, is pushing companies to address indirect emissions in their supply chains, a significant challenge given the complexity of transportation networks [83,84].

6.1.2. Social Trends

Stakeholder expectations are reshaping industry practices. Shippers and consumers increasingly demand sustainable operations, with a 2024 AMCS Group survey finding that 72% of shippers now prioritize sustainability in tender processes, and 56% have ended contracts with non-compliant logistics providers [85]. This reflects a broader societal push for greener supply chains. Meanwhile, urban mobility is evolving with the rise of active and shared transportation models, such as Mobility as a Service (MaaS). By integrating public transit, bike-sharing, and ride-hailing into a single platform, MaaS aims to reduce reliance on private cars, thus potentially easing traffic congestion and pollution [86].

6.1.3. Governance Trends

Governance is increasingly critical as investors and regulators demand transparency and accountability. ESG ratings, such as those from Sustainalytics and MSCI, play a pivotal role in shaping investment decisions, with companies demonstrating strong governance structures attracting more capital [85]. The transportation sector faces heightened scrutiny over issues like labor practices, data privacy (especially with IoT adoption), and compliance with evolving regulations. Robust governance frameworks are essential to manage these risks and maintain stakeholder trust, particularly as penalties for non-compliance grow steeper under frameworks like the CSRD.

6.2. CEPAR^® Analysis

The MTR, headquartered in Hong Kong, is a globally recognized leader in public transportation, which operates an extensive rail network and has integrated its services with property development. Established in 1975, the “Rail plus Property” model of the MTR fosters sustainable urban development by creating high-density, transit-oriented communities, thus reducing car dependency and supporting the climate goals of Hong Kong [86]. Below, we discuss the ESG performance of the MTR.

6.2.1. Challenge

As a key player in the public transportation system of Hong Kong, the MTR is essential for connecting communities, alleviating congestion, and promoting sustainable mobility. In terms of its environmental responsibility, the MTR acknowledges the pressing need to combat climate change and reduce its ecological impact. The company incorporates environmental considerations into its operations by utilizing energy-efficient trains and implementing green building designs.

A fundamental value of the MTR is social inclusion by ensuring accessibility for all passengers, regardless of age or ability. The company actively engages with a diverse range of stakeholders, including commuters, employees, and local communities, to promote inclusivity. The MTR upholds high standards of transparency, ethical conduct, and accountability. Its annual Sustainability Report serves as a key resource for stakeholders by providing insights into its ESG performance and progress.

6.2.2. Evaluation

The approach of the MTR to ESG integration is marked by a thorough assessment of risks and opportunities, which embeds sustainability into its core strategic decision-making processes. These include transparency and strategic imperatives, stakeholder engagement and ESG objectives, alignment with the SASB materiality framework, understanding ESG risks, and double materiality discussion.

The annual Sustainability Report of the MTR serves as a key indicator of its commitment to sustainability. The report highlights initiatives such as the Green Station Initiative, which reflects its dedication to environmental stewardship by incorporating eco-friendly designs and technologies into station infrastructure.

The MTR employs a multifaceted stakeholder engagement strategy, exemplified by the Community Connect program. This initiative enhances station accessibility and community services, thus demonstrating how stakeholder input directly informs and shapes ESG strategies that are responsive.

The SASB Materiality Framework helps the MTR in identifying and prioritizing financially material ESG issues that could influence its financial performance. Notably, the focus of the MTR on energy management and data privacy aligns with SASB standards for the transportation sector by emphasizing critical issues such as fuel management and customer privacy.

The MTR has achieved a favorable ESG risk rating from Sustainalytics, with a score of 19.8, which indicates low risk and high preparedness. This rating enhances investor confidence and highlights the commitment of the MTR to robust risk governance and ESG excellence.

