Identifying and reporting on the most relevant, material issues for a company and its stakeholders are the foundation of sound disclosure. The level of disclosure that is being sought has never been higher, nor has there been as much at stake in terms of transparency of environmental, social and governance performance. Today, the emphasis on materiality extends beyond financial reporting to encompass sustainability disclosure. All reporting standards and frameworks in use today – financial and sustainability – focus on materiality as central to disclosure. We recognize that material issues can directly or indirectly impact AEP’s ability to create long-term value for its customers, employees, investors and society at large. That is one reason our approach to integrated reporting seeks to emphasize the connections between financial and nonfinancial performance and demonstrate a commitment to a high degree of transparency.
We have reported according to the Global Reporting Initiative (GRI) since we began this type of reporting in 2007. We also review the IR Reporting Framework and the standards being developed by the Sustainability Accounting Standards Board (SASB) to inform our disclosure. We do not believe there is a “one-size-fits-all” approach to reporting.
We consider material issues to be those that have affected, or that are reasonably likely to affect, the company’s reputation, liquidity, credit standing, capital resources or operational results. AEP conducted its first, formal materiality assessment in 2012 to evaluate the sustainability issues of importance to our stakeholders and our business. That process identified 18 material issues for AEP. In 2013, the electric utility industry conducted an industry-wide materiality assessment that identified 15 material issues. The survey was conducted by the Electric Power Research Institute (EPRI) Energy Sustainability Interest Group, to which AEP belongs.
|Material Issues of the Electric Power Industry|
Greenhouse gas emissions
Reductions of other air emissions
Habitat protection and biodiversity
Public safety and health
Employee safety and health
Community support and economic development
Engagement and collaboration
Skilled workforce availability
Economic viability of electric utilities
Source: Electric Power Research Institute Energy Sustainability Interest Group
Both assessments were aligned in identifying the most relevant issues for AEP and our industry. And, in both cases, we chose not to rank the issues in numerical order because the level of relevance can change depending on many factors. What we have found to remain constant is the issues themselves. These exercises are valuable because they allow us to see the connections between issues our stakeholders say are important to them and our business strategy, risks and opportunities.
In 2014, we validated our material issues by engaging internally and externally with stakeholders. Although there were no major changes to our material issues, the emphasis on climate change and cyber and physical security was more pronounced. These issues have also become higher priorities industry-wide. The EPRI group is currently developing performance metrics for each of the 15 material issues. We expect a first wave of metrics to be released some time in 2015.
In 2015, we will review our approach to reporting as well as our material issues to insure consistent focus on material issues.