materiality and sustainability disclosure - sgx top50 - ernst & young thought leadership oct2015

7/25/2019 Materiality and Sustainability Disclosure - SGX Top50 - Ernst & Young Thought Leadership Oct2015

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Materiality and

sustainabilitydisclosureKey insights from the Singapore

Exchange top 50


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Our research

EY recently examined the sustainability disclosures of the

Singapore Exchange (SGX) top 50 listed companies (by market

capitalization). Specically, we looked at:

Whether or not they released a sustainability report

What frameworks they used to report

Whether they referenced a process to assess their material

sustainability aspects and provided details of this process

If they reported on sustainability aspects material

to their business

If they identied their stakeholders and involved them in the

materiality assessment

If they referenced specic improvement goals

Their level of preparedness to comply with comply or

explain reporting by FY17

The research took the form of a desktop analysis in which

we examined publicly available annual reports, sustainabilityreports and company websites. The companies included in this

research were those forming the SGX top 50 as of 20 August

2015. This information was reviewed as of 29 September 2015.

From the results, we outlined ve key insights. These insights

are supported by quantitative and qualitative data extracted

from the analysis as well as from our experience in assisting

companies to understand and report their material

sustainability aspects.

Denitions

EYs approach to determining material sustainability aspects is

based on guidance provided by the Global Reporting Initiative

(GRI) G4 Sustainability Reporting Guidelines and AA 1000

AccountAbility Principles Standard. We align with the GRIdenition of materiality in that materiality is the threshold at

which aspects become sufciently important that they should

be reported1.

While nancial reporting refers to material information as

that which could inuence the economic decisions of users

of the nancial statements, materiality from a sustainability

perspective takes into consideration a much broader

stakeholder perspective and examines the aspects from both an

internal and external lens. It assesses the potential impact of an

aspect on the business, and also considers the importance of

the aspect to stakeholders.

This report includes an examination of whether companies inthe SGX top 50 are undertaking an assessment of their material

sustainability aspects. We have chosen the word aspect rather

than issue, based on the denition in the GRI (G4) reporting

guidelines, which states that material aspects are those that

reect the organizations signicant economic, environmental

and social impacts; or that substantively inuence the

assessments and decisions of stakeholders2. The use of

the word aspect also enables consideration of both risks

and opportunities.

The only section in which we have specically referenced

risk rather than aspect, is in relation to the SGXsGuide to

Sustainability Reporting for Listed Companies,which refers to

the mitigation of risks.

1 The Global Reporting Initiative, Implementation Manual, 20142 As per above


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Contents

Executive summary 2

Introduction 4

Insight 1 There is signicant room for improvement

in the quality of sustainability reporting 6

Insight 2 Materiality is clearly gaining traction

among reporters 7

Insight 3 Materiality assessments are guided

by the GRI 9

Insight 4 Stakeholders are engaged in the

materiality assessment process 11

Insight 5 Methods of reporting and

communication are changing 12

Conclusion and recommendations 14

Appendix 1 Materiality denitions 15

Appendix 2 Key material aspects by sector 16

Lets continue the conversation Contacts 17

1Materiality and sustainability disclosure:Key insights from the Singapore Exchange top 50 |


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Executive summary

Contacts

Recent announcements regarding both regulatory and voluntary reporting frameworkshave put a new focus on sustainability disclosures with an emphasis now rmly on

materiality.

EY sought to understand how these

changes were impacting Singapore-

listed companies. We undertook a

desktop analysis of the SGX top 50

(as of 20 August 2015), looking at

whether these companies are assessing

their own materiality aspects, howthey are undertaking that assessment,

and whether a materiality assessment

resulted in more focused disclosures.

In the course of our research we also

looked at the broader sustainability

disclosure, the platforms that are used

for reporting, and whether companies

were ready for a comply or explain

requirement, which is expected to

be effective as of 1 July 2017, as

reiterated at the 2015 International

CSR Summit held by Global Compact

Network Singapore.

Sector performance

The table on page three highlights sector

performance according to the different

criteria we assessed.

For those sectors in the SGX top 50

consisting of more than ve companies,transport and storage and property were

the most likely to undertake materiality

assessments and communicate their

sustainability disclosures, while

manufacturing, commerce and services

were the least likely.

