MODULE 3.

SUSTAINABILITY & SUSTAINABILITY REPORTING

DEFINING SUSTAINABILITY AND SUSTAINABLE DEVELOPMENT

The notion of sustainability is rooted in the wider concept of sustainable development. There have been numerous
attempts to define what is meant by sustainability and sustainable development. However, the most widely used definition was
first developed in 1987 by the World Commission on Environment and Development - also known as the Brundtland Commission
- in an UN-sponsored study entitled Our Common Future, which is used by many governments and organizations:

"Sustainable development is development that meets the needs of the present without compromising the ability of
future generations to meet their own needs."

It contains within it two key concepts:

.
• the concept of 'needs', in particular the essential needs of the world's poor, to which overriding priority should be given;
and
• the idea of limitation imposed by the state of technology and social organization on the environment's ability to meet
present and future needs.

This report also implored the present generation to take immediate action to avert the risk of irreversible ecological damage.
Although the definition of sustainable development is broad, the report valuably points out that:

"Sustainable development is not a fixed state of harmony, but rather a process of change in which the exploitation of
resources, the direction of investments, the orientation of technological development, and institutional change are made
consistent with future as well as present needs."

Sustainable development in these terms can be seen as a global aspiration. The use of the Brundtland definition by
many organizations in their management and reporting on sustainable development and CSR signals a widespread consensus
on the central role organizations have in ensuring future generations can meet their own needs. It evidences an acceptance that
sustainable development requires the political will of governments, organizations, and communities.

This definition also requires organizations to consider the wider and longer-term consequences of decisions. This is the
route to achieving long-term sustainable value for investors and stakeholders and involves considering the impact of economic
activities - things bought, investments made, waste and pollution generated - on the natural and human resources on which they
depend, to avoid irreparable damage to the productive capacity of these resources.
Practically, this requires organizations to consider the consequences of economic decisions on the natural environment, on
economic development, and on the social conditions in which people live and work.

The World Business Council for Sustainable Development's three-pillar model of economic growth, ecological balance,
and social progress is also a useful reference point for understanding sustainability. This reinforces the message that long-term
maximization of shareholder value for public companies will undoubtedly be intertwined with their environmental, social, and
economic performance, where:

o Social performance reflects an organization's impact on people and social issues, which include (a) health, skills, and
motivation on the people side, and (b) human relationships and partnerships on the social side.
o Environmental performance relates to the natural resources consumed in delivering products and services.
o Economic performance continues to include financial performance but will increasingly reflect an organization's wider
impact on the economy. This allows organizations and stakeholders to recognize that profitability, growth, and job
creation lead to compensation and benefits for families, and tax generation for governments.

The term ESG, is also used extensively, particularly by the investment community, reflects the view that managing environmental
and social topics is a governance issue for organizations, a proxy for the quality of their management teams, and a process to
assess whether they are positioned for long-term success. The combination of these three terms also provides a more tangible
and easily understood set of concepts that does not carry any other connotations currently held for the term "sustainability" or
"corporate responsibility". The terms environmental, social and governance can be explained as follows:

Environmental Social Governance

 The E, or environmental, component of The S, or social, component of ESG The G, or governance, component of
ESG information encompasses how a includes information about the ESG incorporates information about a
company is exposed to and manages company's values and business company's corporate governance. This
risks and opportunities related to relationships. For example, social could include information on the
climate. natural resource scarcity, topics include labor and supply-chain structure and diversity of the board of
pollution, waste, and other standards, employee health and safety, directors; executive compensation;
environmental factors product quality and safety, privacy and critical event responsiveness; corporate
data security, and diversity and resiliency; and policies on lobbying,
inclusion policies and efforts. political contributions, and bribery and
corruption.

SUSTAINABILITY REPORTING

Sustainability reporting is a term commonly used to describe a range of practices where organizations provide
information on sustainability matters, in accordance with globally accepted standards. Such disclosures enable organizations to
measure, understand and communicate their ESG performance and then set goals, and manage change more effectively. Often,
they go hand in hand with the setting of performance targets related to ESG impacts. Sustainability reporting can relate to the
reporting to stakeholders of an organization's strategies, priorities, policies and practices concerning sustainability issues, the
sustainability performance of an organization and how sustainability impacts the operations. Sustainability reporting can also,
among other things, discuss how an organization is dependent upon and manages the environment, society and governance, the
risks and opportunities associated with these dependencies, as well as an organization's sustainability related responsibilities
and accountabilities.

Sustainability reporting has become a widespread feature across societies, and it is now a standard practice in many
large organizations, particularly in the business world. Sustainability reporting practices are diverse as sustainability reporting
remains largely a voluntary practice. Organizations can choose whether they publish a sustainability report, how they prepare it,
what information they include, as well as the form and medium they publish the information. Expectedly, sustainability reporting
differs substantially from traditional financial reporting which is based on strictly and largely mandatory frameworks and
enforcement mechanism for non-compliance.

The sustainability reporting landscape has also gone through substantial changes and continues to evolve. What
started several decades ago with some pioneering companies preparing inexperienced attempts at environmental reports has
over the years developed into a standard practice. Sustainability reporting attracts interest across stakeholder groups, ranging
from NGOs to investment bankers. As sustainability reporting has become more widespread and grown in prominence, an
increasing number of regulatory initiatives have emerged in different countries and regions. These initiatives place various
expectations on organizations and the reports they published. In addition, the reporting landscape is strongly shaped by several
reporting frameworks prepared by non-state organizations seeking both to hep organizations prepare their reports and to create
a more standardized practice.

