EY-materiality-and-sustainability-disclosure

Materiality and
sustainability
disclosure
Key insights from the
ASX top 100

Our research
EY recently examined the sustainability disclosures of the
Australian Securities Exchange (ASX) top 100 listed companies.
Specifically, we looked at:
• Whether they referenced a process to assess their material
sustainability aspects
• Whether they provided details of that that process
• If they involved stakeholders
• If they reported on sustainability aspects material to their
business (or more general sustainability disclosures)
• What frameworks and platforms they were using to report
• Whether any were early adopters of Recommendation
7.4 (contained in the third edition of the ASX’s Corporate
Governance Council Principles and Recommendations), which
asks ASX listed companies to “disclose whether it has any
material exposure to economic, environmental and social
sustainability risks and, if it does, how it manages or intends
to manage those risks.
The research took the form of a desktop analysis in which
we examined publicly-available annual reports, sustainability
reports, corporate governance statements and company
websites. The companies included in this research were
those forming the ASX top100 as at 27 February 2015. The
information reviewed was as of 31 March 2015.
From the results we have identified six key insights. These
insights are supported by quantitative and qualitative data
extracted from the analysis as well from our experience
assisting companies to understand and report their material
sustainability aspects.
Definitions
EY’s approach to determining material sustainability aspects
is reflective of the guidance provided by the Global Reporting
Initiative (GRI) G4 Sustainability Reporting Guidelines and AA
1000 AccountAbility Principles Standard. We align with the GRI
definition of materiality in that “materiality is the threshold at
which aspects become sufficiently important that they should
be reported. 1 ”
While financial reporting refers to material information as
that which could influence the economic decision of users
of the financial 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, but also considers the importance of the
aspect to stakeholders.
This report examines whether companies in the ASX top 100
are undertaking an assessment of their material sustainability
aspects. We have chosen the word “aspect”, rather than “issue”,
based on the definition in the GRI (G4) reporting guidelines
which states that “material aspects are those that reflect the
organisation’s significant economic, environmental and social
impacts; or that substantively influence the assessments and
decisions of stakeholders 2 .” The use of the word “aspect” also
enables consideration of both risks and opportunities.
The only section in which we have specifically referenced
risk, rather than aspect, is in relation to the ASX’s Corporate
Governance Council Principles and Recommendations where
Recommendation 7.4 refers to sustainability risk.
1
GRI online Implementation Manual (https://www.globalreporting.org/resource library/GRIG4-Part2-
Implementation-Manual.pdf)
2
As per above

Contents
Executive
summary
Insight 2 —
Materiality is
gaining traction
2
7
Introduction Insight 1 —
Sustainability
reporting has a
firm foothold in
Australian public
companies
Insight 3 — Majority
of materiality
assessments are
being guided by
the GRI
4 6
Insight 4 —
Stakeholders are
being engaged
in the materiality
assessment
process
9 11
Insight 5 — The
mechanisms used
by companies
to report and
communicate
are changing
Appendix 1 —
Materiality
definitions
12
Insight 6 —
Recommendation
7.4 will drive
further disclosure
13
Appendix 2 —
Key material
aspects by sector
Conclusion and
recommendations
15
Let’s continue
the conversation —
Contacts
16
17 18
Materiality and sustainability disclosure Key insights from the ASX top 100 |
1

Executive summary
Recent changes to both regulatory and voluntary reporting frameworks have put
a new focus on sustainability disclosures with an emphasis now firmly on materiality.
EY sought to understand how these
changes are impacting on Australian
companies. We undertook a desktop
analysis of the ASX top 100 (as of 27
February 2015), looking at whether
these entities are assessing their
material sustainability aspects, how
they are undertaking that assessment
and whether a materiality assessment
resulted in more focused disclosures.
In the course of our research we
also looked at broader sustainability
disclosure, the platforms being used for
disclosure and whether companies are
already responding to Recommendation
7.4 contained in the third edition of the
ASX’s Corporate Governance Council
Principles and Recommendations.
Research results
The table on page three highlights sector
performance according to the different
criteria we assessed 3 .
For those sectors in the ASX top 100
consisting of more than five companies,
banks, energy and real estate were
most likely to undertake materiality
assessments and communicate their
sustainability disclosures, while
commercial and professional services,
diversified financial and utilities were
least likely.
Key insights from research
As a result of our research we have
identified six key insights around the
uptake and maturity of materiality
assessments and sustainability disclosure
in the ASX top 100. 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 being used
to report. As a result, our key insights
are not limited to materiality but include
broader discussion around sustainability
disclosure.
Insight 1 — Sustainability
reporting has a firm foothold in
Australian public companies
Insight 2 — Materiality is
gaining traction
Insight 3 — Majority of
materiality assessments are
being guided by the GRI
Insight 4 — Stakeholders
are being engaged in the
materiality assessment process
Insight 5 — The mechanisms
used by companies to report
and communicate are changing
Insight 6 — Recommendation
7.4 will drive further disclosure
This report examines the
results of our research
under each of these
key insight areas.
3
It is important to note that some sectors in the ASX have only one company while other have as many as
seventeen. We have assigned companies to the same industry group, or sector, as referenced by the ASX
which uses the Global Industry Classification Standard.
2 | Materiality and sustainability disclosure Key insights from the ASX top 100

