Complete Disclosures For Material Topics

 Starting from 2025, the Financial Supervisory Commission (FSC) requires all listed and OTC companies in Taiwan to prepare ESG sustainability reports in accordance with the GRI Standards. Since many people are still unfamiliar with GRI, reports are presented in various formats.

One particularly important part of the GRI Standards to pay attention to is **GRI 3: Material Topics 2021**, especially the section on disclosures for material topics. The Taiwan Stock Exchange (TWSE) conducts annual spot checks on ESG reports, and one of the most common deficiencies is **"incomplete disclosure of material topics"**. Many companies mark "3-3" in their content index, but when you click into the text, it's often just patched-together old content that doesn't correspond to the "management approach" requirements of the 2021 version. When the TWSE identifies such deficiencies, it usually does not impose immediate fines (unless the report is completely missing). Instead, it takes the following actions: - **Issues a letter requiring supplementation**: The company is asked to provide supplementary explanations on the Market Observation Post System (MOPS), or to make improvements by a deadline in the next year's report. - **Deducts points in the corporate governance evaluation**: The corporate governance evaluation includes scoring indicators related to the quality of sustainability information disclosure. Incomplete GRI disclosures will result in deductions for that item. The original text of Disclosure 3-3 "Management of material topics" in the GRI Standards is as follows: For each material topic reported under Disclosure 3-2, the organization shall: a. describe the actual and potential, negative and positive impacts on the economy, environment, and people (including their human rights); b. report whether the organization's activities or business relationships are involved with negative impacts, and describe those activities or business relationships; c. describe its policies or commitments related to the material topic; describe the actions taken to manage the material topic and related impacts, including: i. actions to prevent or mitigate potential negative impacts; ii. actions to address actual negative impacts, including providing for or cooperating in remediation; iii. actions to manage actual and potential positive impacts; d. report the following information about tracking the effectiveness of the actions taken: i. processes used to track the effectiveness of the actions; ii. targets, goals, and indicators used to evaluate progress; iii. the effectiveness of the actions, including progress toward the targets and goals; iv. lessons learned and how these lessons have been incorporated into the organization's policies and procedures; e. report the following information about tracking the effectiveness of the actions taken: *(Note: This appears to be a duplication in the provided text; the official standard combines tracking under one point, but the intent is the same as d – processes, targets/indicators, effectiveness/progress, lessons learned, and integration into policies/procedures.)* f. describe how stakeholder engagement has influenced the actions taken (see 3-3-d), and how it informs the organization about the effectiveness of its actions (see 3-3-e). Why is the material topics disclosure section in GRI 3 the one that needs the most attention? Because very few companies provide complete reporting. Most companies disclose material topics, list them out, and better ones include management actions and targets. However, the probability of seeing companies report on points d, e, and f above is very low. In other words, after identifying material topics and taking actions with targets, you still need to track whether those actions are effective; disclose what lessons have been learned from the process and how those lessons have been incorporated into the organization's operational policies and procedures; additionally, if those actions affect stakeholders, you need to engage with them and then report how that engagement influenced the actions taken. ESG reports should be continuous — you can't have completely different material topics every year. If actions were taken last year to address actual negative impacts, report whether those actions were effective, whether progress was made toward targets and goals — include that tracking in next year's report. Since ESG reports must be prepared annually, it's best if they are tied to the company's actual management systems. This is the intended design of GRI 3. You might say this is too complicated — what happens if it's not done? Sometimes you run into issues when major assurance providers (such as DNV, SGS) perform assurance under **AA1000 Assurance Standard (AA1000AS)** or **ISAE 3000 (International Standard on Assurance Engagements 3000)**. They strictly review whether the organization complies with the 9 requirements in GRI 1: Foundation 2021, particularly the completeness of GRI 3. This includes assessing adherence to reporting principles (AA1000 emphasizes inclusivity, materiality, responsiveness, and impact; ISAE 3000 focuses on evidence collection and procedural fairness). If GRI 3-3 deficiencies are found, the firm typically: - **Requires corrections**: Recommends that the organization supplement missing information and strengthen management processes (e.g., conduct due diligence) to ensure compliance with GRI's material topic management requirements. - **Notes explanations and improvements**: Documents the deficiencies in the assurance report and requires the organization to provide detailed explanations (e.g., why omitted, future improvement plans). This helps maintain the transparency and credibility of the report. As more regulations need to be complied with and human time is limited, companies are advised to build AI workflows — for example, a GRI workflow that incorporates GRI 1/2/3 and the 200/300/400 series standards. It can include Excel files to remind you what data to input, then automatically generate corresponding compliant content for the ESG report, reducing the chance of omissions. **ISAE 3000** (full name: International Standard on Assurance Engagements 3000 (Revised), International Standard on Assurance Engagements No. 3000 (Revised)) is an international standard issued by the IAASB (International Auditing and Assurance Standards Board). It primarily applies to assurance engagements on non-historical financial information. This includes ESG reports, sustainability reports, greenhouse gas emissions statements, information security, GDPR compliance, internal controls, and other non-financial areas requiring third-party assurance. **AA1000** is a series of sustainability and accountability standards developed by the UK non-profit organization AccountAbility (AccountAbility). It began with the AA1000 Framework in 1999 and has since evolved into a modular series of standards.