Different Names and Forms of Sustainability Reporting

Sustainability reporting is by far still the most common for all stakeholders but is not the only name used for this type of
reporting. Earlier, it was common for organizations to publish environmental, social or EHS-reports (environment, health and
safety). There are also plenty of ESG reports, triple bottom line reports, corporate citizenship reports, corporate responsibility
reports, accountability reports, responsible business report, creating shared value report, environmental report, and corporate
social responsibility reports out there. More rec ently, the term "non-financial reporting" has become increasingly prominent
(although often broader in scope than sustainability issues), perhaps because it provides a contrast to conventional financial
reporting (i.e., the annual report). These terms will be used interchangeably throughout the discussion.
Sustainability reports also come in various forms. The traditional standalone sustainability report, published on an
annual basis in addition to the financial report, continues to remain a common form in many organizations. Others have turned to
producing integrated reports, in which various types of social, environmental and broader economic information is presented
alongside the financial information in a single report. In additional to the reports published with a regular cycle, many
organizations are reporting sustainability information though their website or on social media. Such reporting offers an
organization the possibility to reach different stakeholder groups than it would with a regular report, as well as potentially facilitate
interaction and dialogue with the stakeholders.

Purpose of Sustainability Reporting

 Sustainability reporting plays a role in accountability relationships as it is a means by which organizations communicate
with a range of stakeholders. While an organization can produce reports on sustainability related performance for internal
purposes (such as those for internal decision-making purposes), the focus remains to communicate to a much broader range of
stakeholders. While stakeholders to an organization's sustainability reporting are usually external to the organization (e.g.,
investors, business partners, customers, suppliers, local communities, civil society, legislators, regulators and policy makers)
they can also be stakeholders internal to the organization (e.g., employees).

However, while sustainability reporting has developed into a common practice, the credibility of sustainability reports is
not always considered to be very high. As reporting is till to a large extent a voluntary practice, for which there is no formal audit
mechanism, stakeholders regularly express concerns that sustainability reports could be used for "greenwashing". At the same
time, in the investment community there is an increasing awareness of how relevant an organization's sustainability impacts and
dependencies can be for risk levels and long-term success. This serves as a driver compelling organization to focus on the
quality of the information they provide for their stakeholders.

NATURE OF SUSTAINABILITY INFORMATION

Sustainability information includes both financial and non-financial information. Financial information has a direct link with the
financial accounting system and is expressed in monetary units. Non-financial information means that it is not presented in
monetary terms and is not based on an accounting standard. Non-financial information can be both quantitative, such as tons (or
units) of greenhouse gas, or qualitative, such as governance processes, the reputation of an organization or the organization's
impact on the state of biodiversity.

Non-financial information is often more difficult to handle compared with financial information because there are generally no
accepted reporting principles, and the data can take many different forms. It is often the case that this information is qualitative
and can be difficult to measure and access. These difficulties should not limit the use of non-financial information because this
kind of information might be very relevant to information users, whether citizens, investors or society at large.

For instance, an organization can measure, and present information related to energy in financial terms referring to expenditure
on energy. In non-financial terms it could be about carbon dioxide emissions where the distinction between energy gained from
renewable and non-renewable sources also makes a difference. Some of the environmental factors are quite easily converted
into financial terms. Other indicators, for example, attention to biodiversity and ecosystem services, might have consequences
that are less easy to calculate in monetary terms. The same is often the case with social issues that could range from employee
satisfaction to the number of women or ethnic minorities in management positions - issues that are difficult to express as, and
often unnecessary to turn into, financial figures. It doesn't, however, mean that they would be less important

EXHIBIT 1:1 Examples of Financial and Non-Financial Environmental Information

Energy Waster Water Procurements

Financial Expenditure on Disposal costs Water bills Price of purchases
transportation heating
Non-financial CO2 tons (per person) Waster in tons/ Water consumption Share of eco-labeled
number of collections/ (cubic meters) and fair-trade products
recycled waste

Consequently, for sustainability to be measurable and reportable, performance indicators need to be chosen. For sustainability
reporting to be meaningful, it needs to be connected to the strategy of an organization. Therefore, the indicators need to be
relevant for the organization. There is a risk that the indicators chosen will not be the best possible ones with reference to
sustainability. For example, the amount of recycled waste could be less important than whether the organization was able to
reduce the creation of waste in the first place. In addition, it is important to remember that sustainability information is not only
about minimizing negative effects (e.g., greenhouse gas emissions) and preventing negative issues (e.g., accidents having
environmental or social implications). It is also about enhancing positive impacts, such as using more sustainable products or
production methods, innovative new services, or increasing the wellbeing of employees.

Some of the essential elements of sustainability reporting compared with financial reporting are presented in Exhibit 1.2.

EXHIBIT 1:2 Differences Between Sustainability Reporting and Financial Reporting

 Emphasis in financial reporting Emphasis in sustainability reporting
Time scale The reported year Future orientation
Focus Issues that organization directly Wider sustainability impacts
controls
Economic view Material Intangible
Data Financial Non-financial
Materiality Financial significance Any information that is significant to
readers
Users Shareholders and investors Stakeholders

DEVELOPMENT OF SUSTAINABILITY REPORTING

Sustainability reporting can be put into a continuum of developments since the 1980s. In the late 1980s, the first
voluntary environmental reports were published. Companies with environmentally sensitive operations, especially large polluters,
started to develop sustainability reporting. This was done partly as a response to pressure from non-governmental organizations
that criticized the power of multinational companies. This indicates the importance of sustainability reporting as a tool in
communicating with stakeholders and managing business reputation. At the same time, the development of voluntary codes of
environmental conduct and eco-auditing led to the development of environmental management systems (EMS) and the creation
of standards, such as the IS014000 standard series. The ISO 14001 standard, which provides requirements for environmental
management systems, was first launched in 1996. The European Union soon launched its own Eco-Management and Audit
Scheme, EMAS.