The MTR embraces the concept of double materiality and considers sustainability issues from both its impact on sustainability (inside–out perspective) and that of sustainability factors on the company (outside–in perspective). For instance, its carbon reduction plan not only addresses its environmental footprint but also positions the company to adapt to future regulatory changes and societal expectations of climate change.

Through these evaluations, the MTR has demonstrated a proactive and integrated approach to ESG, which ensures that it remains aligned with stakeholder interests and regulatory demands while enhancing its overall sustainability performance. Table 5 and Table 6 are the stakeholder impact map, preferences of major stakeholders, and the performance indicators of the MTR on carbon reduction and strategy for enhancing energy efficiency.

MTR’s governance performance stands out, reflected in its low ESG risk score (19.8) by Sustainalytics [33]. This reflects strong board oversight, ethical compliance systems, and a culture of transparency in public disclosures. Socially, the MTR invests in inclusive infrastructure (100% station accessibility) and operates the Community Connect platform to foster dialogue with underserved urban communities. Its workforce policies emphasize equitable hiring and training opportunities, aligning with ESG goals around social equity and resilience. Together, these initiatives show how governance and social innovation intersect to enhance overall sustainability performance.

6.2.3. Planning

The MTR is set to develop a strategic plan for integrating ESG principles into its operations. This phase will establish Specific, Measurable, Achievable, Relevant, Time-bound (SMART) goals that align with its objectives and values, along with KPIs to track progress and ensure accountability.

Engaging stakeholders, such as employees, shareholders, customers, and community members, is essential for developing a comprehensive ESG strategy. Additionally, integrating ESG factors into a risk management framework will help to mitigate potential risks and enhance organizational resilience.

The commitment of the MTR to the United Nations SDGs is evident through its various initiatives. They include

• Providing eco-friendly services while contributing to economic growth as per SDG 8: Decent Work and Economic Growth, based on its Environmental and Social Responsibility Policy;
• Prioritizing accessibility for all by focusing on universal mobility and diversity as per SDG 10: Reduce Inequalities, as found in its Sustainability Report, which highlights efforts to design accessible stations and promote gender diversity on the board;
• Focusing on reducing GGEs through sustainable practices, as per SDG 13: Climate Action, based on its commitment to emissions reduction as outlined in its Sustainability Report.

6.2.4. Action

With a clear plan for success, the MTR should integrate ESG throughout its operations. This involves several key initiatives, including

• Investing in renewable energy sources to lower carbon emissions;
• Enhancing diversity and inclusion programs for employees;
• Strengthening governance practices to ensure accountability;
• Promoting transparency through regular reporting.

Additionally, prioritizing stakeholder engagement and communication is vital for building trust and aligning with ESG objectives. Continuous monitoring and adaptation are also essential in this phase to effectively address emerging challenges and capitalize on opportunities.

6.2.5. Review

The final phase of the corporate ESG integration process focuses on reviewing the progress, outcomes, and lessons learned. The MTR conducts regular evaluations to determine the effectiveness of its ESG initiatives against predefined KPIs and targets. These KPIs, outlined in the Sustainability Report, encompass key metrics such as environmental and social performance and safety targets. Environmental performance involves tracking reductions in energy consumption, GGEs, and waste generation. Social performance measures improvements in customer satisfaction, employee engagement, and community investment. Finally, safety targets include evaluating achievements through safety performance indicators, such as reduced accident rates and enhanced emergency preparedness.

7. Comparative Discussion

The application of the CEPAR^® methodology to the H&M Group, Towngas, and MTR Corporation case studies reveals both commonalities and differences in their approaches to ESG integration. This section provides a comparative analysis of the three companies across each phase of the CEPAR^® framework.

7.1. Challenge Phase

All three companies face significant environmental challenges, particularly related to climate change and resource efficiency. However, the specific nature of these challenges varies:

• The environmental challenges of H&M are largely tied to its supply chain and product life cycle, including resource consumption in production and waste generation from fast fashion.
• Towngas focuses on the environmental impact of energy production and distribution, particularly carbon emissions and air quality.
• The environmental challenges of the MTR center on the energy efficiency of its transport operations and the sustainability of its property developments.