Sector performance
Number of
companies
in the
sector
GICS sector
Reference
to a
materiality
process
Use of
stakeholder
engagement
for aspect
identification
Identification
of boundaries
of material
aspects
Materiality is
a recurring
process
Public
reporting
of material
aspects
Early adopters of
Recommendation
7.4
6 Banks
2 Capital Goods
5 Commercial and
professional services
2 Commercial services
and supplies
7 Consumer services
6 Diversified financials
7 Energy
3 Food and staples retailing
3 Food, beverage and tobacco
7 Health care, equipment
and services
4 Insurance
17 Materials
2 Media
1 Pharmaceuticals,
biotechnology and
life sciences
11 Real estate
2 Retailing
2 Software and services
2 Telecommunication services
6 Transportation
5 Utilities
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
Materiality and sustainability disclosure Key insights from the ASX top 100 |
3

Introduction
Historically, organisations have used the financial bottom line to benchmark success
and determine materiality thresholds, with social and environmental aspects either
overlooked or not measured.
Increasing 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, has encouraged stakeholders
from investors to NGOs to become
more interested in understanding how
organisations 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
organisations with limited or no reporting
structures 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 relative
importance of these disclosures to their
business’ performance, or to relative
importance of each aspect to their
stakeholders.
Despite reporters investing significant
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 find the aspects of most
importance to them. This dissatisfaction
was highlighted in a 2014 EY survey
which found that while investors,
analysts, and portfolio managers were
factoring non-financial risks into their
decision-making, materiality was the
missing ingredient, with one fund
International
Integrated
Reporting Council
Sustainability
Accounting
Standards Board
Global
Reporting
Initiative
Converging
developments
manager commenting that “the data is
just so wide that it is hard to zero in on
what is important and what is material 4 .”
With stakeholders driving the push for
more targeted and relevant non-financial
disclosures, regulators and voluntary
reporting organisations have responded
accordingly by focusing on the principle
of materiality, an underlying foundation
for sustainability disclosure. These
converging developments are detailed
on page five.
Australian Securities
Exchange — Corporate
Governance Principles
and Recommendations
International
regulatory trends
Australian
Investment and
Securities Commission
Regulatory Guide 247
4
Tomorrow’s investment rules: Global survey of institutional investors on non-financial performance. EY
(http://www.ey.com/Publication/vwLUAssets/EY-Institutional-Investor-Survey/$File/EY-Institutional-Investor-
Survey.pdf)
4 | Materiality and sustainability disclosure Key insights from the ASX top 100

Australian Securities Exchange —
Corporate Governance Principles and
Recommendations
International regulatory trends
International Integrated
Reporting Council
The Australian Securities Exchange (ASX)
has embedded the concept of materiality in
Recommendation 7.4 of the third edition of
its Corporate Governance Council
Principles and Recommendations which
asks companies to disclose whether they
have any material exposure to economic,
environmental and social sustainability
risks and, if they do, how they manage or
intend to manage those risks.
Both the ASX and ASIC requirements
reflect an international regulatory trend to
non-financial and sustainability disclosure.
Research released in 2013 by the Global
Reporting Initiative (GRI) reviewed
reporting requirements from 45 countries
and found 180 policies specific to
sustainability disclosure of which 72
percent were mandatory 5 . In September
2014 the EU published its requirements for
non-financial disclosure with a focus on
environment, social and employee-related
aspects.
The International Integrated Reporting
Council (IIRC) was established in 2010 and
released the International Framework in
December 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’ – financial, manufactured,
intellectual, human, social and relationship
and natural.
Australian Investment and Securities
Commission Regulatory Guide 247
Global Reporting Initiative
Sustainability Accounting
Standards Board
The ASX disclosure recommendations are
supported by the Australian Investment
and Securities Commission (ASIC)
Regulatory Guide 247 (March 2013) with
Section 247.63 recommending the
directors’ operating and financial review
(OFR) includes a discussion of
environmental and other sustainability
risks where those risks could affect the
entity’s achievement of its financial
performance or outcomes disclosed.
The Global Reporting Initiative (GRI) is the
most commonly used international
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 Standards
Board (SASB) was established at Harvard
University in 2011 and is aimed at developing
sustainability accounting standards which
include analysis of material aspects for a
range of industries.
While each of these regulatory or non-regulatory frameworks have their own specific explanation of materiality (as detailed in appendix one)
there is a high degree of consistency in their definitions.
With the focus now on material sustainability disclosure, EY sought to understand how Australian companies were responding and the
impact this was having on sustainability reporting. We set out to examine the sustainability reporting habits of the ASX top 100 and how
they were factoring materiality into their disclosures. In undertaking this research we identified six key insights in regard to materiality and
sustainability disclosure among the ASX top 100.
5
GRI online: Carrots and Sticks (https://www.globalreporting.org//resourcelibrary/Carrots-and-Sticks.pdf)
Materiality and sustainability disclosure Key insights from the ASX top 100 |
5