Since the mid-1990s, sustainability reporting has developed in various directions. Companies with socially sensitive
operations started to develop corporate social responsibility (CSR) reporting, which had some roots in earlier philanthropic
movements. The European Union, for instance, currently defines CSR simply as "the responsibility of enterprises for their
impacts on society", One of the drivers of CSR reporting was concerns about labor conditions in supply chains that were
becoming more complex while human rights and particularly the use of child labor had become concerns for consumers.
Sustainability reporting developments have taken different forms, one of them being triple bottom line (TBL) reporting, where the
three dimensions are social, economic and environmental, or people, planet and profit. At the same time, global organizations
supporting sustainability reporting were founded. One of them is the Global Reporting Initiative (GRI), which has developed a
voluntary sustainability reporting framework. In addition, there are country-specific initiatives, such as Connected Reporting,
developed in the United Kingdom, which aims to provide a new approach to corporate reporting and improve annual reports and
accounts.

The social emphasis of sustainability is visible in the UN's Global Compact, which was launched at the turn of the
millennium. It encourages businesses worldwide to adopt sustainable and socially responsible policies and to report on their
implementation. It concentrates on the areas of human rights, labor, environment, and anti-corruption. The OECD also has
Guidelines for Multinational Enterprises that are recommendations by to governments, aimed at providing voluntary principles for
responsible business conduct. One example of changing concerns is that the 2000 update of these Guidelines added
recommendations on the elimination of child labor and forced labor, and new chapters on combating corruption and consumer
protection, whereas the 2011 update contained a new chapter on human rights. Also, the attention paid to climate change issues
is now more pronounced.

Another development was the launch of the ISO 26000 guidance for social responsibility in 2004. It is voluntary
guidance and is not used as a certification standard unlike other ISO standards. According to the ISO 26000 guidance, the
objective of social responsibility is to contribute to sustainable development. Social responsibility has the organization as its
focus and concerns its responsibilities to society and the environment. According to ISO 26000, the core subjects of social
responsibility are issues related to organizational governance, human rights, labor practices, the environment, fair operating
practices, consumer issues, and community involvement and development. (SO 26000, however, notes that as society's
concerns change, its expectations of organizations also change, and therefore the elements of social responsibility are liable to
change.

In addition to wider social and environmental reporting, the growing concern about climate change has made carbon
reporting more popular. One example is the Carbon Disclosure Project, which has encouraged companies and cities around the
world to measure and disclose their greenhouse gas emissions, climate change risks and water strategies.

The first reports labeled as "sustainability reports" were mostly single-issue reports that focused on environmental
performance. The reason for this was partly the high priority given to environmental concerns and partly the difficulty in grasping
the multidimensional concept of sustainability. Since the turn of the millennium, the number of more holistic sustainability reports
has increased while the share of environmental reports has decreased. Even so, in many cases sustainability reporting practices
have focused largely on environmental issues and eco-efficiency. So far, sustainability reporting has taken many different forms.
There are stand-alone reports that can be published annually or biannually. Alternatively, sustainability reporting can happen via
a suite of reports that are also published online. Although currently it is most common for organizations to publish environmental
or social information in separate reports, there are also approaches that combine them with the annual financial report. This is
reflected in the most recent and forceful development in the reporting field, the initiative of the International Integrated Reporting
Council (IRC), which is promoting the development and use of an integrated reporting framework. On the one hand, various
developments indicate that there is a demand for sustainability reporting. This need has been expressed through many
stakeholders who are developing sustainability reporting frameworks. On the other hand, the variety of concepts, frameworks
and actors has caused some confusion about concepts and even competition between developers of reporting frameworks. g

WHO ARE THE MARKET MAKERS DRIVING THE PRACTICE OF SUSTAINABILITY REPORTING?

Sustainability reporting has myriad players involved that play different roles, some of them wearing multiple hats within
the market. To better understand the landscape, sustainability reporting can be viewed as a series of market makers who
influence what is reported and elevate its importance. Reporting regulations, including the EU Non-Financial Reporting Directive
update in 2014, further spur demand and reference and/or align with the standards that have been established prior to this by
these ESG market makers.

Commitment Formers (Creating Demand)

Sustainability reporting is driven in large part by entities that set forth a series of commitments for which organizations
become members and signatories. Within these commitments, self-reporting on sustainability and requesting sustainability
reporting from entities within your value chain is often included. A leading set of commitments among investors is the UN
Principles for Responsible Investment (PRI) with more than 3,800 global signatories from over 60 countries. UN PRI signatories
collectively manage more than US$121.3 trillion in assets in management. PRI signatories include some of the largest pension
funds in the United States, Europe, South America, and Australasia. Two of the six Principles are to "seek appropriate disclosure
on ESG issues by the entities" in which they invest, and to "report on responsible investment] activities and progress toward
implementing the Principles".

For lenders, financial institutions commit to the Equator Principles (EPs) to manage environmental and social risks in
project financing. As of 2021, 124 financial institutions across 37 countries, including Bank of America, Citigroup, HSBC, and J.P.
Morgan, have officially adopted the EPs, estimated to cover more than 70% of international proiect finance debt in emerging
markets. Other ESG commitments formed by the financial sector and banking industry include the Carbon Principles and The
Climate Group. Additionally, the Ceres Coalition is comprised of more than 130 investors, advocacy groups, and other public
interest organizations working to "mobilize investor and business leadership" to reduce environmental and social risks.

As mechanisms to value and protect "natural capital" become prioritized, more than 90 global financial institutions and
partners have joined the Natural Capital Finance Alliance. In 2016, the Alliance was launched to pilot scenario modelling to
stress-test corporate lending portfolios for environmental risk, and in particular, the economic resilience of major industries to the
risk of extreme droughts. The participating financial institutions represent more than US$10 trillion in assets.

Insurers have also formed their own commitments to proactively address ESG risks through the UN Principles for
Sustainable Insurance. Over 180 organizations - including insurers representing approximately more than 25% of world premium
volume and US$14 trillion in assets under management - have adopted the Principles. The UN Principles for Sustainable
Insurance are also part of the insurance industry criteria for two leading ESG investor indexes: Dow Jones Sustainability Indices
(DJSI) and FTSE4Good.