Five key insights

Based on our research, we have identied

ve key insights around the uptake and

maturity of materiality assessments

and sustainability disclosure in the SGX

top 50. While the focus of our research

was to understand how companies are

assessing their material sustainability

aspects, we also looked more broadly

at what they are reporting and the

platforms that are being used for

reporting. As a result, our key insights

are not limited to materiality but include

broader discussion around sustainability

disclosure. In the following pages we

examine in detail each of these insights.

Insight 1: There is signicantroom for improvement in

the quality of sustainability

reporting

Insight 2: Materiality is clearly

gaining traction among

reporters

Insight 3: Materiality

assessments are guided

by the GRI

Insight 4: Stakeholders are

engaged in the materiality

assessment process

Insight 5: Methods of

reporting and communication

are changing

2 | Materiality and sustainability disclosure:Key insights from the Singapore Exchange top 50


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Performance at a glance

Number of

companies

in the

sector

Sector Details of process

in assessing

materiality

Public reporting of

material aspects

Identication on

boundaries of

material issues

Engagement with

stakeholders

4 Finance

7 Transport and storage

3 Multi-industry

12 Property

7 Manufacturing

1 Agriculture

6 Commerce

1 Electricity, gas and water

1 Food products

8 Services

It should be noted that the agriculture, electricity/gas/water and food products sectors contain only one company, and may therefore

not be reective of these sectors performance as a whole.

80% or more companies in the sector meet the assessment criteria

50% to 79% companies in the sector meet the assessment criteria

none to 49% companies in the sector meet the assessment criteria

3Materiality and sustainability disclosure: Key insights from the Singapore Exchange top 50 |


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Introduction

Historically, organizations have used the nancial bottom line to benchmark successand determine materiality thresholds, with social and environmental aspects either

overlooked or not measured.

Increasingly, challenges resulting

from macro geopolitical, social and

environmental events such as supply

chain impacts, economic instability,

climate change, natural resource

depletion and the pressures of a

growing population, have encouragedstakeholders from investors to NGOs to

become more interested in understanding

how organizations are managing

these aspects.

While some companies have responded

to these trends and demands for

information by disclosing a myriad of

environmental, social and governance

aspects, others have done little

or nothing. As a result, external

stakeholders, such as investors,

regulators and NGOs, are pushing

organizations with limited or no reportingstructures to disclose their material

sustainability aspects the aspects of

most importance to companies and to

their stakeholders.

The focus on materiality also signals

a clear change from sustainability

reporting of the past where companies,

aiming to report on the triple bottom

line of social, environmental and

economic aspects, often released a mass

of information covering everything from

paper recycling to human rights. Indeed,

there was little regard to the relativeimportance of these disclosures to their

business performance, or to the relative

importance of each aspect to

their stakeholders.

International

regulatory

trends

Global

Reporting

Initiative

Singapore

Exchange

Sustainability

Reporting Guide

International

Integrated

Reporting Council

SGXs move to

comply or

explain basis

Sustainability

Accounting

Standards Board

Converging

developments

3 EY, Tomorrows investment rules2.0: Emerging risk and stranded assets have investors

looking for more from nonnancial reports, 2015.

Despite reporters investing signicant

time and effort in preparing increasingly

larger reports, investors and other key

stakeholders were left frustrated by

the need to sift through volumes of

information to nd the aspects of most

importance to them. Their dissatisfactionis highlighted in EYs 2015 Global

Investor Survey, which found that

investors face a severe decit of useful

non-nancial information3.

With stakeholders driving the push for

more targeted and relevant non-nancial

disclosures, regulators and voluntary

reporting organizations have responded

accordingly by focusing on the principle of

materiality, an underlying foundation for

sustainability disclosure. These convergingdevelopments are detailed below.



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4 Global Reporting Initiative, Carrots and Sticks, 2013(accessed via https://www.globalreporting.

org//resourcelibrary/Carrots-and-Sticks.pdf )

SGX Sustainability Reporting Guidelines Move to comply or explain basis International Integrated Reporting Council

The SGXreleased their Guide to

Sustainability Reporting for Listed

Companiesin 2011 (the Guide) to increasetransparency in reporting on sustainability

issues. While reporting is not mandatory,

the Guide provides the suggestion that

all companies should disclose their

sustainability performance, and provides

basic actions regarding how to report and

what to report on.