Insight 1: Sustainability reporting has a firm
foothold in Australian public companies
Our research revealed that 100 percent of the ASX top 100 reported at least some
dimension of sustainability however, the depth of reporting varies enormously across
the ASX with some companies providing targeted and extensive disclosures and others
offering limited information.
With even the poorest performers
reporting on at least one sustainabilityrelated
topic, it appears that even before
the new ASX disclosure principles come
into effect, the benefits of reporting are
being realised.
It is our expectation that sustainability
reporting will continue to grow as listed
companies outside the ASX top 100
respond to Recommendation 7.4 and
begin to understand the benefits of such
reporting as a mechanism to engage with
a broad set of stakeholders and illustrate
that they understand and are managing
their key sustainability risks.
While Recommendation 7.4 is
expected to lead to greater reporting
throughout the ASX, the Corporate
Governance Council’s Principles and
Recommendations are also viewed as a
leading practice governance reporting
framework by other organisations. As
a result, we expect to see non-listed
Australian companies following the lead
of ASX listed companies in disclosing
sustainability risk.
As sustainability reporting continues
to evolve we believe this will lead to
greater alignment of financial and nonfinancial
reporting, especially as leading
organisations also integrate sustainability
into their business strategy. More
integrated or ‘connected’ reporting 6 ,
that links the financial results with the
business context, will continue to develop
and rise in prominence as companies
respond to growing reporting demands
and provide stronger links between nonfinancial
and financial performance.
Integrated reporting also brings with it a
demand for more reliable and accurate
non-financial disclosure to meet similar
requirements as current financial
disclosures. It also allows for robust,
consistent, timely and strategic reporting
to communicate with the organisation’s
broader value creation stakeholders.
6
http://www.ey.com/AU/en/Services/Assurance/Financial-Accounting-Advisory-
Services/EY-connected-reporting-responding-to-complexity
6 | Materiality and sustainability disclosure Key insights from the ASX top 100

Insight 2: Materiality is gaining traction
Our research found that 50 percent of the ASX top 100 provided some evidence
of a process to identify their material sustainability aspects. In the ASX top 50,
this rose to 76 percent of companies.
Of those 50 companies in the ASX top 100 that provided some
evidence of a materiality assessment, 42 described the process
while eight only referenced a process with no supporting
commentary.
There are some sectors that are clearly ahead in respect to
implementing a materiality approach.
Real estate, energy and banks lead the way with over 80
percent of companies in these sectors undertaking materiality
assessments. It should be noted that this is also true of the
pharmaceutical and insurance sectors although both sectors
consist of a significantly smaller number of companies.
Consumer services, software, retailing and health care appear
to be missing the opportunity, with no companies exploring
materiality. Indeed, health care was also notable for its generally
poor level of sustainability reporting.
In the ASX top 100 there are 22 companies with a recurring
materiality process, of which 19 are performed annually and
three biennially.
Real estate
90% 11
Energy 86% 7
Banks 83% 6
Insurance 75%
4
Insurance 75%
4
Food and
staples retailing
67%
3
Diversified financials
Health care equipment
and services
Software and services
Consumer services
17%
Retailing 2
Evidence of a materiality process used
No evidence of a materiality process used
6
7
2
7
Number of companies in each sector
Banks
83%
17% 6
Capital goods
50%
50%
2
Commercial and
professional services 20%
80%
5
Commercial services
and supplies
50%
50%
2
Consumer services 7
Diversified financials 17%
83%
6
Energy
86%
14% 7
Food and staples retailing
67% 33% 3
Food beverage and tobacco
Health care equipment
and services
33% 67%
3
7
Insurance
75%
25% 4
Materials
59%
41%
17
Media 33%
67%
2
Pharmaceuticals,
biotechnology etc.
Real estate
Retailing
Software and services
100%
90%
10%
1
11
2
2
Telecommunication services
50% 50%
2
Transportation
67% 33% 6
Utilities
40% 60%
5
Number of companies in each sector
Evidence of a materiality process used
No evidence of a materiality process used
Materiality and sustainability disclosure Key insights from the ASX top 100 |
7

