Materiality Process and Results
GRI Content: G4-19, G4-37
As an industry leader, SGS is committed to sustainable operations. To achieve these effectively, it is important that we consider and report on which issues are most critical to our stakeholders and the business. Management is deeply involved in these processes.
We decide which issues are critical through a periodic materiality assessment. This process allows us to prioritize issues through our strategies and programs, which allows us to address the issues of most importance to our business. It also ensures that we stay in touch with and respond to the information needs and expectations of our stakeholders. Any issues of importance are included in our Annual Report and our Sustainability Report.
Global Reporting Initiative (GRI) G4 guidelines
Since 2013 – when we first referenced the Global Reporting Initiative (GRI) G4 guidelines as part of a detailed materiality process – our approach to materiality has evolved in line with GRI G4 reporting guidelines.
Our approach has also evolved as we strive to move towards an integrated reporting model.
In 2016, we reached a significant milestone in our journey towards integrated reporting by merging the outputs of our materiality and business risk assessment processes. The journey began with an extensive materiality assessment process, involving a consultation with around 850 stakeholders in 52 countries. These included customers, senior managers, employees, suppliers, NGOs, ratings agencies, sustainability professionals and academics. Alongside the survey, we conducted a detailed benchmark review of globally relevant and sector-specific sustainability issues and trends.
Having conducted a weighted analysis of the results of our materiality assessment by stakeholder type, we integrated the business risks identified in our annual Board of Directors risk review to provide a more complete picture of the most salient issues for SGS. This resulted in a consolidated list of environmental, social and governance topics. Next, we conducted an impact assessment, which involved over 80% of Operations Council members participating in an online survey to rank each topic (covering business continuity, economic performance, reputation and legal compliance) according to its relative impact on the business and assessing the controls in place to manage that impact.
The outcome of the processes described above was the development of our first Business Materiality Matrix. During 2017, we carried out a high-level review of the material topics identified, adapting the Materiality Matrix to new trends. The review included the integration of updated information from sustainability ratings, financial analysts, media and investors and new business risks raised as a result of our three-level risk identification process.
Our materiality reviews are planned to be held:
- Annually: high-level materiality review
- Three-year cycle: comprehensive assessment of materiality and business risks
Phase 1 Identification of Relevant Sustainability Topics:
- In June 2016, we created a list of around 100 topics using frameworks such as the Global Reporting Initiative, the International Integrated Reporting Council (IIRC) Framework, the Dow Jones Sustainability Indices (DJSI) and the CDP criteria
- We reviewed questionnaires from socially responsible investors and analysts, customer tenders and our internal risk assessment process
- We mapped the list against our operations to identify the most relevant topics for our business and our industry
- We agreed on a shortlist of 40 topics
Phase 2 Global Stakeholder Survey and Benchmark Review:
- In July 2016, we conducted an online survey with around 850 stakeholders (representing customers, senior managers, employees, suppliers, NGOs, ratings agencies, sustainability professionals and academics) in 52 countries providing feedback
- We conducted a detailed benchmark review of globally relevant and sector-specific sustainability issues and trends
Phase 3 Data Analysis and Synchronization:
- We conducted a weighted analysis of the outputs of our materiality assessment (by stakeholder type and integrated the business risks identified in our annual board risk review) to provide a more complete picture of the most salient issues for SGS
- We consolidated a list of environmental, social and governance topics
Phase 4 Senior Level Impact Assessment:
- We conducted an impact assessment to rank each topic according to its relative impact on the business (covering business continuity, economic performance, reputation and legal compliance) and assess the controls in place to manage the impacts
- Over 80% of Operations Council members participated in this online survey
Phase 5 Prioritization of Topics:
- We calculated the median score for each topic based on its importance to stakeholders and its assessed impact on our business
- We identified, after plotting the scores, a threshold of priority topics for SGS to manage and report on
- We considered topics outside the threshold as not material and highlighted them in a different color (however, we recognized that these topics could become material over time and as such will continue to manage and observe our performance but not necessarily report on them as part of our Sustainability Report)
Topics and Boundaries
GRI Content: G4-19, G4-20, G4-21, G4-27
The table below lists our material topics and their boundaries (i.e. whether their effects are felt inside or outside the company) based on our full materiality assessment in 2016 and our high-level review of the material topics performed in 2017.
Our Materiality Matrix sets out the issues that are deemed most important to our business and our stakeholders. There are 32 topics listed (from our original shortlist of 40 topics). The reason there are fewer topics than those listed in our shortlist is because we have combined certain topics that were too alike to be listed as separate issues.
There have been some significant changes in our materiality topics since the previous assessment in 2013. New topics include “Customer Relationship Management” and “Customer Privacy and Data Protection”. Tax Strategy has also emerged as a new topic (although this is not one of our priority topics), possibly because of media attention given to some major companies in the last year that have failed to pay taxes in local jurisdictions.