At the 2014 International Singapore

Compact CSR Summit, the SGX CEO

announced that the exchange would betransitioning to sustainability reporting on

a comply or explain basis, with a view to

target implementation by FY17.

The SGX has already begun a one-year

consultation exercise to aid with the

development of a new listing rule and to

review the existing Guide. The SGX

anticipates they will submit the proposed

Listing Rule and reviewed Guide for

regulatory approval by the end of 2015.

The International Integrated Reporting

Council (IIRC) was established in 2010 and

released the International Framework inDecember 2013. Adoption of the framework

is gathering momentum with materiality

underpinning its vision to report on the

factors critical to value creation across six

capitals nancial, manufactured,

intellectual, human, social and relationship,

and natural.

International regulatory trends Global Reporting Initiative and

AccountAbility AA1000

Sustainability Accounting Standards Board

The Guide and the move to a comply orexplain basis are reective of an

international trend towards non-nancial

sustainability disclosure. Research released

in 2013 by the Global Reporting Initiative

(GRI) reviewed reporting requirements

from 45 countries and found 180 policies

specic to sustainability disclosures, of

which 72% were mandatory4. In September

2014, the EU published its requirements

for non-nancial disclosures with a focus

on environment, social and employee-

related aspects.

The GRI is the most commonly usedinternational framework for sustainability

reporting. The latest iteration of its guidelines,

GRI G4, was released in 2013 with materiality

as a fundamental guiding principle.

The Sustainability Accounting StandardsBoard (SASB) was established at Harvard

University in 2011 and is aimed at developing

sustainability accounting standards that

include analysis of material aspects for a

range of industries.

AccountAbility produces widely-used

standards and leading research on

sustainability. Their AA1000 Assurance

Standard is used globally, and is

complemented by their Guidance Note on

the Principles of Materiality, Completeness

and Responsiveness.

While each of these regulatory or non-regulatory frameworks have their own specic explanation of materiality (as detailed in

Appendix 1), there is a high degree of consistency in their denitions.

With the focus now on material sustainability disclosure, EY sought to understand how Singapore companies were responding and

the impact this was having on sustainability reporting. We set out to examine the sustainability reporting habits of the SGX top

50 and how they were factoring materiality into their disclosures. In undertaking this research, we identied ve key insights with

regard to materiality and sustainability disclosure among the SGX top 50.

Converging developments



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There is signicant room for improvementin the quality of sustainability reporting

While 80% of the SGX top 50 make some mention of sustainability either in annualreports or on their company websites, only 60% of the SGX top 50 report on their

sustainability performance.

Ten companies in the SGX top 50 make

no mention of sustainability at all, while a

further 10 refer broadly to sustainability

either on the company website or briey

in their annual report. The remaining 30

companies in the SGX top 50 actually

report their sustainability performance,however the depth of reporting varies

enormously, with some companies

providing robust and detailed disclosures

on their performance while others offer

limited information.

There are also disparate levels of

reporting among companies issuing

disclosures. Of the 30 companies

reporting on their sustainability, 47%

produced unbalanced reports, in

that they presented a one-sided view

of their sustainability performance,failing to mention challenges, negative

performance, missed goals and areas

for improvement, and rather focussing

solely on positive progress and Corporate

Social Responsibility (CSR) programs.

A further 43 percent produce reports

that were fairly balanced, with many

companies disclosing sustainability data

(such as greenhouse gas emissions),

and commenting on areas where

performance targets had not been met.

Just 10% of the reports among the SGX

top 50 companies could be consideredtruly balanced in terms of what they

disclosed. These reporters disclosed:

A wide range of performance data

Whether specic targets had been met

or not

Negative impacts of the companys

operations and how these impacts were

being managed

For example, one company disclosed a

full list of endangered species potentially

impacted by their operations, and the

steps they were taking to protect them.

With the SGXs announcement of a

transition to a comply or explain

model by FY 2017, we expect to see an

increasing number of listed companies

reporting in the next few years.

