How they manage their people, energy and climate were the top material issues for leading sustainability corporates of 2016. This was accompanied by high prioritization of human rights (diversity and inclusion), ethics and corruption, the health and safety of employees, and related standards in supply chains…
Human resources (including talent management) again moved to the top of the list for the 24 DJSI Industry Group Leaders of 2016. Second position among the top 20 topics across sectors was taken by Supply Chains (including responsible management and traceability), followed this year by climate and energy in third position.
There were some important differences between what companies formally state to be their top material topics and what topics they most talk about in their annual sustainability reports (SRs) and integrated reports (IRs). An automated content analysis of the reports by the 24 Industry Group Leaders shows that five out of the top eleven most emphasized topics relate to climate and energy (including GHGs, energy efficiency and renewables). The automated analysis was done as MaterialityTracker adds machine learning capabilities to its analysis of the key material topics of the DJSI Industry Group Leaders.
The automated analysis was performed by our new Materialitytracker partner eRevalue, using their Datamaran business intelligence platform. The results of the automated analysis identify topics with the highest level of emphasis in non-financial reports (defined as SRs and IRs in this analysis). These results were compared with our manual analysis of what leading corporates formally state (for example with a Materiality Matrix) to be their top material topics of the year. With eRevalue, we also assessed the topics with the highest level of emphasis in the 24 Industry Group Leaders annual financial reports (ARs). This illustrated important differences between conventional ARs and their more recent non-financial peers.
Leading corporates devote more attention to Corporate Governance in ARs, with higher emphasis placed on the topics employee benefits, shareholder activism, investor relations, board composition and executive compensation (found among the top 20 topics).
Figure 1: Most emphasised topics in non-financial reports by DJSI Industry Group Leaders of 2016 (Source: Datamaran)
While the top 20 topics formally stated as most material in IRs or SRs include external development-related topics such as community impact, environmental stewardship, improved access, food and nutrition as well as public health and education, these topics do not feature among the top 20 topics more emphasized in both annual financial and non-financial reports. They are rather addressed in an internal, business operational context (for example employee health and training) or addressed broadly through a reference to human rights. This implies that external developmental issues (and by implication the SDG agenda) are not addressed in much detail in reporting by the 24 sustainability leaders. This finding is likely to look different if the analysis were done on specific sectors such as the natural resource extractive industries.
Other than people, energy and climate, consistency in top issues formally stated as material and also most emphasized in non-financial reporting by the 24 Leaders included the generic topic of Responsible Business, Strategy and Execution with ESG in mind. Relative consistency was also found on the topics of Water (ranked 17th from our manual analysis versus 12th from the software analysis) and Resource Productivity (including materials management, waste and recycling, ranked 14th from our manual analysis versus 10th, 14th and 19th from the automated analysis). The same can be said of customer satisfaction (ranked 15th and 13th from the two analyses). A surprising consistency between formally stated material topics in non-financial reporting versus most emphasized topics in financial reporting, was the topic of information security and privacy. This topic ranked 13th from our manual analysis of SRs and IRs and 9th from the automated analysis of ARs.
The top 20 topics from our analyses are listed in the table below, showing the results of our manual analysis of what is formally stated in non-financial reporting by the 24 Industry Group Leaders, and the results from the automated analysis of respectively non-financial and financial reports.
Table 1: Top twenty issues for 24 DJSI Industry Group Leaders of 2016
The manual analysis was done of reporting by the 24 DJSI Industry Group Leaders as announced by RobecoSAM in September 2016. A manual analysis was done of the reporting (mostly SRs and IRs, and ARs in complementary analysis) to identify what the 24 companies formally state to be their most material topics for the reporting year (2015-2016). The core of the analysis was focused on (based on availability) three companies with IRs, four companies with AR only (but including sustainability information), 14 companies with one AR and one SR, one company with only an SR (alongside quarterly financial reports), and two companies with only an AR (one releasing an SR biennially and one with only web-based sustainability reporting to complement the AR).
Automated Analysis (using narrative data analytics)
An automated analysis of the same reports (SRs, IRs and ARs of the same 24 companies) was performed by eRevalue’s narrative data analytics platform, covering the same reporting year. This detected the topics most emphasized. The Datamaran ontology is dynamic i.e. topics are amended and more topics included over time to ensure results reflect current developments for continuous relevance. Topic emphasis is described as High, Medium, Low or No Mention. High topics are those with a high number of hits in each source and/or frequently included in key sections of the source. Medium topics are those with a moderate number of hits in each source and/or included in key sections of the source, though found rarely otherwise. Low topics are those with a low number of hits in each source and are not included in key sections of the source.
Related terms (such as GHGs, CO2, carbon) are detected and aggregated. The related count is then normalized with reference to the size of the report, prevalence relative to other topics mentioned in the same report, plus a weighing is performed. The weighing is based on the location of a term within the report (e.g. mention of GHGs in environmental chapter; or mention in CEO Foreword). eRevalue has an online database of 45,000 corporate reports of publicly listed companies, and can provide further sectoral analysis for clients.