UNGC participants commit to "enact within the sphere of their influence" for each of ten principles. As a result, UNGC
participants often set forth supplier standards and request data from suppliers, including corporate travel providers, on ESG
topics and performance.

As part of its long-term strategy, the UNGC aim to "drive business awareness and action in support of" the UN
Sustainable Development Goals (SDGS) for 2030. Although having no formal commitment or signatory structure, the UN SDs
have gained a lot of traction among companies. A 2016 survey conducted by the UNGC found that 87% of Chief Executive
Officers believe the SDGs "provide an opportunity to rethink approaches to sustainable value creation" Companies across
sectors are integrating the SDs into their sustainability reporting, particularly in the context of strategies, goals, and focus areas.

Similarly, a set of commitments have been formed to support the landmark 2015 Paris climate change agreement.
Within the new Commit to Action platform affiliated with the We Mean Business coalition), over 500 companies so far - and
growing - have committed to a series of actions including (1) adopt a science-based emissions reduction target, (2) procure
100% of electricity from renewable sources, (3) remove commodity-driven deforestation from all supply chains, and (4) Place an
internal price on carbon.

These commitments support the Science-Based Targets Initiative (with over 200 companies having approved targets)
and RE 100 (where nearly 90 companies including Coca-Cola, Goldman Sachs, Google, H&M, London Gatwick Airport, and Tata
Motors have committed to 100% renewable power).

The financial power behind these commitment-forming global investors, lenders, and corporations has created demand
for sustainability reporting among the thousands of companies in their supply chain (both large and small as well as public and
privately held) and creates a mechanism by which the practice of sustainability reporting is becoming institutionalized.

Sustainability Reporting Framework Providers (Creating Structure)

While commitment formers assist in creating demand for sustainability reporting, a group of non-profit organizations
create the structure, frameworks, guidelines, and standards for it.

The Global Reporting Initiative (GRI), established in 1997, is often referred to as the de facto guideline for sustainability
reporting in the absence of mandated reporting. In 2015, 60% of sustainability reporters referenced GRI guidelines in their
disclosures. At least partial reporting in alignment with GRI guidelines or standards, or an explanation for non-reporting, is
embedded with the Investor Listing Standards Proposal issued by the Investor Initiative for Sustainable Exchanges. In 2016, GRI
introduced new standards, which are designed to be updated more frequently with oversight from GRI's newly created Global
Sustainability Standards Board.

CDP, formerly known as the Carbon Disclosure Project and established in 2000, is an independent body that develops
and distributes annual information requests on behalf of 827 investors representing US$100 trillion in capital and approximately
purchasing organizations, including Walmart. Initially distributing a singular questionnaire on climate change, CP now also offers
Water, Forest, and Supply Chain disclosure programs. CDP also engages with cities, governments, and policymakers. In 2016,
more than 5,600 companies responded to one of CDP disclosure programs. More than 500 cities also disclosed environmental
information to CDP.

As the practice of sustainability reporting matures and the perception increases that sustainability-related externalities
are material to the financial success of companies, standards are now also under development for sustainability reporting within
investor filings and annual investor reports. Globally, the Climate Disclosure Standards Board (CDSB) - a consortium including
the CDP, Ceres, The Climate Group, the World Business Council for Sustainable Development, the World Economic Forum, and
the World Resources Institute (WRI) - has developed two frameworks for disclosures in mainstream financial reports. The first
CDSB framework is focused on climate change disclosures. The second CDSB framework has expanded beyond climate
change to include environmental and natural capital information, namely water and forest commodities.

In the USA, the Sustainability Accounting Standards Board (SASB) is currently developing standards for material
sustainability issues designed for disclosure in mandatory filings to the Securities and Exchange Commission (SEC), such as
Form 10-K and 20-F. As part of its partnership with CDP, SASB receives technical assistance in referencing CDSB protocols for
disclosure of carbon emissions. While not yet adopted in the marketplace or endorsed by regulators, SASB continues to evolve
with an update to its governance and conceptual framework published in 2017.

Additionally, the International Integrated Reporting Council (IIRC) is an entity consisting of international regulators,
investors, companies, standards providers, accountants, and nongovernmental organizations whose mission is to enable
integrated sustainability reporting to become a mainstream practice in both the public and private sectors. More than 35 investor
organizations and 100 companies, including Unilever, Clorox, Marks and Spencer, Microsoft, and Tata, participated in the IIRC
Pilot Programme. (IRC's partners include GRI, CDP, and SASB.
 Companies in Travel & Tourism that currently utilize integrated sustainability reporting practices include Cinnamon
Hotels & Resorts, HSH Group, IHG, Meliä Hotels International, and TUI Group.

Sector-specific framework providers are also gaining market influence. For example, the Global Real Estate
Sustainability Benchmark (GRESB) distributes a survey on behalf of 250 members (including 60 pension funds and their
fiduciaries). In 2016, 759 real estate companies, including those owning Travel & Tourism assets, responded to the survey. The
GRESB Survey covers both environmental and social topics with questions about supply chain standards and monitoring.
GRESB is now part of the Green Building Certification Institute, the partner organization of the US Green Building Council that
focuses on technical advancement of certification across various components of buildings and real estate. Commitment formers
may also provide their own ESG frameworks, as in the case of the UNGC, which has guidelines for its signatories to issue a
Communication of Progress (COP) on its progress toward applying the ten principles.

Similarly, the SDGs have become an unofficial reporting framework, as companies seek to map their sustainability
strategies and programs to the 17 SDGs, 169 targets and global indicators for these targets. To support this trend, GRI has also
aligned with the SDs, helping to produce the 'SDG Compass', a guide for business action on the SDGs. This is in collaboration
with the UNGC and World Business Council for Sustainable Development and is also used as a linkage document between the
SDGs and the GRI framework. The UNGC has also published an 'SDG Industry Matrix', which provides industry-specific
examples and ideas for corporate action related to the SDGs. Similarly, the World Business Council for Sustainable
Development has produced an online 'SDG Business Hub' to facilitate information sharing.