Key aspects
being identified
Our research found that environment
is the most reported sustainability
issue in the ASX100, whether or not a
materiality assessment is undertaken. This
reflects findings by Australian Council of
Superannuation Investors that companies
reporting on sustainability are more likely
to focus on compliance-related reporting
of environmental and health and safety
aspects. 7
Our research suggested that those
companies undertaking materiality
assessments were more likely to identify
and report specific aspects. These
companies still tend to report under the
general headings such as community,
health and safety, governance and
people however they are then more
likely to refine and focus their disclosure.
For example, while the overall heading
may be ‘our community’, companies
undertaking materiality assessments
were then more likely to refer to specific
aspects under that heading such as
‘unemployment in the local community’.
We found that many sustainability
aspects identified as material were
common across sectors. These included
aspects such as health and safety, and
environmental impact.
There were also sector specific aspects.
Some examples of these are provided in
the next column.
Banking sector
• Consumer protection
• Affordability for customers in need
• Transparency and reporting
• Financial literacy
• Environmental, social and governance
risks in lending
Insurance sector
• Customer experience
• Insurance affordability
• Community resilience
• Leadership operating in a way that
has a positive effect on society
• Product responsibility putting
customers’ needs first
Pharmaceuticals,
biotechnology and life
sciences sector
• Ensuring the safety and quality
of therapies
• Ethical marketing and promotion
of products
• Transparent and ethical conduct
of clinical trials
• Security of supply of critical products
• Responding to and minimising
instances of counterfeit drugs
Key aspects by sector are included
in Appendix 2 of this report. Those
sectors where no companies undertook
a materiality assessment 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 of most
importance to their business and to
their stakeholders. Indeed, taking such
an approach will allow companies that
have previously done little in terms of
sustainability reporting to rapidly mature
and produce targeted, meaningful and,
hopefully, more connected disclosures.
7
Corporate Reporting in Australia: Disclosure of sustainability risks among S&P/ASX200 companies.
Australian Council of Superannuation Investors (http://www.acsi.org.au/images/stories/ACSIDocuments/
generalresearchpublic/Sustainability%20Reporting%20Journey%202014.Jul%2014.pdf)
8 | Materiality and sustainability disclosure Key insights from the ASX top 100

Insight 3 — Majority of materiality assessments
are being guided by the GRI
The majority (34) of the 50 companies undertaking a materiality assessment use the
GRI framework as a foundation. Of these 34 companies, 16 are using GRI G3/ G3.1 for
guidance and 18 are using the GRI G4. Others are using risk management frameworks,
AccountAbility’s five part materiality test, or internal testing.
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, were
released in 2013 with a focus firmly on
materiality. Organisations 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/ G3.1 does not mandate a
specific process to support the principle
of materiality, it does recommend that
companies consider both internal and
external factors to understand the
organisation’s significant economic,
environmental, and social impacts as well
as those aspects that would substantively
influence 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 of identification,
prioritisation and validation. A number
of companies using the GRI G4 also
plot their material aspects against a
materiality matrix.
Additionally, GRI G4 also requires that
companies report the boundary, or
impact, of each material aspect. This is
explored further in the section on page
ten titled Identifying aspect boundaries.
Frameworks used by the fifty companies in the ASX100 with
a materiality process
50
ASX 100
companies
that disclose
material issues
18
GRI G4
16
GRI G3/3.1
Risk management frameworks
Other companies are using internal risk
management frameworks to identify
key environmental, social and economic
aspects. Six companies of the 50
undertaking materiality assessments
are using risk management to guide
their process. The most common risk
management frameworks are based on
a process of identifying risks and then
using internal engagement to categorise
them based on consequence and
likelihood scenarios.
6
Risk
management
frameworks
5
Account
Ability’s
AA1000
5
Internal test
AA1000 five part
materiality test
Five companies used the AA1000’s five
part materiality test to help determine
their key sustainability aspects. The five
part test takes into consideration shortterm
financial impacts, policy-related
performance, peer-based norms, societal
norms and stakeholder behaviour and
concerns.
Internal tests
Five of 50 companies in the ASX top
100 are using internal tests devised by
the organisation to assess materiality.
These vary but usually involve some
type of internal and external stakeholder
engagement.
Materiality and sustainability disclosure Key insights from the ASX top 100 |
9