In terms of social challenges, all three companies prioritize safety but in different contexts:

• H&M emphasizes worker safety and fair labor practices in its supply chain.
• Towngas focuses on customer safety in gas usage and occupational safety for its employees.
• MTR prioritizes passenger safety in its railway operations.

Governance challenges show some commonalities across the three companies, particularly in areas such as ethical business practices, stakeholder engagement, and data protection. However, the MTR faces additional challenges related to large-scale project management and public accountability as a provider of critical infrastructure.

7.2. Evaluation Phase

All three companies use materiality evaluations to determine and prioritize their ESG challenges. This approach allows them to focus their efforts on the most significant issues for their business and stakeholders. However, the specific material issues identified reflect the unique nature of their operations:

• The material issues of H&M are heavily focused on supply chain management, circular economy, and ethical fashion.
• Towngas prioritizes issues related to energy transition, air quality, and community engagement.
• The material issues of the MTR center on transport safety, service reliability, and sustainable urban development.

7.3. Planning Phase

The planning approaches of the three companies show both similarities and differences:

All three companies have developed comprehensive sustainability strategies that align with their core business operations.

• The strategy of H&M is notably ambitious, with the aim to achieve industry leadership in sustainable fashion.
• Towngas adopts a strategy that focuses on balancing the transition to cleaner energy along with maintaining a reliable and affordable supply of energy.
• The MTR uses a strategy that emphasizes the integration of sustainable practices in both its transport and property development businesses.

7.4. Action Phase

The actions taken by each company reflect their specific challenges and strategies:

• H&M has implemented a wide range of initiatives across its value chain, from sustainable sourcing to garment recycling programs.
• Towngas has focused on technological innovations for cleaner energy production and distribution.
• MTR has implemented actions to improve the energy efficiency of its railway operations and the sustainability of its property developments.

All three companies show a commitment to community engagement and social responsibility, although the specific initiatives vary based on their business context.

7.5. Review Phase

All three companies have established mechanisms for reviewing and improving their ESG performance:

All produce annual sustainability reports and seek external assurance for key sustainability data.

Stakeholder engagement is a common theme, with all three companies actively seeking feedback from various stakeholder groups.

Performance monitoring and target-setting are used by all three companies to drive continuous improvements in ESG performance.

However, the specific metrics and targets used vary based on their industry and strategic priorities.

7.6. Overall ESG Integration

While all three companies demonstrate a commitment to ESG integration, the depth and breadth of integration vary:

• H&M shows the most comprehensive integration of ESG considerations across its business model, possibly due to the high visibility and scrutiny of the environmental and social impacts of the fashion industry.
• The integration of ESG by Towngas is very much focused on the environmental aspect, particularly related to energy transition and emissions reduction.
• The integration of ESG by the MTR is well-balanced across the ESG aspects, thus reflecting its role as both a transport provider and property developer.

7.7. ESG Strategy Limitations in China’s Institutional Context

To further deepen our comparative analysis, we examine how national-level environmental policies, social dynamics, and institutional governance structures in China affect ESG implementation across the three case companies. While all three firms operate globally or across Greater China, their ESG strategies are shaped by distinct regulatory and cultural constraints in the Chinese context. For instance, H&M’s circular fashion model is constrained by gaps in recycling infrastructure and consumer awareness in China [87]. Towngas faces mounting pressure under China’s dual-carbon commitments (carbon peak by 2030, neutrality by 2060) [88], while MTR must navigate a hybrid governance environment as it aligns Hong Kong operations with mainland sustainability standards [89]. These cross-sector observations are synthesized in

Table 7. Comparative ESG challenges and limitations in the context of China’s institutional environment.

