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The average score for the seven Special Factors we evaluated was 1.68 (2.09 for South African companies vs. 1.58 for all other companies). Significantly lower overall than for the six capitals and content elements, this category also had the largest range from high to low of .92 (Figure 7.4), with only 11 companies receiving a 3 on all seven factors. Concomitantly, a smaller percentage of companies had a score of 2 or 3 for each special factor: material

Average Score by Special Factor

FIGURE 7.4 Average Score by Special Factor

risks identified (62.1%), explained how material risks are handled/mitigated (54.0%), used a materiality matrix (34.5%),36 stakeholder engagement demonstrated and explained (60.5%), connectivity of information demonstrated or explained (68.6%), and letter from chief executive officer (CEO) or chief sustainability officer (CSO) addressing organizational sustainability (67.7%). The one exception was website content supporting the integrated report (92.9%). We consider disclosures made by Wartsila,37 DSM,38 SAP,39 American Electric Power,40 and BS Financial Group41 to be excellent examples of reporting on each of the special factors.

These data suggest that the "Guiding Principles" part of the <IR> Framework will be the most challenging to follow. Connectivity of information demonstrated or explained, the key to producing an integrated report rather than a combined report, received a score of 1.76. Only 2 5 companies received a score of 3 on this item. Stakeholder engagement demonstrated and explained also scored fairly low at 1.75.42 Although identification of material risks received a score of 1.90, explanation of how material risks are handled or mitigated received a score of 1.63, and use of a materiality matrix only got a score of .97 based on the fact that most companies (nearly 60%) did not have one in their report—although some did on their website.

A comparison between South African companies and the rest of the population casts the lower scores on special factors into even sharper relief. In contrast to the rest of the sample (scored at 1.58), the average for the South African companies was 2.09—a much bigger spread than for the six capitals and content elements. Furthermore, some of the greatest differences in all of the factors occurred in special factors. The most striking disparity was in providing a materiality matrix (1.71 vs. 0.79). South African companies were also much better at explaining how material risks were handled or mitigated (2.08 vs. 1.52), showing connectivity of information (2.33 vs. 1.62), and using their website to support their integrated report (2.33 vs. 1.74). Some of these differences could be due to use of the IRC of SA Discussion Paper, which contained an in-depth discussion of materiality. Despite the fact that the term "connectivity" is not overtly mentioned, South African companies scored much higher here. Similarly, for the CEO/CSO letter, South African companies scored 2.21 in contrast to the rest of the sample's 1.83, which is also not covered in the IRC of SA Discussion Paper. Interestingly enough, there was virtually no difference between South African (1.79) and non-South African companies (1.74) on stakeholder engagement demonstrated or explained, although stakeholders received substantial discussion in the IRC of SA Discussion Paper.


The treatment of materiality in the <IR> Framework has been covered extensively in Chapter 5. Since most companies discussed materiality as a risk factor, we focused our analysis accordingly. Although not high in an absolute sense, the materiality scores indicated that companies on average did a better job identifying their material risks than they did in explaining how they handled or mitigated them. Some discussed material risks at the business unit level. The very low score for use of a materiality matrix indicates that disclosure about the process companies used for identifying material risks was generally poor, even if some did discuss the relationship between stakeholder engagement and the identification and management of material risks. Disclosure was even poorer when it came to explaining the company's definition of materiality or if and how it was making progress in managing these risks.

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