Identifying aspect boundaries
GRI G4 requires organisations to report
on a series of standard disclosures
applicable to all organisations as well
as on specific standard disclosures
applicable to each material aspect
identified. GRI G4 also asks reporters
to determine and disclose the boundary
for each material aspect. This requires
organisations to understand where
the impact of the aspect occurs either
internal to the organisation, external to
the organisation or both.
Of the 50 companies in the ASX 100
that have a materiality process, 38
have identified a boundary for their
material aspects.
Of those companies using the GRI G4
to determine materiality, a majority
(14 companies) sought to identify
internal and external boundaries
for each material aspect however
the other seven did not specify the
aspect boundary. The majority (14
organisations) of the GRI G3 reporters
disclosed general geographical
reporting boundaries and not
boundaries specific to each
material aspect.
Our analysis suggests that even GRI
G4 reporters have not yet developed
a strong grasp on boundary setting.
Companies are still struggling to point
out exactly where the impact of the
material aspect occurs and whom the
aspect affects. A number of companies
simply stated that the boundaries for
their material aspects were ‘internal’
and/or ‘external’ to their organisation,
without elaborating on particular
entities, subsidiaries, joint ventures
or drilling into the full value chain
including suppliers, contractors
and customers.
It is our view that as companies move
into their second and third year of
producing GRI G4 reports and further
refine 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 the propensity
for the business itself to be able to
manage it.
10 | Materiality and sustainability disclosure Key insights from the ASX top 100

Insight 4 — Stakeholders are being engaged in
the materiality assessment process
Understanding stakeholder needs is critical to a robust materiality assessment and
yields rich information that can inform strategic thinking.
The GRI, the most commonly used
sustainability reporting framework in
the ASX top 100, specifically references
the importance of engagement with
stakeholders as part of the materiality
assessment and reporting processes.
Stakeholder engagement was used with
varying levels of sophistication among
the 50 percent of companies providing
evidence of a materiality process. All
50 described some level of stakeholder
engagement as part of the materiality
assessment, with 41 of these consulting
both external and internal stakeholders.
With Recommendation 7.4
acknowledging that companies impact a
diverse range of stakeholders and the GRI
G4 specifically asking reporters to reveal
the basis for identifying and selecting
those stakeholders, we expect to see
enhanced stakeholder identification
processes such as those detailed in
AccountAbility’s AA 1000 Stakeholder
Engagement Standard. We also expect
that they will report the methodology
used to identify and prioritise the
stakeholders with whom they engage.
50
9
41
Half of the companies undertaking
materiality assessments took the further
step of obtaining stakeholder input to
validate their material aspects, with 15 of
these 25 consulting external and internal
stakeholders.
Twenty companies prioritised their
material aspects, with fifteen using
high, medium or low business impact
as the basis for prioritisation. Only five,
however, took the important step of
mapping stakeholder interests or impact
against the importance to business.
ASX 100
companies
undertaking
materiality
Internal
stakeholder
management
Internal and
external
stakeholder
engagement
Materiality and sustainability disclosure Key insights from the ASX top 100 |
11

Insight 5: The mechanisms used by companies
to report and communicate are changing
An EY survey of 500 CFOs globally 8 found 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.
In addition to assessing the content of the
ASX top 100’s sustainability disclosures
our research also examined the platforms
or mechanisms used to communicate this
information. Of the 50 companies in the
ASX top 100 disclosing material aspects,
the majority are reporting in at least two
formats with the strongest trend towards
reporting across three platforms — the
sustainability report, annual reports and
electronically (via the company website).
50
3
8
Recently we have noted a decline in
the number of printed sustainability
reports, with organisations producing
an electronic report on their websites
or specific reporting webpages. We are
also seeing more interactive electronic
reporting with links to video, audio and
interactive diagrams. There has been
movement around ‘build your report’
platforms, where readers select areas
of interest to them with the content
automatically compiled and available to
be viewed online or downloaded. This
may be the start of more stakeholder-led
reporting where specific 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 particular
performance 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 present
information in different ways for
alternative audiences.
3
4
10
1
21
ASX100 companies
that disclose
material issues
Sustainability
report only
Annual Report
(CSR section) only
Website only
Sustainability &
annual report
Sustainability
report & website
Annual report
& website
All three
One reporting format
Two reporting formats
8
Connected Reporting: Responding to complexity and rising stakeholder demands. EY (http://www.ey.com/Publication/ vwLUAssets/eyassurance-faas-connected-reporting/$FILE/ey-assurance-faas-connected-reporting.pdf)
12 | Materiality and sustainability disclosure Key insights from the ASX top 100