Company	Environmental Limitations	Social Limitations	Governance Limitations
H&M Group	- Limited access to renewable energy infrastructure in China for supply chain decarbonization - Inconsistent recycling systems hinder circular fashion	- Complex labor conditions in supplier factories across Asia, including China - Low consumer awareness of sustainable fashion in Tier 2/3 cities	- ESG disclosure in China remains voluntary until 2026, limiting transparency [87] - Risk of reputational backlash due to geopolitical sensitivity to geopolitical tensions (e.g., Xinjiang cotton)
Towngas	- High downstream Scope 1 emissions from customer-side combustion (methane-rich gas) - Regulatory pressure to meet China’s dual-carbon targets (peak by 2030, neutrality by 2060)	- Public concern over air quality and health impacts from fossil fuel use - Limited public engagement on energy transition pathways	- Green finance policies increase capital constraints for carbon-intensive firms [88] - ESG performance influenced by state-owned enterprise (SOE) governance norms
MTR Corporation	- Urban expansion limits space for renewable infrastructure - Balancing infrastructure growth with carbon reduction targets	- Need to ensure accessibility and affordability amid rising urban inequality - Pressure to maintain service quality during ESG upgrades	- Must navigate both Hong Kong and Mainland regulatory frameworks - Institutional pressure to align with national sustainability mandates [87,89].

, which highlights key ESG strategy limitations in environmental, social, and governance dimensions across H&M, Towngas, and MTR in the Chinese institutional environment.

These limitations emphasize that while corporate ESG ambition is essential, success also depends on the external policy, institutional, and cultural environments in which these strategies are deployed.

7.8. ESG and Financial Outcomes: Connecting Strategy with Results

While the ESG strategies of H&M, Towngas, and MTR are shaped by sector-specific priorities and contextual constraints, there is growing empirical support for the argument that robust ESG integration contributes to improved financial outcomes. Firms with consistent ESG practices tend to benefit from stronger operational resilience, enhanced brand equity, and easier access to capital. Loew, Endres, and Xu [90] demonstrate that across a sample of Western European listed firms, ESG performance shows a positive relationship with profitability metrics such as Return on Assets (ROAs) and Tobin’s Q—especially in the energy and finance sectors where risk exposure is more sensitive to sustainability considerations. In the Chinese context, Zhang [91] finds that companies with high ESG scores face fewer financing constraints and enjoy more favorable investor sentiment, particularly in environmentally sensitive or state-linked sectors. These findings reinforce the idea that ESG excellence is not merely a compliance exercise but also a pathway to long-term value creation.

Friede et al. [92], in a meta-analysis of more than 2000 peer-reviewed studies, report that the vast majority found a positive or neutral relationship between ESG performance and corporate financial outcomes, with only a minority showing negative results. As such, the cases of H&M, Towngas, and MTR should not be viewed in isolation from the financial implications of their sustainability strategies. In all three cases, effective ESG practices are increasingly tied to reputation management, stakeholder loyalty, and the ability to attract sustainable finance. These connections underscore why ESG should be embedded not only as a governance imperative but as a financial one.

8. Conclusions

Addressing ESG-related risks has become a critical component of modern business strategy, with a growing emphasis on sustainability across various industries. The cases of H&M, Towngas, and MTR Corporation show how organizations are actively pursuing ESG objectives in response to the pressing challenges posed by climate change and societal expectations.

These companies have demonstrated that integrating ESG principles into their operations not only enhances environmental performance but also drives social responsibility and governance excellence. The commitment of H&M to sustainable fashion, the Towngas initiatives for cleaner energy, and the focus of the MTR on accessibility and community engagement exemplify the diverse approaches that organizations can adopt to meet their ESG commitments.

The proposed five-step CEPAR^® model serves as a valuable framework for helping organizations navigate the complexities of ESG integration. By providing a structured methodology for ethical decision-making and risk management, the model equips stakeholders with the tools necessary to analyze dilemmas, make principled choices, and evaluate outcomes effectively.

