INTERNAL AND EXTERNAL

BENEFITS OF Chapter 1

SUSTAINABILITY REPORTING
INTERNAL BENEFITS
•Internal reasons for adopting sustainability reporting usually relate to
Improving an organization's performance. Reporting processes can help
increase the quality of information, both by generating additional information
that was not previously available and by improving the quality of existing data
•Sustainability reporting helps to gather and organize this Information and
improve management systems and the quality of management information.
INTERNAL BENEFITS
1. Effective management and sustainability risks and opportunities
a) Reducing exposures to sustainability related risks- Businesses are increasingly exposed
to environmental and social changes, including population growth, climate change,
ecosystem decline, etc. Failure to manage sustainability-related risks (e.g., floods arising
from extreme weather or strikes arising from unsafe working conditions) may result in an
organization incurring losses or costs (e.g., disruptions to production).
b) Staying ahead of emerging sustainability risks and disclosure regulations - For example,
when a new requirement emerges for greenhouse gas ("GHG") emissions information, an
organization which has already considered GHG emissions as material would have
already factored this into its risk considerations and will be ready to respond.
c) Reducing the cost of capital through a lower risk profile - There is a tendency for investors
to favor organizations which demonstrate good ESG risk management. This in turn can
enhance corporate value and diminish risk, resulting in a lower cost of capital.
INTERNAL BENEFITS
2. Sustainable vision, strategy and business plans - Sustainability reporting
encourages companies to assess, and if necessary to update, their visions,
strategies and business plans to ensure that sustainability is embedded in their
organizations. It gives companies the opportunity to determine the necessary
changes in their vision strategies and performance goals/targets for more
sustainable operations.
INTERNAL BENEFITS
3. Improved management systems - Sustainability reporting involves tracking
and gathering data which when evaluated can identify the areas that need
improvement. In addition, public reporting on performance motivates
companies to improve in succeeding reporting periods, thus, resulting to
improvement in management systems, such as streamlining of processes,
reduction of costs and over-all improvement in efficiency and productivity.
INTERNAL BENEFITS
4. Motivated workforce - Creating a sustainability report requires a concerted
effort from companies' employees, exposing them to the companies'
commitment to sustainability Knowing that the company is environmentally
and socially conscious increases morale and motivates the workforce to
work hard for the company.
EXTERNAL BENEFITS
•External reasons to disclose sustainability information deal mostly with
stakeholder communication and providing transparency on risks,
opportunities and performance, as well as establishing trust with stakeholders.
EXTERNAL BENEFITS
1. Investor attractiveness
• Traditionally, investors have looked at an organization's financial performance to drive their
investment decisions. However, it is fast becoming the norm for investors to evaluate ESG factors
alongside financial data when determining their investments