Insight 6: Recommendation 7.4 will drive
further disclosure
In March 2014 the ASX Corporate Governance Council released the third edition of its
Corporate Governance Principles and Recommendations with Recommendation 7.4
stating: “A listed entity should disclose whether it has any material exposure
to economic, environmental and social sustainability risks and, if it does, how
it manages or intends to manage those risks.”
While ASX listed entities need to respond
to the third edition in their first reporting
cycle after 1 July 2014, 18 percent of
the ASX top 100, from across a broad
range or sectors, have chosen to be
early adopters.
It is important to note that there is a
significant variation in the quality of
responses from early adapters. Some
have referenced their sustainability
report, or information in the annual
report, but others have included minimal
information in the Corporate Governance
Statement while others have provided
more detailed disclosure.
As with the first and second editions
of the Corporate Governance Principles
and Recommendations, we would expect
Recommendation 7.4 to quickly become
established practice, noting the degree of
disclosures will vary from company
to company.
82%
ASX 2nd edition
ASX 3rd edition
18%
1%
2%
2%
2%
Recommendation 7.4 does not provide
any specific advice to organisations on
how to assess their “material exposure”
to economic, environmental and social
sustainability risks. However it does
define material exposure as “a real
possibility that the risk in question could
substantively impact the listed entity’s
ability to create or preserve value for
security holders over the short, medium
and long terms.” Organisations will need
to determine and frame their definition of
material exposure within this context.
While not a requirement of
Recommendation 7.4, we believe that
a robust materiality assessment of
sustainability aspects is essential to
enable organisations to determine their
response.
The ASX also states that companies
can respond to this recommendation
through a sustainability report or similar,
however it is also our position that any
sustainability report cross referenced as
a response must be based on a robust
materiality assessment.
3%
2%
2%
1%
1%
1%
1%
Banks
Capital goods
Commercial and
professional services
Consumer services
Diversified financials
Energy
Insurance
Real Estate
Telecom services
Transportation
Utilities
In addition to helping organisations
respond to Recommendation 7.4,
we believe that an assessment of
sustainability aspects will provide a
range of other benefits outlined below
and importantly will also support the
intent of the ASX to raise the profile of
sustainability disclosure.
Aligned and consistent
disclosure
As referenced earlier in this section,
the commentary supporting
Recommendation 7.4 advises
organisations that they may respond
to this recommendation via a number
of mechanisms, including through a
sustainability report. This implies that
the ASX views sustainability reports as
an already established mechanism for
the disclosure of material sustainability
aspects, including risks. It is our position
that a sustainability report referenced
as a response must be based on a robust
assessment of material sustainability
aspects.
Stakeholders will also expect
consistency of reporting so responses to
Recommendation 7.4 should reflect all
communication or disclosure on material
sustainability aspects including through a
sustainability report, annual report or on
a company website. It would be unusual
for a company to provide no response
to Recommendation 7.4, while at the
same time publishing a sustainability
report particularly one based on a robust
materiality assessment.
Materiality and sustainability disclosure Key insights from the ASX top 100 |
13

Enhanced understanding
of risk
While an assessment of key sustainability
aspects differs from a business risk
assessment, there are clear benefits from
aligning the two processes. By aligning
the sustainability materiality assessment
with the business risk process,
companies are better placed to be able
to understand and manage the suite of
issues not only important to the company
but also to its stakeholders.
We find that material aspects are by their
nature not only significant to external
stakeholders but also to the organisation
and therefore worthy of consideration
in a risk assessment. A materiality
assessment of sustainability aspects
may also provide insight into new or
emerging risks thus expanding the impact
of the enterprise wide risk management
framework.
Greater focus on sustainability
across the organisation
With directors required to sign the
Corporate Governance Statement we
can also expect that, in addition to
more disclosure, there will be increased
scrutiny of sustainability information.
Boards and their associated audit and
risk committees are likely to include
sustainability information on their
agendas, as they seek assurance that
sustainability aspects are being identified
and managed appropriately.
Alignment with existing
reporting frameworks
and guidelines
The commentary supporting
Recommendation 7.4 also recognises
“the increasing calls globally for the
business community to address matters
of economic, environmental and social
sustainability”, and references a number
of reporting frameworks including the
GRI and the International Integrated
Reporting Council (IIRC).
The commentary also states that ‘how
a listed entity conducts its business
activities impacts directly on a range of
stakeholders including security holders,
employees, customers, suppliers,
creditors, consumers, governments and
the local community in which it operates.’
This statement reflects guidance from
organisations, such as the GRI and
IIRC, that recommend entities take into
consideration the aspects of importance
to the company as well as the views of
the wider stakeholder group.
The ASX definition of “material exposure”
also leans heavily on the IIRC concept of
value creation and preservation over the
short, medium and long term.
This alignment or support of such
reporting guidelines would also indicate
that the ASX considers them to be
appropriate mechanisms to identify and
disclose material sustainability aspects.
While some companies may be hampered
by the wording of Recommendation
7.4, we support the intent of the
ASX to provide stakeholders with an
understanding of the key economic,
environmental and social aspects
specific to an organisation and to more
broadly communicate these aspects to
stakeholders.
It is also important to note that 7.4 is
a recommendation, and the principles
and recommendations are set in the
context of an ‘if not then why not’
regime. Entities do not have to follow
the recommendation providing that they
give adequate or alternative discussion.
Of course it is a matter of judgement as
to what is adequate, an assessment that
will be made by their investors and other
interested stakeholders.
14 | Materiality and sustainability disclosure Key insights from the ASX top 100