Of the 30 companies that report, the

majority (19) produced stand-alone

sustainability reports, while the others

reported their performance in the

companys annual report.

As sustainability reporting continues

to evolve, we expect to see greater

alignment of nancial and non-nancial

reporting, particularly as leading

organizations integrate sustainabilityconcerns into their core business

strategy. Integrated reporting that links

the nancial results with the business

context will continue to gain popularity as

companies respond to growing demands

for information, and link nancial and

non-nancial performance.

Leading example:City Developments Limited

City Developments Limited (CDL) was the rst Singapore company to produce aGRI-checked report in 2008. Since then CDL has continued to improve both itssustainability performance, and reporting methods. Starting from 2015, CDLhas transitioned to an integrated reporting approach, guided by the InternationalIntegrated Reporting Councils (IIRC) Integrated Reporting Framework, allowingthem to better connect their social, environmental and nancial performance for amore meaningful and all-rounded corporate reporting. This new approach aims topresent a holistic picture to investors and stakeholders on value creation over the

short, medium and long term.

1



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Materiality is clearly gaining tractionamong reporters

Eighty-three percent of reporting companies reported on the sustainability aspectsidentied as material to their organization. However, only 63% of these companies

provide evidence of the actual process to identify these issues.

There are some sectors that are clearly ahead with respect to

implementing a materiality approach.

Services, multi-industry and commerce lead the way with over

75% of companies in these sectors undertaking materiality

assessments, albeit a small number of these companies are

included in the research. The agriculture and food products

sectors also performed well, although both sectors contain just

one reporting company and may therefore not be reective of

these sectors as a whole.

The nance sector appears to be slow to take up materiality,

with one out of two companies not disclosing material issues.

Sector Number of reporters Reporting on material issues Adopting a materiality assessment process

Multi-Industry 3 3 3

Manufacturing 4 3 3

Property 8 6 6

Services 2 2 1

Transport and storage 7 6 3

Agriculture 1 1 1

Food products 1 1 1

Finance 2 1 1

Commerce 2 2 0

Total 30 25 19

2



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Key aspects identied

Community engagement was the most

commonly reported sustainability issue

among the SGX top 50, whether or not a

materiality assessment was undertaken.

Resource use, particularly energyand water, was also a major concern

among companies.

We also determined that those companies

undertaking materiality assessments

were more likely to identify and report

specic aspects beyond the standard

heading such as community, health

and safety, and governance. These

companies are more likely to report on

additional specic topics under these

general headings.

Some sustainability aspects were

common across sectors, particularly

health, safety and environment, and

environmental impact. There were also

sector specic aspects, examples of

which are outlined here.

Property

Security of properties

Corruption and bribery

Community development and

social integration

Transport and storage

Reliable access to telecommunications

Responsible practices

Employee safety

Manufacturing

Fair employment practices

Procurement and sourcing

Innovation and productivity

The key aspects by sector are included

in Appendix 2. The sectors in which

no companies undertook materiality

assessments have not been included.

With a robust assessment of material

sustainability aspects forming the basis

of sound sustainability disclosure, it

also presents opportunities for internal

audiences, from the board to site-based

working groups, to use the information to

not only report but also to drive strategy

and link to performance.

We expect materiality assessments

to become the norm as companies

appreciate the value of determining the

sustainability aspects most important to

their business and to their stakeholders.

Indeed, taking such an approach will

allow companies that have previouslydone little in terms of sustainability

reporting to rapidly mature and produce

targeted, meaningful and, hopefully,

more connected disclosures.

Leading example:Singapore TelecommunicationsLimited (Singtel)

2015 saw the release of Singtels Sixth Sustainability Report prepared inaccordance with GRI G4 core reporting. In keeping with the guidelines, theirreport places a rm emphasis on materiality, including a detailed materialityassessment process owchart. The material issues are prioritized based on

discussions with internal stakeholders, direct inputs from external stakeholders,value and supply chain analysis and lastly benchmarking research on industrial

and global best practices.



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Materiality assessments are guidedby the GRI

18 of the 19 companies undertaking a materiality assessment use the GRI frameworkas a foundation. Of these 18 companies, ve are using GRI G3 or G3.1 for guidance

and 13 are using the GRI G4. Four of these companies are also using the AA1000

AccountAbility Principles Standard for their materiality assessment.