In fact, the momentum behind the SDGs is so strong that The GreenBiz 2016 State of Green Business Report opined
that they "could become a de facto standard against which companies will be judged going forward. No doubt they will become
the basis for benchmarks, scorecards and ratings by activists, investors and media seeking to identify leaders and laggards."

ESG Rankings, Ratings, and Indexes (Comparing and Benchmarking)

With the proliferation of public ESG data and increased interest in using it to inform decision-making, many
organizations rate and rank companies based on their ESG information. These include broad-based, holistic ESG rankings, such
as the DJSI, FTSE4Good Indexes, and the Global 100 Most Sustainable Companies. Additionally, there are targeted
environmental rankings, including the Newsweek Green Rankings and the CDP Leadership Index, in addition to social
responsibility rankings, such as thisphere's World's Most Ethical Companies. Additionally, regional, local, and industry rankings,
such as Brazil's Most Sustainable Companies ranking, exist.

Goldman Sachs' GS SUSTAIN platform has expanded its analysis to nearly 3,300 companies globally, which includes
the collection and analvsis of thousands of ESG data points from publicly available sources. GS SUSTAIN is described as a
"global, long-term investment research strategy designed to generate sustainable alpha by integrating analysis of global themes,
company fundamentals, and governance and stakeholder factors, including environmental and social considerations.

Notably, S&P Global Ratings announced plans in 2016 to launch ESG evaluation tools, separate from its credit rating,
to assess risks to sustainability at both the individual project and corporate entity level. The ESG Assessment will aim to rank
issuers on a five-point scale based on the degree of an issuer's exposure to ESG risk factors over a two- to five-year horizon and
beyond.

A multitude of more than 100 ratings and rankings have sprung up in recent years as the ability to use publicly
available data for comparative analysis has a relatively low barrier to entry. Rate the Raters research has been published by
Sustainability on evaluating the various ratings and organizations to help understand the strengths and weaknesses of each.

To assist organizations in navigating the numerous publicly available ESG rankings, ratings, and indexes, The Global
Initiative for Sustainability Ratings (GISR) has been established and has developed 12 principles from which the quality of ratings
can be assessed. These principles include transparency, impartiality, continuous improvement, and assurability.

ESG Research Providers

In the background behind many leading ESG rankings, ratings, and indices, a set of specialized ESG research
providers develop and apply the methodologies in addition to providing support and research products to investors and
stakeholders. Leading ESG research providers include SAM (supporting the Dow Jones Sustainability Index), MSCI (with a
series of its own ESG Indexes), Sustainalytics (supporting seven investment indexes including the UNGC 100 Index and STOXX
Global ESt Leaders Index), Trucost (supporting the Newsweek Green Rankings), and W Financial (supporting Corporate
Responsibility Magazine's annual 100 Best Corporate Citizens list). Some firms perform their own research in-house to produce
their own ratings, as is the case of oekom research (developing proprietary country, sector, and corporate ratings in addition to
publishing annual Corporate Responsibility Review reports).

ESG Aggregators and Disseminators

Another by-product of sustainability reporting is the aggregation and dissemination of information across platforms.
Examples include CSRHub, which houses data from more than 300 data sources and nearly 17,000 companies across 133
countries, and the Corporate Register, which is an online registry of sustainability reports. Additionally, ESG frameworks,
including the GRI, CDP, UN PRI, and UNGC provide repository for accessing sustainability reports. Other third-party
disseminators of information include Google, where companies' CDP Climate Change scores are posted as 'key statistics' on
public companies' Google Finance pages.

Bloomberg's ESG products provide data on more than 120 indicators for approximately 5,000 publicly listed companies
globally, based primarily on public disclosures, and are increasing coverage every day, Bloomberg's products include scoring
based on quantity of disclosure (not the quality of disclosure or the organization's ESG performance), robust customized
screening, and other portfolio optimization tools. Additionally, Bloomberg's ESG platform provides investors with access to
scores from ESG researchers including Sustainalytics.

Thomson Reuters also provides ESG data to its customers, leveraging its database of more than 60,000 companies
and 400 metrics.

Consultants, Auditors, and Data Management Providers

Consultants, auditors, and data management providers also play an important role in shaping markets. Consulting
firms, including McKinsey, Bain, and SustainAbility, regularly publish research that emphasizes the strategic importance of ESG
issues and conduct studies to elucidate the business case and potential financial implications. Large accounting firms, including
PwC, Deloitte, KPMG, and Ernst & Young, actively engage with standard providers to promote and emphasize the emerging
practice of having ESG data assured.

Data management providers, including SAP, CRedit360, CSRware, and OneReport, also work to streamline and
promote the practice of sustainability reporting.

WHO ARE THE INTENDED USERS OF SUSTAINABILITY REPORTING?

Reports about a company's social, economic and environmental performance are relevant to a diverse group of
stakeholders:

Corporate Customers

Large corporate purchasers across nearly every sector now ask their suppliers to provide information on ESG policies,
performance, and commitments. Notable examples include Walmart, which has expanded its sustainability questionnaires for
suppliers from 15 to 100 questions, and Microsoft, which is specifically requesting that its Tier 1 suppliers produce GRI reports.
Other large corporate purchasers that issue sustainability surveys to suppliers include IBM, Airbus, Siemens, Marathon Oil,
British Telecom, Boeing, Volvo, BMW, and Johnson Controls.

As with investors, corporate purchasers are also using specialized research providers such as EcoVadis, which
conducts a survey and grades suppliers on sustainability to inform decision-making and manage their value chain risks. More
than 150 companies, including Accor, Air France-KLM, Coca-Cola, ING Bank, and Michelin, use EcoVadis's supplier scorecards.