Conclusion and recommendations
While there are clear leaders and followers, overall the ASX top 100 is moving steadily
towards a new era of more effective sustainability disclosure that will provide valuable
and targeted information to stakeholders. We believe this will in turn help to drive
strategy, enhance risk management and provide a platform for innovation.
While our research found that all the
ASX top 100 are disclosing sustainability
aspects, they are doing so at very
different levels of sophistication. Fifty
percent are undertaking materiality
assessments and the majority of those
are including the all-important external
stakeholder perspective. That leaves 50
companies only reporting on general
sustainability aspects — that may or may
not be of importance or relevance to
their business and their stakeholders.
It is clear however, that the ASX top 100
is still exploring the concept of assessing
material sustainability aspects as well as
the implications of material sustainability
disclosures. Since understanding and
reporting on material sustainable
aspects requires a tailored approach,
organisations 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 maximise the benefits to
stakeholders and the organisation itself.
A continued focus on material aspects
is essential as business and stakeholder
needs change, and as new aspects
emerge.
In considering the insights into materiality assessments and sustainability
disclosure highlighted in this report, we recommend that organisations continue
to drive improvement in sustainability disclosure by:
1. Articulating the business case for sustainability reporting including responding
to regulatory requirements
2. Undertaking an assessment to understand your material sustainability
aspects and put in place strategies to manage them
3. Engaging with internal and external stakeholders as part of this
materiality process
4. Using the outcomes of the materiality proves to drive focused
and relevant reporting
5. Developing a reporting framework to communicate your sustainability story
6. Knowing your key audiences and select appropriate platforms to connect with
them regarding your sustainability performance
7. Looking beyond external reporting and using the materiality assessment to
drive internal strategy
EY’s approach
While the breadth and depth of materiality assessments varies between
organisations and the intended application of the assessment, EY’s 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 reflect the needs of our clients ranging from
significant guidance and support to higher level materiality assessments. This
is also reflected in our approach to sustainability reporting where we work with
clients to recommend reporting frameworks, design report structures, identify
key performance metrics, gathering data and supporting commentary, and
write sustainability reports.
Materiality and sustainability disclosure Key insights from the ASX top 100 |
15

Appendix 1: Materiality definitions
Source
Global Reporting Initiative 9
International Integrated
Reporting Council 10
Sustainability Accounting
Standards Board 11
Australian Securities
Exchange Corporate
Governance Principles and
Recommendations,
Third Edition 12
Definition of ‘materiality‘
Materiality is the threshold at which aspects become
sufficiently important that they should be reported.
A matter is material if it is of such relevance and
importance that it could substantively influence the
assessment of providers of financial capital with regard
to the organisation’s ability to create value over the
short, medium and long term.
SASB uses the U.S. Supreme Court definition of
materiality. U.S. Federal law requires publicly listed
companies to disclose material information, defined
by the U.S. 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 significantly altered the ‘total mix’
of information made available.” (TSC Industries, Inc. v.
Northway, Inc., 426 U.S. 438 (1976)).
“Material exposure” in this context means a real
possibility that the risk in question could substantively
impact the listed entity’s ability to create or preserve
value for security holders over the short, medium or
long term.
9
GRI online: Materiality (https://g4.globalreporting.org/how-you-should-report/reporting-principles/principlesfor-defining-report-content/materiality/Pages/default.aspx)
10
Materiality: Background Paper for IR. American Institute of Certified Public Accountants (http://www.theiirc.
org/wp-content/uploads/2013/03/IR-Background-Paper-Materiality.pdf)
11
Why is it important? Sustainability Accounting Standards Board (http://www.sasb.org/materiality/
important/)
12
Corporate Governance Principles and Recommendations: 3rd edition. ASX Corporate Governance Council
(http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf)
16 | Materiality and sustainability disclosure Key insights from the ASX top 100