|Material Issue||GRI Material Aspect||Possible Effect on SGS||Possible Effect Outside SGS|
|Operational Integrity||Occupational Health and Safety||Yes||The health, safety and wellbeing of people outside of SGS (including contractors, subcontractors, customers, visitors and neighbors) can be affected by the way in which SGS manages environmental, health and safety risks.|
|Business Ethics and Integrity||Anti-Corruption||Yes||Maintaining the highest standard of integrity is critical to our customers’ ability to deliver trusted products and services to society. In addition, the fraudulent use of the SGS brand may present risks to individuals using products and services that they believe to be from trusted sources.|
|Business and Economic Performance||Economic Performance||Yes||Economic value is distributed directly (i.e. to shareholders and through the payment of taxes which support social services) and indirectly through employment and training and through community investment.|
|Energy and Climate Change||Energy; Emissions||Yes||Carbon emissions, if not properly mitigated, contribute to global warming and climate change, which affects society. SGS’s services help to reduce carbon emissions and risks associated with climate change while supporting customers in developing products and services that have fewer adverse impacts on the planet.|
|Diversity and Equal Opportunities||Diversity and Equal Opportunity||Yes||Societies can fail when people become marginalized – denied employment opportunities, access to education and training, access to products and services, and benefits derived from community investment.|
|Respect for Human Rights||Non-Discrimination; Freedom of Association and Collective Bargaining; Child Labor; Forced or Compulsory Labor||Yes||Societies can fail when individual human rights are not observed or respected. Human rights violations can lead to the erosion of trust and trigger social and political unrest.|
|Investment in Local Communities||Local Communities||Yes||A lack of respect for and investment in local communities can lead to a lack of skills and poor employment prospects which, in turn, negatively impact local economic development.|
|Supply Chain Sustainability||Supplier Environmental Assessment; Supplier Assessment for Labor Practices; Supplier Human Rights Assessment; Supplier Assessment for Impacts on Society; Procurement Practices||Yes||Poor labor practices and exploitation in supply chains can have serious consequences on workers’ health, safety, wellbeing and livelihoods. This in turn can impact local economic development as well as political and social stability.|
|Corporate Governance||Corporate Governance||Yes||Inadequate management of business risks and opportunities can affect business performance, which, in turn, can negatively impact shareholder value and business sustainability.|
|Employee Engagement||Labor/ Management Relations||Yes||We recruit people from local communities and we migrate employees to other communities.|
|Customer Privacy and Data Protection||Customer Privacy||Yes||Exposure of confidential and commercially sensitive information can lead to fraudulent activity, such as extortion and embezzlement. A breach of trust in the management of sensitive customer data can impact our brand, our customer relationships and our bottom line. It can also impact our share price.|
|Customer Relationship Management/ Customer Satisfaction||Customer Satisfaction||Yes||Poor customer management can lead to loss of business and, ultimately, business value.|
|Brand and Brand Protection||Marketing Communications||Yes||Risks that are not effectively managed can affect reputation and brand, which, in turn, can lead to loss of business and, ultimately, brand value.|
|Market Presence||Market Presence||Yes||Customers benefit from the expansion of our services into new markets and territories.|
|Investment Strategy/Mergers and Acquisitions||Investment||Yes||Capital investments enable us to improve our facilities and enhance our services, which, in turn, benefit our employees and our customers.|
|Talent Acquisition and Retention||Talent Acquisition and Retention||Yes||Employment stability benefits local economies through the payment of wages and local taxes.|
|Talent Development and Recognition||Training and Education||Yes||Employees developing skills and reaching their potential can achieve fulfilling careers which in turn contribute to economic development.|
|Technical Developments||N/A||Yes||Improved technical developments can benefit customers and ultimately consumers by providing enhanced services and improved standards.|
|Fair and Equal Remuneration||Equal Remuneration for Women and Men||Yes||The exploitation of workers through unfair and unequal wages and benefits can impact livelihoods and impair local economic development.|
|Risk and Crisis Management||N/A||Yes||Inadequate management of business risks can affect business performance, which, in turn, can negatively impact shareholder value and business sustainability.|
|Services Development and Innovation||Products and Services||Yes||Customers benefit from innovation in our services and expansion into new markets and geographies.|
|Regulatory Compliance||Compliance||Yes||Laws and regulations govern behavior that might otherwise pose risks to individuals, society and the environment.|
|Pricing||Anti-Competitive Behavior||Yes||Fair pricing ensures that individuals and organizations along the value chain are not exploited or compromised.|
|Security of Company Assets||Security Practices||Yes||The security of people and physical assets associated with our business is of paramount importance to stakeholders and local communities.|
|Water and Waste Management||Water; Effluents and Waste||No – This topic did not meet the materiality threshold. However, we recognize that these are increasingly important issues with significant local relevance to certain affiliates. We therefore oversee water and waste as part of our EHS management system and will continue to report on our performance on these issues.||Human and animal health can be significantly compromised by issues linked to access to clean drinking water and pollution caused by hazardous and non-hazardous waste and effluents. The latter can also affect biodiversity. Economies can also be affected if manufacturers are impacted by water scarcity or contaminated water.|
|Materials Consumed||Materials||No||The overuse and eventual decline of non-renewable or valuable resources can upset biodiversity and lead to issues associated with limited resources, such as restrictive pricing, exploitation and the withdrawal of trade.|
|Indigenous Rights Protection||Indigenous Rights||No||A lack of respect for traditional customs, culture and heritage as well as the ownership of knowledge and land assets can severely impact socio-economic relations.|
|Protection of Biodiversity||Biodiversity||No||Biodiversity is essential to the Earth’s ecosystems, on which all people, animals and the environment depend. Loss of biodiversity can lead to economic and market failure through the loss of essential resources. It can also have a direct impact on the health and wellbeing of humans and animals.|
|Tax Strategy||N/A||No||National and local economies are dependent on tax as a source of revenue. Depriving economies of revenues from taxes can significantly impact the social services on which societies depend in order to thrive.|
|Role in Public Policy Developments||Public Policy||No||No.|
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