Of particular interest to corporate customers are the environmental attributes of products and services, and
mechanisms to ensure responsible labor and human rights practices within the supply chain

Investors and Lenders

 Investors are an important audience for sustainability reporting with the market size for "sustainable investments"
estimated at 30% of professionally managed assets globally.

Within the investment community there has been a shift from 'negative' to 'positive' screening on sustainability
performance. Originally, this community would seek to divest from companies or investments based on negative market
perceptions. Currently, certain investors specifically seek companies with a positive reputation, with some portfolios and indexes
focused on positive screening. ESG is perceived as a framework for managing risks and achieving above-average returns.
Mainstream investors use ESG principles to achieve above-average financial returns. For the sizable yet niche group of 'socially
responsibility investing' (SRI) firms and funds, the role of ESG is evaluated. These entities aim to be socially conscious first and
foremost, with secondary goals to achieve positive financial returns as well as positive social and environmental impacts.

Among investors, institutional investors and pension funds are an important audience, as many - notably CalPERS,
CalSTRS, TIAA-CREF, and RobecoSAM - have committed to incorporate ESG into investment decisions. Additional investor
audiences include niche SRI firms, such as Calvert and Generation Investment Management, where ESG is central to fund
selection. Mainstream firms, such as Morningstar, have begun to provide ESG ratings for specific funds for both institutional and
retail investors.

Investors are particularly interested in governance practices, value creation opportunities, and quality of management
approaches. Some investors will seek specific ESG-related criteria as part of their investment evaluations.

Lenders are also increasingly interested in ESG factors, particularly for project financing, as evidenced by the growth of
the Equator Principles as well as the growing demand to invest in green bonds and pending S&P ESG assessment ratings.

The degree to which investors utilize and value the information will vary as well. Some investors have signed the UN
PRI and request information as a best practice while others have more rigorous screening processes and evaluation criteria. In
addition to the commitment formers, investor groups have entered into association with each other around the concepts of
screening and evaluation, including the US Forum for Sustainable and Responsible Investment (US SIF), and the Global
Sustainable Investment Alliance (GSIA), which is a consortium of national-level investment forums.

Investors are also informed by ESG raters and analysts producing reports based on the assessment of a company's
Sustainability report and public disclosures. As such, some companies target investors by considering ESG rates and analysts
as well. ESG raters and analysts typically seek to easily find information on policies, programs, and performance metrics to
support integration within their methodologies for developing rankings, ratings, indices, and other products.

Employees

Sustainability is also now a leading topic of interest among the newest generation of employees entering the workforce,
with research indicating that 96% of millennials look for an employer that is environmentally aware, and employees who are
proud of their organization's socially responsible activities are more engaged, confident, and likely to stay with the company.
These trends are also highly prevalent among millennials with more than 50% of millennials indicating that they would be willing
to take a pay cut to find work that matches their values, and 90% wanting to use their skills for good. Similar trends exist among
Generation Z (or post-millennials). Research has indicated that 31% of Generation Z consumers have boycotted a company that
they perceived as following unsustainable practices.

Sustainability reports are used as an engagement and recruiting tool. in addition to environmental programs, reporting
on workforce and community engagement is of particular importance to employee audiences (both current and prospective).

Communities

Communities where an organization has a significant presence are also potential audiences for sustainability reporting.
Community audiences are generally interested in knowing an organization is responsible and strives to make a positive impact in
communities while also mitigating any potential negative impacts to communities. Information found in sustainability reporting
can help form the basis of discussion for a company's social license to operate.

Advocacy Groups and Media

 Advocacy groups (including non-governmental organizations) and media are also important audiences because their
assessments of organizations can create a multiplier effect that influences guest and other stakeholder perceptions, and overall
reputation. These audiences generally seek to easily find information on management approach to the economic,.
environmental, and social topics about which they care the most.

Because reporting is prevalent across sectors, campaign-focused advocacy groups are often able to engage in sector-
wide comparisons regarding key issues utilizing sustainability reports as a resource. Examples include Friends of the Earth and
Greenpeace, who publish regular advocacy reports, such as 'How Dirty is Your Data?'. Increasingly, leading non-governmental
organizations, such as WRI, World Wildlife Fund (WWF) and The Nature Conservancy also review companies' sustainability
reports with a focus less on 'criticism campaigns' and more on identifying collaboration and partnership opportunities based on
sector practices.

Media, both mainstream and specialized, can refer to sustainability reports when developing content for mass
consumption. For example, Skift - an online tourism industry news and research firm - publishes stories on environmental and
social practices in the industry.

Regulators and Government Agencies

Companies in Travel & Tourism, particularly cruise lines and aviation, often identify regulators and government
agencies - at the local and national levels - as a prioritized audience for the sustainability report. A company's sustainability
report provides the opportunity to demonstrate their commitment to compliance with laws and responsible business practices,
and to describe their management approach in addition to key actions and/ or investments to comply with laws and regulations.
A company's sustainability report also provides the opportunity to explain any challenges that the organization has experienced
about compliance.

Additionally, when entering new geographic markets, a sustainability report can be shared with local and national
regulators to demonstrate a company's 'social license to operate.

Furthermore, the sustainability report can explain the organization's economic, social, and environmental practices to
assist in addressing any potential concerns and/or differentiate an organization from other potential entrants in a market.

It is worth noting that regulators and government agencies are also purchasers of travel services. As with corporate
customers, they consider ESG practices in purchasing decision making. For example, the US General Services Administration
has encouraged potential vendors to disclose their environmental performance through sustainability reports or other
mechanisms.

Suppliers and Business Partners

Through sustainability reporting, organizations can communicate their expectations of suppliers and business partners,
and in numerous instances, where shared values and focus areas exist.

