Since 2013, we have evolved our materiality process, in line with the ‘G4’ reporting guidelines from the Global Reporting Initiative (GRI). Here we re-cap on how the process was implemented, the results, and how we plan to refine it further in future.
This webpage includes information on “G4” General Standard Disclosures G4-18, G4-19, G4-20, G4-21 and G4-23. See Global Reporting Initiative (GRI) for further details on the alignment of the Sustainability Report to “G4”.
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An explanation of each of these steps is given in Materiality Process.
Step 1: Review of previous year’s report
Stakeholder feedback on the 2013 Report identified a number of issues for reporting. The following lists the priority topics which achieved a score of more the 50% in the survey:
- SGS Sustainability Services
- Compliance with laws and regulations
- Environment – materials, energy and water use, energy and climate change
- Labor practices – employee health and safety, human rights – employees, learning and development
This feedback was used during the final “Confirmation of topics” step, to ensure the materiality matrix covered the key interests of the readers of the report.
Step 2: Identification of topics
Our review of how the wider sustainability context had evolved in 2013 and again in 2014, which examined global and regional sustainability sources of news and thought leadership, such as the World Business Council on Sustainable Development, Sustainability Asia and Ethical Corporation, and sustainability events from the year, emphasized topics such as climate change adaptation, water scarcity and supply chain management. These findings were combined with the results of our stakeholder engagement to identify our most material topics. These matched well to the Global Reporting Initiative’s (GRI’s) list of “Aspects”, with the exception of “Sustainability services”, which was mentioned by a range of stakeholders and so was added to our list of topics.
Step 3: Prioritization of topics
In 2013, each topic was ranked on its importance to our stakeholders, based on how frequently, and in some cases how strongly, stakeholders had mentioned it. Each topic was also ranked on its importance to SGS, based on financial impact data such as monetization of sustainability impacts in the Green Book, and the most recent Board risk review. If neither of these sources ranked the issue, the results of a materiality exercise with representatives of senior management, where they were asked to place the GRI’s Aspects onto a blank matrix, were used. The matrix was split into bands based on priority, with issues in the top band representing the main focus of the Sustainability Report. Topics needed to score above a threshold on both axes to appear on the materiality matrix, except for a few issues which had scored highly in the sustainability context and stakeholder review, but had not been found to be as important to SGS. These were placed in a ‘holding area’ of the matrix, to determine the reaction of the Stakeholder Panel to these topics.
Step 4: Confirmation of topics
The first draft of the matrix was reviewed by a range of internal and external stakeholders, including senior management and our Stakeholder Panel. Based on this feedback, the matrix was revised. “Water management”, “Effluents and waste” and “Responsible supply chain” were left in the ‘holding area’ of the matrix, as issues we will continue to monitor closely as they gain importance, and may be material in certain affiliates, but are not currently exceeding the materiality threshold for SGS at the corporate level. Final checks of the matrix were made against the feedback on the 2012 Report, as well as newly available sources of information, such as the CATALYST employee engagement results, analyst feedback from the SGS investor days and the updated Board risk review conducted in October 2013. Finally, the materiality matrix was approved by our CEO and Sustainability Steering Committee. The matrix was revised in 2014 following an interim, high level review of material aspects. There were no significant changes to the material issues presented, although we changed the design of the matrix following feedback from our Stakeholder Panel which suggested that the ‘holding zone’ for emerging issues was confusing.
Topics (Aspects) and Boundaries
The table below lists our material topics and their boundaries (i.e. whether their effects are felt inside or outside the company). The main change from materiality results in previous years is that “Responsible supply chain” has increased in significance, reflecting greater awareness in society of the complexity of global supply chains.
For all topics with impacts inside the company, we define the boundary as our trend countries for our reporting of relevant indicators and data, enabling us to confidently report accurate and reliable performance data. These countries represent three-quarters of revenue and two-thirds of headcount from countries listed on pages [128-131] of the Annual Report.
Material Topics and Their Boundaries
Ethical Conduct Anti-Corruption Yes Some cases of misconduct, e.g. bribery and fraudulent use of the SGS brand, may impact on external parties Economic Performance Economic Performance Yes Economic value is distributed outside the organization, both directly e.g. to shareholders, and indirectly, such as infrastructure investment, but the latter cannot be accurately quantified Occupational Health and Safety Occupational Health and Safety Yes Our management of Health and Safety includes our subcontractors as well as our employees Talent Acquisition and Development Employment; Training and Education Yes Our acquisition of new talent includes potential recruits who are not currently employed by the company Energy and Climate Change Energy; Emissions Yes As a services company, our major Scope 3 emissions are from business travel. Several of our services do increase energy efficiency and reduce carbon emissions in our customers’ operations, but the total impact of this cannot be quantified accurately Sustainability Services N/A Yes Our sustainability services support our customers, their value chain and the communities in which they operate Human Rights Non-discrimination; Freedom of Association and Collective Bargaining; Child Labor; Forced or Compulsory Labor Yes Yes – Human Rights of local communities in which SGS operates and has community projects
N.B. the supplier human rights topic is addressed under Responsible Supply Chain
Diversity and Equal Opportunities Diversity and Equal Opportunity Yes No Effluents and Waste Effluents and Waste No – this issue did not meet the threshold for materiality for SGS. However, we are detecting an increase in the significance of this issue, which warrants due diligence action No – this issue did not meet the threshold for materiality for SGS. However, we are detecting an increase in the significance of this issue, which warrants due diligence action Local Communities Local Communities Yes – these impacts are felt by our employees, as members of our local communities and initiators of our community projects Yes Responsible Supply Chain Supplier Environmental Assessment; Supplier Assessment for Labor Practices; Supplier Human Rights Assessment; Supplier Assessment for Impacts on Society; Procurement Practices No No – this issue did not meet the threshold for materiality for SGS. However, we are detecting an increase in the significance of this issue, which warrants due diligence action. N.B. due to the size of our supply chain, with over 50,000 individual suppliers in trend countries, we focus efforts on our global suppliers, and sourcing where there is potential for greater environmental and social impacts, such as low-cost sourcing and major construction projects. We will continue to monitor this issue closely Water Management Water No – this issue did not meet the threshold for materiality for SGS as a whole. It may be material in particular affiliates, such as those in water-stressed regions, but further analysis is required. We will continue to monitor this issue closely No – this issue did not meet the threshold for materiality for SGS as a whole. It may be material in particular affiliates, such as those in water-stressed regions, but further analysis is required. We will continue to monitor this issue closely
2013 was the first year of using our new materiality process. Although this approach added greater objectivity, we believe it can be improved further and intend to refine it over time. This year we undertook a high level review of materiality aspects through consultation with various internal and external stakeholders at the corporate level. In future, we aim to gather key trends from our affiliates as well. Some of the surveys that are used to inform the process, such as the Community Survey, were conducted slightly earlier in the year so that the results would be available sooner, but for several surveys the schedule is set by other factors and cannot be brought forward. In addition, based on feedback from some of the stakeholders who reviewed the materiality matrix in 2013 and 2014, we will ensure more in-depth discussion in future, with greater explanation of each of the material topics on the draft matrix. We intend to strengthen our ties with our Stakeholder Panel during 2015, with discussions on key sustainability topics through the year, and a review of the Panel’s membership to ensure it reflects our global stakeholder base.