GRI

Since its launch in 1997, the GRI

sustainability reporting guidelines

have emerged as a leading framework

for sustainability reporting. The latest

iteration of its guidelines, GRI G4, was

released in 2013 with a focus rmly on

materiality. Organizations can report in

accordance with GRI G3, GRI G3.1 or GRI

G4. However reports published after 31

December 2015 should be prepared in

accordance with GRI G4.

While GRI G3 or G3.1 does not mandate

a specic process to support the principle

of materiality, it does recommend that

companies consider both internal and

external factors to understand the

organizations signicant economic,

environmental, and social impacts as wellas those aspects that would substantively

inuence the assessments and decisions

of stakeholders.

With the introduction of the GRI G4

guidelines, the focus on materiality has

become more precise. These guidelines

recommend a process for identication,

prioritization and validation. A number

of companies using the GRI G4 also

plot their material aspects against amateriality matrix.

Additionally, the GRI G4 also requires

that companies report the boundary, or

impact, of each material aspect.

Risk management frameworks

Internal risk management frameworks

are extremely popular among the 30

companies producing sustainability

reports, with 90% demonstrating internal

processes for risk management. The

most common forms of risk managementframeworks are based on a process

of identifying risks and using internal

engagement to categorize them.

AA1000 ve part

materiality test

Four companies used the AA1000s ve

part materiality test to help determine

their key sustainability aspects. The ve

part test takes into considerationshort-term nancial impacts, policy-

related performance, peer-based norms,

societal norms and stakeholder behavior

and concerns.

Internal tests

Two of the 30 companies in the SGX

top 50 are using internal tests devised

by the organization to assess materiality.

These vary but usually involve some

type of internal and external

stakeholder engagement.

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Identifying aspect boundaries

GRI G4 requires organizations to report

on a series of standard disclosures

applicable to all organizations as well

as on specic standard disclosures

applicable to each material aspect

identied. GRI G4 also asks reporters

to determine and disclose the boundary

for each material aspect. This requires

organizations to understand where the

impact of the aspect occurs, whether

internally, externally, or both.

Of the 25 companies in the SGX top

50 that reported on their material

aspects, only 12 have identied a

boundary for them.

Of the 13 companies that used the

GRI G4 to determine materiality, all

but one sought to identify the aspect

boundaries. And of the four companies

using GRI G3, again, all but one identied

aspect boundaries.

While GRI G4 reporters appear to have

developed a sound grasp of boundary

setting, other companies however are still

struggling to point out exactly where the

impact of the material aspect occurs and

whom the aspect affects.

Many companies simply stated that the

boundaries for their material aspects

were internal and/or external to their

organization, without elaborating on

particular entities, subsidiaries or joint

ventures. Our research nds that it is

common for companies to list internaland external stakeholders (such as

employees, suppliers, contractors and

customers) but make no further mention

to aspect boundaries.

It is our view that as companies move

into their second and third year of

producing GRI G4 reports and further

rene their materiality process, they will

develop a more nuanced understanding

of boundary setting, leading to enhanced

disclosure. Such disclosures will better

enable the reader to distinguish where in

the value chain an aspect occurs, and thepropensity for the business itself to be

able to manage it.

Leading example:Genting Singapore PLC

Genting Singapore was among

the rst companies in Singapore

to disclose its sustainability

performance in line with the GRI

G4 comprehensive reporting.

FY 2014 marks the companys

second sustainability disclosure

and a thorough adherence to the

G4 principles for dening report

content: stakeholder inclusiveness,

sustainability context, materiality

and completeness. A stakeholder

engagement workshop was

conducted to identify material

issues and a detailed mapping of

sustainability issues to GRI G4 was

disclosed to illustrate relevant G4aspects for reporting.



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The GRI, the most widely used

sustainability reporting framework in

the SGX top 50, specically references

the importance of engagement with

stakeholders as part of the materiality

assessment and reporting processes.

Stakeholder engagement was used

consistently among the 25 companies

disclosing their material issues. All 25

described some level of internal and

external stakeholder engagement as part

of the materiality assessment.