Industry Peers and Influencers

When reporting on sustainability, organizations should be aware that it is very likely that industry peers and influencers
will view the information for competitive benchmarking purposes. Through sustainability reporting, organizations can highlight
leading-edge practices and innovative approaches to industry challenges.

INTERNAL AND EXTERNAL BENEFITS OF SUSTAINABILITY REPORTING

Stakeholders (who may include investors, customers, employees, suppliers, NGOs, local communities, etc.) are now
more aware of the impact that businesses have on the economy, environment and society. This impact may be positive or
negative. For example, agricultural activities may create a positive economic or social impact (e.g., providing job opportunities;
improving quality of life of local communities) but may also create a negative impact on the environment in the form of local or
regional air pollution (e.g., haze generated from open burning). This negative impact may become a reputational risk to the
organization which allowed it to occur and may subsequently affect its ability to obtain funding. Sustainability-related issues,
therefore, can significantly affect an organization's risk profile, potential liabilities and its value. Hence, there is a need for the
business community to respond appropriately. Business leaders have also begun to recognize the benefits of integrating
sustainability.

Internal Benefits

Internal reasons for adopting sustainability reporting usually relate to improving an organization's performance. Reporting
processes can help increase the quality of information, both by generating additional information that was not previously
available and by improving the quality of existing data. Sustainability reporting helps to gather and organize this information and
improve management systems and the quality of management information. Paying attention to sustainability can help to drive
innovation, develop new market offerings and safeguard sustainable growth in the long run. Therefore, the process of producing
a sustainability report can be a very valuable exercise for organizations internally.

Sustainability reporting can also improve organizations' ability to understand and manage sustainability related risks and help
them better anticipate changing societal expectations. The effective management of natural resources, for instance, affects
current performance and the failure to plan may risk prospects. Further, reporting can act as a tool for leadership, increase
employee satisfaction and make organizations attractive to new employees. Sustainability reporting can also improve the internal
awareness of sustainability issues in the organization. This all helps organizations to reach better decisions and can enhance
long-term financial prospects.

Sustainability reporting can be a tool to attain cost savings because it encourages an organization to use natural resources more
efficiently, improve process efficiency and use recoverable resources. For example, paying attention to energy consumption and
possible measures to reduce it can help to reduce energy bills and thus spending. Indirect savings can occur, for instance, if the
need to pay associated environmental taxes is reduced or through reduced insurance costs

1. Effective management of sustainability risks and opportunities. The process involved in sustainability reporting
allows companies to know and better understand their sustainability risks and opportunities. This would in turn result to a more
effective assessment and management of said risks and opportunities.

ESG issues are starting to feature more prominently in the management of risks. You may consider integrating ESG
risks into your organization's risk framework. Sustainability reporting may serve as a catalyst to prompt organizations to assess
the ESG risks that may impact their businesses. Managing ESG risks can help in:

a. Reducing exposures to sustainability-related risks - Businesses are increasingly exposed to environmental

and social changes, including population growth, climate change, ecosystem decline, etc. Failure to manage
sustainability-related risks (e.g., floods arising from extreme weather or strikes arising from unsafe working
conditions) may result in an organization incurring losses or costs (eg. disruptions to production).

Therefore, if an organization proactively recognizes and manages sustainability-related risks, it can be better
placed to avoid and reduce cost impacts resulting from these risks.

Businesses are increasingly recognizing that non-financial risks may have financial impact, directly or indirectly.
For example, financial institutions are particularly vulnerable as they could be exposed to credit risks because of
ESG issues such as long-term impact of climate change, adverse weather conditions or the valuation of fossil
fuels faced by their clients which may be unpredictable.

b. Staying ahead of emerging sustainability risks and disclosure regulations - For example, when a new
requirement emerges for greenhouse gas ("GHG") emissions information, an organization which has already
considered GHG emissions as material would have already factored this into its risk considerations and will be
ready to respond.

c. Reducing the cost of capital through a lower risk profile - There is a tendency for investors to favor
organizations which demonstrate good ESG risk management. This in turn can enhance corporate value and
diminish risk, resulting in a lower cost of capital. This is because investors add risk premiums to the cost of capital
for firms with questionable environmental and social practices.

CASE STUDY:
 In 2011, Thailand suffered severe flooding, the worst in half a century. This resulted in a disruption to the supply of
parts to automobile makers Toyota, Honda and Nissan - Southeast Asia being a manufacturing hub for these
organizations. Honda was forced to halt production at its Thai plant, their second largest production base outside
Japan. Exports to Australia and Europe, among others were also affected. Financial analysts estimated that the
loss in production was more than US$500 million a month for these three companies.
This example highlights the potential losses and impacts (particularly financial) of not dealing adequately with the
sustainability-related risks in business operations.

2. Sustainable vision, strategy and business plans. Sustainability reporting encourages companies to assess, and
if necessary to update, their visions, strategies and business plans to ensure that sustainability is embedded in their
organizations. It gives companies the opportunity to determine the necessary changes in their vision strategies and performance
goals/targets for more sustainable operations.

As sustainability considerations increase, an organization that recognizes the opportunities and has the capacity to
innovate will drive growth through new products, services and customers. The introduction of sustainability-driven products and
services can carve out a niche market for the organization. General Electric's ("GE") Ecomagination initiative is one of the
leading examples of driving business growth through sustainable products and services.

CASE STUDY:
In 2005, GE introduced "Ecomagination", an initiative that focused on bringing new products and services to the market
in the green technology (clean technology) area. Realizing the potential impacts of increasing energy costs for its customer base,
GE saw opportunities to reposition its brand as a leader in clean technology. Through the development of a range of green
products and services, Ecomagination was able to innovate and drive growth. GE's Ecomagination's track record and
performance data in the period 2005 - 2014 included the following:
 US$15 billion in research and development expenditure;
 US$200 billion revenue generated;
 Four times GE overall growth;
 31% reduction in GHG emissions; and,
 42% reduction in freshwater use.

