2025 will be an important year for Taiwan’s capital market on its promotion of sustainable development. In March 2023, the Financial Supervisory Commission released the “Sustainable Development Action Plans for TWSE and TPEx Listed Companies”, which aims to lead companies to achieve net-zero carbon emission, deepen the sustainable governance culture, improve sustainability information disclosure, strengthen stakeholder communication, and promote ESG evaluation and digitization. One of the most important milestones is that from 2025 onwards, all TWSE and TPEx listed companies must prepare and release their sustainability reports. This not only helps companies communicate and dialogue with investors, but also represents a further improvement in the implementation of sustainable governance and transparency in the information disclosure by TWSE and TPEx listed companies.
In the “Rules Governing the Preparation and Filing of Sustainability Reports by TWSE Listed Companies” announced by the TWSE, it is stipulated that companies should refer to the relevant standards issued by the Global Reporting Initiative (GRI) to prepare their sustainability reports for the previous year on an annual basis, and the core spirit of the GRI reporting framework is that companies must disclose significant sustainability topics that need to be managed to achieve sufficient communication with stakeholders and provide relevant sustainability information. “Material Topics Assessment” is the process used in the GRI framework to determine which sustainability topics are most important to the company and its stakeholders, and also the first step in promoting sustainability disclosure and the key to determining the quality of a sustainability report.
Material topics assessment can be conducted according to the following four steps：
1. Understanding the organizational structure
Firstly, the company must understand the sustainability related topics that its operations, value chain, and business relationship and activities may cover or involve, and establish a list of sustainability topics for the company which can be collected through the following different channels:
- GRI standards
- International sustainability standards and norms
- International investment institution evaluation
- Industry sustainability disclosure indicators announced by the TWSE and the TPEx
- Industry related issues of concern
- Internationally recognized frameworks for sustainability topics, such as the United Nations Sustainable Development Goals (SDGs)
2. Identify the impact and evaluate the significance
After confirming the list of sustainability topics, the company needs to further identify the actual and potential positive and negative impacts that may arise from individual sustainability topics during its operations. The company can evaluate the significance of a topic’s impact based on factors such as the likelihood of its occurrence and degree of its impact. Through this analysis process, the company can gain a more quantitative understanding of the strengths and weaknesses of sustainability topic management and analyze the potential positive and negative impacts on the economy, environment, and people (including their human rights). Taking water resource management as an example, if a company fails to implement sewage treatment, the sewage may seriously pollute rivers, damage the ecology, affect the lives of local community residents, possibly even affecting the reputation of the company. Therefore, water resource management is a high-impact sustainability topic.
3. Prioritize the impacts
Once the significance levels are confirmed, the company can rank them and determine the sustainability topics that should be prioritized for inclusion in operational strategies, resource investment, and external disclosure, thus these topics will become the company’s material sustainability topics. In the selection process, the company can also take reference from its usual interaction experience with stakeholders or collect their feedback as a reference for confirming the material topics, and then make adjustments as appropriate.
4. Communication and disclosure
After confirming the material topics, the company should fully integrate its operational strategies with material topic management during the operation process to ensure that sustainability topics that may cause positive or negative impacts are properly controlled. At the same time, the company should disclose the information in accordance with the topic guidelines of GRI standards, regularly make internal and external stakeholders aware of the company’s investment in material topic management and respond specifically to stakeholders’ expectations.
Material topics assessment not only is a key step in preparing the sustainability report, but also enables the company to fully understand and manage sustainability related risks and opportunities, effectively communicate with external parties and provide meaningful information, enhance transparency of corporate sustainability information disclosure, and assist the company in moving towards developments which are sustainable, responsible, and create long-term value.