Of these companies, 48% specically

mentioned efforts or an intention to

act on stakeholder concerns. This was

frequently demonstrated in a table

outlining the stakeholder, their primary

concerns and the actions taken to

address these concerns. Commonconcerns among stakeholders included

training and development, resource use

and community engagement.

As the SGX transitions towards comply

or explain reporting by their target

of FY17, we expect to see increased

disclosure and frequency and depth of

stakeholder engagement.

Understanding stakeholder needs is critical to a robust materiality assessment andyields rich information that can inform strategic thinking.

Stakeholders are engaged in the materialityassessment process

Those also mentioning

efforts to act on

stakeholder concerns

Number of

companies

disclosing

material issues

1225

Leading example:StarHub Ltd

For StarHub, stakeholder

engagement is an important

ongoing aspect of the sustainability

approach. The feedback allows them

to assess, identify and prioritize

their most signicant economic,

social and environmental impacts,

and determine what should be

included in their report. In 2014, the

company identied 12 stakeholders

(namely customers, employees,

suppliers, distributors/retailers,

business partners, investors, local

communities, media, government

and regulators, trade associations,

trade unions and NGOs and advocacy

groups). The details of their methodsof engagement, expectations,

responses to these expectations,

progress made during the reporting

period, and plans for the following

year were also systematically

disclosed in a table format.

4



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In addition to assessing the content

of the SGX top 50 sustainability

disclosures, our research also examined

the platforms and mechanisms that are

used to communicate this information.

Of the 25 companies in the SGX top 50

that disclosed the sustainability aspectsmaterial to their organization, the vast

majority are reporting in at least two

different formats, usually a combination

of a sustainability report, website,

integrated report or Environmental,

Social and Governance (ESG) section

in the annual report.

Recently we noted a decline in the

number of printed sustainability reports,

with organizations producing an

electronic report on their websites or

designing specic reporting webpages.

Globally we are also noticing moreinteractive electronic reporting with links

to video, audio and interactive diagrams.

There has been movement around

build your own report platforms,

where readers select the areas that

interest them, with the content

automatically compiled and available

to be viewed online or downloaded. This

may be the start of more stakeholder-ledreporting where specic interest groups

can target the information of greatest

interest to them.

Other companies are beginning to use

apps as a reporting tool, giving readers

mobile and interactive access to company

information. Social media is also growing

in prominence with companies using

a host of platforms to both report and

lead people to reports on their websites.

Additionally, these mediums are being

used to present a snapshot of key

initiatives, opinion pieces or particularperformance information.

By connecting information using different

formats, companies can effectively

meet the needs of different groups of

stakeholders. Innovative digital formats

offer the option to link seamlessly from

high-level information in one place to

detailed data in another, and to presentinformation in different ways for

alternative audiences.

ESG section

integrated into

annual report

Sustainability section

integrated into

annual report

SGX companies

that disclosed

material issues

ESG section

in annual report

and website

Sustainability report

section integrated

into annual report

and website

Independent

sustainability

report and

website

One reporting format Two reporting formats

25 3

13

7

1

1

Methods of reporting and communicationare changing

An EY Survey of 500 CFOs globally5found that large companies are being confronted

with an increasingly challenging reporting environment as a result of business

complexity. Stakeholders, including regulators and consumers, are challenging

companies to not only improve reporting but compelling them to reconsider how they

disclose information in a fast-changing environment.

5 EY, Connected Reporting: Responding to complexity and rising stakeholder demands, 2014 (accessed via http://www.ey.com/

Publication/ vwLUAssets/ey-assurance-faas-connected-reporting/$FILE/ey-assurance-faas-connected-reporting.pdf).

Leading example:Ascendas Real Estate

Investment Trust (A-REIT)

For the 2014-15 reporting period,

A-REIT disclosed its sustainability

performance in a designated

section of the annual report. The

report content is clear, concise and

graphics are adequately used toillustrate performance comparison

over different years. This report is

available for print and download

and can also be accessed via an

interactive online format. The

interactive report features easy

navigation through each page, with

the option of adding a bookmark to

keep your place. The table contents

menu also allows readers to jump

between the sections, allowing them

to locate the areas they are most

interested in.