Appendix 2: Key material aspects by 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
ASX which uses the Global Industry Classification Standard.
This information has been compiled from
those companies that have undertaken
a materiality process. This list does not
include the sectors where there were
no companies undertaking a materiality
assessment.
Companies in many of these sectors
identified in their materiality
assessments 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
specific to particular industries.
Banks
• Consumer protection
• Affordability for customers in need
• Transparency and reporting
• Financial literacy
• Environmental, social and governance risks in lending
Capital goods*
• Market conditions and economic instability
• Reduction in global demand for commodities
• Brand and reputation
• Sustainable procurement
• Challenges that impact the ability to secure high quality project an contracts
Commercial and professional services*
• Supply chain collaboration to deliver mutually beneficial solutions
• Engaging and enabling people
• Inclusion and diversity
• Sustainable procurement
• Community investment
Commercial services and supplies*
• Monitoring competitor activity around innovation
• Impacts on the community and surrounding environment from operations
• Compliance with legislation and regulation
• Health and safety management for employees, contractors and customers
• Community impacts
Diversified financials*
• Direct economic value
• Financial implications and other risks associated with climate change
• Environmental reporting (energy use, greenhouse gas, resource efficiency)
• Environmental compliance (policies with specific social economic components)
• Labour practices
Energy
• Future energy solutions
• Indigenous participation
• Market forces and economic conditions
• Major incident prevention and response
• Road safety
Food and staples retailing
• Responsible sourcing
• Community investment and engagement
• Customer health and safety
• Human rights
• Economic performance and competition
Food, beverage and tobacco*
• Product information
• Responsible consumption
• Environmental impacts of packaging
• Sustainable sourcing
• Community engagement
Materiality and sustainability disclosure Key insights from the ASX top 100 |
17

Insurance
• Customer experience
• Insurance affordability
• Community resilience
• Leadership operating in a way that has a positive effect on society
• Product responsibility putting customers’ needs first
Materials
• Relationships with neighbouring local communities
• Land management and rehabilitation
• Human rights management
• Supply chain management
• Diversity and equal opportunity
Media*
• Editorial integrity
• Agile, innovative and collaborative culture
• Engaged workforce
• People and culture
• Community engagement
Pharmaceuticals, biotechnology and life sciences*
• Ensuring the safety and quality of therapies
• Ethical marketing and promotion of products
• Transparent and ethical conduct of clinical trials
• Security of supply of critical products
• Responding to and minimising instances of counterfeit drugs
Real estate
• Investor relationships
• Optimising portfolio performance
• Land use policy and greenfield development
• Liveable communities
• Affordability
Telecommunication services*
• Customer experience
• Privacy data and protection
• Digital literacy
• Cyber safety
• Responsible resource use
Transportation
• Infrastructure investment and network capacity
• Fleet procurement and management
• Labour relations
• Future of coal
• Intermodal competition and service levels
Utilities
• Legislative compliance and public policy
• Climate change risk
• Ethical conduct
• Customer satisfaction
• Community engagement
*Only one company reports material aspects in this sector
18 | Materiality and sustainability disclosure Key insights from the ASX top 100

Let’s continue the conversation
Find out how we can help you tackle
your sustainability challenges at
ey.com/au/sustainability
Contacts
Mathew Nelson
Asia Pacific Managing Partner
Climate Change and Sustainability Services
Tel: +61 3 9288 8121
mathew.nelson@au.ey.com
Susan Koreman
Brisbane Leader
Climate Change and Sustainability Services
Tel: +61 7 3011 3333
susan.koreman@au.ey.com
Terence Jeyaretnam
Melbourne Leader
Climate Change and Sustainability Services
Tel: +61 3 9288 8291
terence.jeyaretnam@au.ey.com
Michele Villa
Perth Leader
Climate Change and Sustainability Services
Tel: +61 8 9429 2193
michele.villa@au.ey.com
Matthew Bell
Sydney Leader
Climate Change and Sustainability Services
Tel: +61 2 9248 4216
matthew.bell@au.ey.com
Materiality and sustainability disclosure Key insights from the ASX top 100 |
19

20 | Materiality and sustainability disclosure Key insights from the ASX top 100

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About EY’s Climate Change and Sustainability Services
Governments and organisations around the world are increasingly
focusing on the environmental, social and economic impacts of climate
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Your business may face new regulatory requirements and rising
stakeholder concerns. There may be opportunities for cost reduction
and revenue generation. Embedding a sustainable approach into core
business activities could be a complex transformation to create longterm
shareholder value.
The industry and countries in which you operate as well as your
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Our global, multidisciplinary team combines our experience in
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EY can provide the right professionals to support you in reaching your
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© 2015 Ernst & Young, Australia.
All Rights Reserved.
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M1527812
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