2. Improved company reputation and brand value

• Having a sustainability report indicates the companies' commitment to full transparency and
accurate and complete reporting on both positive and negative news. Moreover, it shows the
companies' efforts towards sustainability. This improves the company's image and builds trust
and respect for the company. Thereby, improving company reputation and brand value.
EXTERNAL BENEFITS
3. Stakeholder engagement
•The process of sustainability reporting provides companies with opportunities
for stronger engagement with their stakeholders, which in turn can result in
better relationships with them. Stakeholders would feel empowered while the
companies can gain valuable insights beneficial to their sustainability journey.
4. Competitive advantage
SUSTAINABILITY REPORTING Chapter 2
PRINCIPLES AND PROCESS
SUSTAINABILITY PRINCIPLES
1. The Material Domain, which constitutes the basis for regulating the flow of
materials and energy which underlie existence. This principle suggests
continuous flow of resources through and within the economy as permitted by
physical laws and provides justifications for regulating the flow of materials
and energy. Policy and operational implications of this principle are concerned
with the promotion of highest resource productivity, recycling of non-
regenerative resources and regenerating energy resources that underlie
existence.
SUSTAINABILITY PRINCIPLES
2. The Economic Domain, which provides the guiding framework for defining,
creating, and managing wealth. This principle posits that there exist economic
and accounting guiding frameworks for managing wealth and aligning
economic performance with the planet's ecological processes. Policy and
operational implications of this principle are concerned with the effective
management of all capitals, including natural, financial, manufacturing, human
and social, with a focus on the wellbeing of all stakeholders. It also relies on
market mechanisms and smart regulation for the proper allocation of
resources and capital assets.
SUSTAINABILITY PRINCIPLES
3. The Domain of Life, which provides the basis for appropriate behavior in the
biosphere. This principle promotes diversity of all forms of life as the basis for
appropriate behavior in the biosphere. Policy and operational implications of
this principle are concerned with accountability and stewardship, responsibility
for the planet and conservative use of scarce resources.
SUSTAINABILITY PRINCIPLES
4. The Social Domain, which provides the basis for social interaction. This
principle suggests the basis for providing the maximum degree of freedom
and self-realization for all humans and their social interactions. Policy and
operational implications of this principle are concerned with the promotion of
tolerance as a foundation for social interactions, good citizenship, democratic
governance, equitable and fair access to resources, sustainability literacy and
sustainability enhancing concepts.
SUSTAINABILITY PRINCIPLES
5. The Spiritual Domain, which provides the necessary attitudinal, value
orientation, and acts as he basis for a universal code of ethics. This principle
advocates the recognition of the necessary attitudinal orientation as a need
for a universal code of ethics. Policy and operational implications of this
principle are concerned with the understanding of humanity's unique function
in the universe, the creation of synergy in human endeavors and linking the
inner transformation of individuals to transformation in society.
SUSTAINABILITY THEORIES
The concept of sustainability performance suggests that a firm must extend
its focus beyond maximizing short-term shareholder profit by considering the
impact of its operations on all stakeholders including the community, society
and the environment.
SHAREHOLDER/AGENCY
THEORY
•Shareholder/agency theory defines the relationship between shareowners
(principal) and management (agent) and addresses the potential conflicts of
interest between management and shareholders. This shareholder wealth
maximization theory specifies that shareholders are the owners of the firm,
and that management has a fiduciary duty to act in the best interest of owners
to maximize their wealth.
STAKEHOLDER THEORY
•The stakeholder theory suggests that sustainability activities and
performance enhancement of the long-term value of the firm fulfill the firm's
social responsibilities, meet their environmental obligations and improve their
reputation. However, these sustainability efforts may require considerable
resource allocation that can conflict with the shareholder wealth
maximization objectives and thus management may not invest in
sustainability initiatives (social and environmental) that result in long-term
financial sustainability.
LEGITIMACY THEORY
•Legitimacy theory is built on a socio-political view and suggests that firms are
facing social and political pressure to preserve their legitimacy by fulfilling
their social contract. The legitimacy theory suggests that social and
environmental sustainability performance is desirable for all stakeholders
including customers and non-compliance with social norms and
environmental requirements threatens organizational legitimacy and financial
sustainability.
SIGNALING/DISCLOSURE
THEORY
•The signaling/disclosure theory helps in explaining management incentives
for achieving all three ESG dimensions of sustainability performance and
reporting ESG sustainability performance, as well as investors' reaction to the
disclosure of sustainability performance information. This theory suggests
that firms tend to signal "good news" using various corporate finance
mechanisms including voluntary reporting of non-financial ESG sustainability
performance.
STEWARDSHIP THEORY
•Stewardship theory is derived from sociology and psychology and views
management as custodians of the long-term interests of a variety of
stakeholders rather than as exhibiting self-serving and short-term
opportunistic behavior, as under agency theory. Stewardship is "the extent to
which an individual (manager] willingly subjugates his or her personal
interests to act in protection of others' (stakeholders] long-term welfare" and
thus it is very applicable to the emerging concept of corporate sustainability
EMBEDDING SUSTAINABILITY IN
ORGANIZATIONS
Tone from the Top Identifying and Managing material Communicating and
prioritizing material sustainability matters providing credibility to
sustainability matters your sustainability
performance and
disclosures
TONE FROM THE TOP
PHASE 1 PHASE 2 PHASE 3
Sustainability is not Sustainability issues Oversight if
one of the agenda are included in the sustainability
items during the Boards Agenda integrated into Board
board meeting strategy
IDENTIFYING AND PRIORITIZING
MATERIAL SUSTAINABILITY MATTERS
•Reflect the organization’s significant ESG impacts
•Substantively influence the assessment and decisions of stakeholders
WHAT ARE SUSTAINABILITY
MATTERS
•Sustainability matters are the risks and opportunities arising from the ESG
impacts (i.e.. impacts that relate to sustainability themes such as energy,
diversity, human rights, etc.) of an organization's operations and activities.
WHAT IS MATERIALITY?
•Materiality is the principle of identifying and assessing a wide range of
sustainability matters and refining them to what are most important to your
organization and your stakeholders
MATERIALITY ASSESSMENT
•Material sustainability matters for each organization are likely to differ, even if
the organizations are in the same sector.
• Factors contributing to the determination of material sustainability matters
may include the business model and strategy, products and services, types of
stakeholders, size of the organization, geographical presence, and the
organization's risk appetite, etc.
•When applying materiality, organizations may consider formulating criteria to
determine what is significant or substantive.
APPLYING MATERIALITY ACROSS
ORGANIZATIONAL VALUE CHAIN
•In applying materiality, organizations are encouraged to closely consider all
parts of its organization's value chain. This simply means considering more
broadly the impacts of the organization's products and services beyond its
operations.
For example:
•a. once its product has left the production line, does it contribute to negative
impacts (e.g., excessive consumption of electricity due to inefficiency) during
its usage?
•b. can opportunities be created through the management of such a risk (i.e.,
product redesign using less packaging, which in turn could drive cost
efficiencies)?
FIVE STEPS TO BE CONSIDERED
IN APPLYING MATERIALITY
•Phase 1 : Objective and Scope
•Phase 2 : Identification and Categorization of Sustainability issues
•Phase 3 :Stakeholder engagement
•Phase 4 : Prioritization
•Phase 5 : Process Review
MANAGING MATERIAL
SUSTAINABILITY MATTERS
•Once material sustainability matters are reviewed and approved, the next step
is for the organization to develop its position and response with respect to
each material sustainability matter. The response could be in the form of;
•Developing policies and procedures.
•implementing various initiatives, measures or action plans.
•Setting indicators, goals and targets and a timeframe and, where possible,
setting longer term goals (e.g., five-year goals), in line with the strategic
objectives of your organization.
•Implementing new, or changing existing systems, to capture, report, analyze,
and manage data requirements associated with each material sustainability
matter.
COMMUNICATING AND PROVIDING
CREDIBILITY TO YOUR
SUSTAINABILITY PERFORMANCE
AND DISCLOSURES
It would be useful to investors and stakeholders alike if the organization will
provide a content index to its sustainability-related disclosure which could
also include relevant information in its Corporate Governance Statement or
Statement of Risk Management and Internal Control.