5



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Conclusion and recommendations

While the number of reporters is likely to rise after the implementation of comply

or explain reporting, it is yet to be seen whether this will lead to improved quality of

reports, or a greater uptake of materiality assessments.

Volume and quality

of reporting

While our research found that 80%

of the SGX top 50 makes some

mention of sustainability, only 60% are

producing sustainability reports. Withthe introduction of comply or explain

reporting, it is expected that most will

begin to report in some capacity.

However, regardless of this, there is no

guarantee it will improve the quality of

the reports.

As the ndings suggest, of those who

currently report on sustainability,

the level of sophistication varies

substantially. Many reporters are using

sustainability reports, or CSR sections

of annual reports, as a forum to list

their achievements and involvement in

environmental and social projects. Very

few reporters are disclosing performance

data, and even fewer are assessing

whether their sustainability goals from

the previous period have been met.

To improve the quality of reporting,

future reports need to instead focus

attention on presenting a balanced

overview of the companys sustainability

information, allowing stakeholders to

gain a comprehensive understanding of

the companys nancial and non-nancial

performance.

Materiality

Like the quality of reporting, we will have

to wait and see whether or not materiality

will be a focus for new reporters.

Regardless of this, listed companies

should focus further on their material

aspects, particularly as businesses and

stakeholders face changes, and as new

aspects emerge. Currently only 25

companies in the SGX top 50 reported

on sustainability aspects that are

material to their business, while only 19

involved stakeholders in this process.

Since understanding and reporting on

material sustainability aspects requires

a tailored approach, organizations will

need to consider the best way for them

to undertake the process and then

determine the most appropriate ways

to communicate in order to maximize

the benets to stakeholders and the

organization itself.

In considering the insights into

sustainability reporting, materiality

assessments and sustainability

disclosures highlighted in this report,

we recommend that organizations

continue to drive improvement insustainability disclosure by:

1. Being proactive in engaging with

the SGX during and even after the

Consultation Exercise

2. Articulating the business case

for sustainability reporting

including responding to

regulatory requirements

3. Undertaking an assessment to

understand material sustainability

aspects and put in place strategies

to manage them

4. Engaging with internal and

external stakeholders as part

of the materiality process

5. Using outcomes of the materiality

process to drive relevant reporting

that includes understanding and

articulating where the impact of

the material aspect occurs

6. Developing a reporting framework

to communicate more effectively

7. Selecting appropriate channels

and platforms to communicate

with audiences



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Consequences of mandatory

reporting: international

examples

The introduction of comply or explain

reporting requirements impacts

companies differently depending onwhere they are based. Before 2011, four

countries (China, Denmark, Malaysia

and South Africa) saw the introduction

of mandatory reporting requirements,

each with different effects on listed

companies. Those in China and South

Africa signicantly increased their

disclosures, adopting reporting guidelines

to increase comparability. South

African companies also found increased

propensity to receive assurance and thus

increase disclosure credibility. In contrast,

however, companies in Denmark and

Malaysia adopted a different stance

towards increasing disclosure. Those

in Denmark embraced and embedded

sustainability in their supply chain

management, and committed themselves

to the United Nations Global Compact

(UNGC), while Malaysian rms adopted

specic reporting guidelines focusing

on CSR.6

Given the current reporting environment

in Singapore, the implementation

of comply or explain reporting

requirements will likely see newreporters adopting guidelines such

as those from the GRI, and mature

reporters increasingly seeking assurance

from established independent audit

organizations such as EY.

6 Ioannou, I and Serafeim, G. The consequences of mandatory sustainability reporting:

Evidence from counties(Harvard Business School, 2014).

Our approach

While the breadth and depth of

materiality assessments varies

between organizations and

the intended application of the

assessment, our approach is guided

by reporting frameworks and

standards including the GRI G4,

IIRC and the AA1000 Standard,

which acknowledge materiality as a

fundamental principle for reporting.

We tailor our approach to reect the

needs of our clients ranging from

signicant guidance and support to

higher level materiality assessments.

This is also seen in our approach to

sustainability reporting where we

work with clients to recommend

reporting frameworks, design reportstructures, identify key performance

metrics, gather data and supporting

commentary, and advise on drafting

sustainability reports.



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Appendix 1: Materiality denitions

Source Denition of materiality

Global Reporting Initiative7 Materiality is the threshold at which aspects become

sufciently important that they should be reported.