As corporations increasingly recognize the importance of sustainability, the lessons learned from these case studies can guide future initiatives. Organizations that adopt the CEPAR^® model are expected to improve their decision-making capabilities, enhance stakeholder engagement, and ultimately contribute to a more sustainable and equitable future. Through continuous monitoring and adaptation, businesses can ensure that their ESG efforts align with strategic goals and meet the evolving needs of society.

Furthermore, by incorporating quantitative metrics and cross-sector ESG indicators—including CO₂ emissions intensity, stakeholder impact mapping, and third-party ESG scores—this study advances a more data-driven and comparative approach to evaluating corporate sustainability.

8.1. Key Findings

The application of the CEPAR^® methodology to H&M, Towngas, and the MTR has revealed several key findings:

Industry-Specific Challenges: While all three companies face ESG challenges, the nature and prioritization of these challenges vary significantly based on their industry and operational context.

Materiality-Driven Approach: All three companies use materiality assessments to identify and prioritize ESG issues, thus demonstrating a strategic approach to sustainability.

Integration with Core Business: Successful ESG integration is closely tied to core business strategy and operations.

Stakeholder Engagement: All three companies recognize the importance of stakeholder engagement in shaping their ESG strategies and actions.

Continuous Improvement: The review phase of the CEPAR^® model is crucial for driving ongoing improvements in ESG performance.

Balancing Multiple Priorities: Each company must balance multiple, sometimes competing, priorities in its ESG efforts.

8.2. Implications for Practice

The findings of this study have several implications for businesses seeking to enhance their ESG integration:

Adopting a Structured Approach: The CEPAR^® methodology provides a useful framework for systematically addressing ESG challenges.

Prioritizing Material Issues: Conducting regular materiality assessments can help companies focus their sustainability efforts on the most significant areas.

Aligning with Business Strategy: ESG initiatives should be closely aligned with the core business strategy to ensure long-term commitment and impact.

Engaging Stakeholders: Regular and meaningful stakeholder engagement is crucial for identifying ESG priorities and building support for sustainability initiatives.

Setting Clear Targets and Monitoring Progress: Establishing specific, measurable ESG targets and regularly monitoring progress can drive continuous improvement.

Adapting to Changing Contexts: ESG strategies should be flexible enough to adapt to changing regulatory environments, stakeholder expectations, and global sustainability challenges.

8.3. Future Research Directions

This study opens up several avenues for future research, including:

Longitudinal Studies: Examining how the integration of ESG evolves over time within the three companies could provide insights into the long-term impact of sustainability strategies.

Quantitative Impact Assessment: Developing methods to quantitatively assess the impact of ESG integration on financial performance and stakeholder value could provide valuable insights for businesses and investors.

Cross-Sector Comparisons: Expanding this analysis to a broader range of sectors could help to identify industry-specific best practices in ESG integration.

Regulatory Impact: Investigating how changes in ESG-related regulations affect corporate sustainability strategies could provide insights for both businesses and policymakers.

ESG Integration in Supply Chains: Given the importance of supply chain management in ESG performance, particularly for companies like H&M, further research into the effective integration of ESG across global supply chains would be invaluable.

Future studies should consider expanding the sample to include companies from diverse geographical and cultural contexts. ESG strategies are significantly influenced by national culture, institutional maturity, and regulatory environments. For example, Gao et al. [93] demonstrated that ESG disclosures vary between Chinese and U.S. firms due to differences in cultural dimensions such as individualism and power distance. Ren [94] further emphasized that institutional receptivity shapes the implementation of global ESG norms. Moreover, Singhania et al. [95] identified four tiers of ESG regulatory development across 28 countries, highlighting disparities in stakeholder engagement and reporting standards. Incorporating firms from multiple countries would provide broader generalizability and enable more nuanced benchmarking of ESG practices across institutional settings.