International Integrated

Reporting Council8

A matter is material if it is of such relevance and

importance that it could substantively inuence the

assessment of providers of nancial capital with regard

to the organizations ability to create value over the

short, medium and long term.

Sustainability Accounting

Standards Board9

SASB uses the US Supreme Court denition of

materiality. US Federal law requires publicly listed

companies to disclose material information, dened

by the US Supreme Court as information presenting

a substantial likelihood that the disclosure of the

omitted fact would have been viewed by the reasonable

investor as having signicantly altered the total mix

of information made available. (TSC Industries, Inc. v.

Northway, Inc., 426 U.S. 438 (1976)).

Singapore Exchange

Investors Guide to Reading

Sustainability Reports10

A material issue is [one] that could signicantly

inuence the decisions, actions and performance of an

organization or its stakeholders.

AccountAbility AA1000

Guidance Note on the

Principles of Materiality,

Completeness and

Responsiveness11

Information about [an organizations] sustainability

performance required by its stakeholders for them to

be able to make informed judgments, decisions and

actions.

7 Global Reporting Initiative, Materiality, 2014 (accessed via https://g4.globalreporting.org/how-you-should-

report/reporting-principles/principles-for-dening-report-content/materiality/Pages/default.aspx).8 American Institute of Certied Public Accountants, Materiality: Background Paper for IR. American Institute

of Certied Public Accountants(accessed via http://www.theiirc.org/wp-content/uploads/2013/03/IR-

Background-Paper-Materiality.pdf).9 SASB, Why is it important?, 2014 (accessed via http://www.sasb.org/materiality/important/ ).10 Singapore Exchange, An Investors guide to Reading Sustainability Reports, 2014 (accessed via http://www.

sgx.com/wps/wcm/connect/6d1251df-ca80-456d-a96c-ccc2eec2c068/SGX+Investors+Guide+Sustainabilit

y+Brochure_D6.pdf?MOD=AJPERES).11 AccountAbility, Guidance Note on the Principles of Materiality, Completeness and Responsiveness as they

Relate to the AA1000 Assurance Standard, AccountAbility, 2014 (accessed via http://www.accountability.

org/images/content/1/8/189/AA1000%20Guidance%20Note%20-%20Low%20Res.pdf ).



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Appendix 2: Key material aspects by sector

This information has been compiled from

those companies that have undertaken

a materiality process. Sectors where

there were no companies undertaking a

materiality assessment are not included

in this list.

Companies in many of these sectors

identied common aspects such as

health and safety and environmental

impacts in their materiality assessments.

In the summary, we have chosen to

highlight aspects that tended to be more

specic to particular industries.

* Only one company reports material

aspects in this sector

The table below details some of the key material sustainability aspects by sector.We have assigned companies to the same industry group, or sector, as referenced

by the SGX.

Sector Material aspects

Finance* Economic performance

Resource use

Non-discrimination

Anti-bribery

Market presence

Transport and storage Responsible business practices Customer focus

Workplace health and safety

Employment

Supporting local communities

Multi-industry Economic performance Corporate governance

Environmental performance

Labor practices

Product excellence

Property Emissions Corruption and bribery


Health, safety and environment

Tenant satisfaction

Regulatory compliance

Manufacturing Workplace health and safety

Learning and development

Resource use

Innovation and productivity


Agriculture* Workplace health and safety Anti-corruption

Environmental management

Waste management

Emissions

Food products* Labour relations


Supplier relations

Consumer relations Sustainability in plantations

Services Corporate governance

Regulatory compliance


Responsible provision of products and services

Training and development



19/20

Lets continue the conversation

Find out how we can help you tackle

your sustainability challenges at

ey.com/SG/en/Services/Assurance/

Climate-Change-and-Sustainability-Services

Contact

K. SadashivPartner, (ASEAN)

Climate Change and Sustainability Services

Tel: +65 6309 8813

Mob: +65 9008 4635

[email protected]

Keat Meng Mak

Head and Partner, Assurance

Tel: +65 6309 6738

[email protected]

Materiality and sustainability disclosure: Key insights from the Singapore Exchange top 50 | 17


20/20

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