3. Improved management systems. Sustainability reporting involves tracking and gathering data which when
evaluated can identify the areas that need improvement. In addition, public reporting on performance motivates companies to
improve in succeeding reporting periods, thus, resulting to improvement in management systems, such as streamlining of
processes, reduction of costs and over-all improvement in efficiency and productivity.

4. Motivated workforce. Creating a sustainability report requires a concerted effort from companies' employees,
exposing them to the companies' commitment to sustainability. Knowing that the company is environmentally and socially
conscious increases morale and motivates the workforce to work hard for the company. When sustainability efforts, such as
employee engagement programs or health and safety programs, go beyond basic compliance with labor standards (for example,
incorporating other benefits), an organization can expect to improve its attractiveness to recruit and retain top talent and enhance
employee and supplier productivity. This can lead to longer-term benefits such as customer attraction, improved reputation,
stronger operating margins, and optimized capital expenditure. If sustainability efforts fail, such as in relation to health and safety,
the impacts may include interruption in production, investigations by vs relevant government agencies, fines and negative
publicity. Further, considering sustainability risks and opportunities may lead to cost efficiencies as illustrated in the case study
below.

CASE STUDY:
The treatment of palm oil mill effluent ("POME") results in the release of biogas including methane and carbon dioxide
which can contribute to global warming. As part of its sustainability efforts, Sime Darby has implemented a Carbon Reduction
Strategy involving the capturing of methane gas in 50% of its mills in Indonesia and Malaysia. In the period 2012 to 2013, it
reported a reduction of 74,816 tons of carbon dioxide emissions whilst capturing methane to power its Hadapan Oil Mill (Johor)
and Flemington Oil Mill (Perak), which are connected to the electricity grid. Excess electricity generated was fed back to the grid.
POME has been used alongside empty fruit bunches to produce compost, which can be repurposed as inorganic soil fertilizers.
Four of its composting plants are registered under the United Nation's Clean Development Mechanism (CDM) program and have
garnered investment from developed countries (in the form of Certified Emission Reduction credits) due to its carbon reduction
efforts under the CDM program.
These efforts resulted in cost reductions and investment revenue generation for Sime Darby.
External Benefits

External reasons to disclose sustainability information deal mostly with stakeholder communication and providing
transparency on risks, opportunities and performance, as well as establishing trust with stakeholders. The management of
reputation is also an important motivation. Thus, it is no surprise that most of the reporters are large companies and firms having
severe environmental impacts. Traditionally, active reporters have come from sectors such as chemicals and pharmaceuticals,
computers and electronics, automobiles, utilities, and oil and gas. One indication of the investment perspective is the creation of
socially responsible investment tools, such as the Dow Jones Sustainability Index that tracks the stock performance of
companies in terms of economic, environmental and social criteria.

1. Investor attractiveness. Institutional investors are now looking at the ESG practices of companies and makes this
a key element in their investment analysis and decisions. In CFA Institute Survey done in 2017, 73% of the survey respondents
answered that they consider ESG issues in their investment analvsis and decisions. Sustainability reporting, thus, provides
institutional investors easy access to ESG information of companies. At the same time, it allows companies to discuss their
sustainability performance in a clear and concise manner.

Traditionally, investors have looked at an organization's financial performance to drive their investment decisions.
However, it is fast becoming the norm for investors to evaluate ESG factors alongside financial data when determining their
investments. From 2012 to 2014, the global sustainable investment market increased by 61% to US$21.4 trillion. In Asia
specifically, responsible investment grew by 32% over this period.12 in Malaysia, local investors are beginning to consider
sustainability factors in their investment decision-making processes.

Recognizing the increasing demand from investors for quality sustainability information, mainstream research providers
such as Bloomberg, MSCI, and Thomson Reuters have begun to offer sustainability performance analysis to the market, in
particular investors. Given the increasing focus by investors, improving sustainability performance and disclosures may provide
organizations increased access to capital, locally and globally.

The increasing investor focus also led to FTSE and Bursa Malaysia introducing an ESG Index for the Malaysian market
called the FTSE4Good Bursa Malaysia Index which is part of the globally benchmarked FTSE4Good Index Series. The main
objectives of the FTSE4Good Bursa Malaysia Index are to provide support to investors in making ESG investments in listed
issuers; increase the profile and exposure for organizations with leading ESG practices; encourage best practice disclosures and
draw capital allocation and investment interest for those investors focused on ESG risks.

CASE STUDY:
Sustainability data is now becoming the norm in investment decision making processes. Organizations may miss out
on securing investment if they are unable to meet the specific sustainability criteria set by investors. For example, in 2015,
Norway's pension fund made a decision to divest from any organization where 30% of revenue is derived from mining or burning
of coal.
As one of the leading global institutional investors, this move is reflective of the increasing focus and influence of
sustainability in investment decisions.

2. Improved company reputation and brand valve. Having a sustainability report indicates the companies'
commitment to full transparency and accurate and complete reporting on both positive and negative news. Moreover, it shows
the companies' efforts towards sustainability. This improves the company's image and builds trust and respect for the company.
Thereby, improving company reputation and brand value.

It is widely accepted that reputation and brand can create value by generating demand and securing future earnings for
organizations. Issues such as sourcing of raw materials; energy and water usage; and human rights are increasingly impacting
organizational brand and reputation. Therefore, organizations will need to identify associated risks and opportunities and assess
their impacts.

Stakeholders respond positively to organizations that conduct themselves in a sustainable and ethical manner. This
can lead to increased confidence and trust among stakeholders, enhanced brand value and reputation, as well as improved
customer loyalty.

CASE STUDY:
Nike had received unfavorable media exposure in relation to labor practices since the 1990s - low wages, poor working
conditions, and the use of child labor. Nike countered this by increasing minimum wage rates, the minimum age requirements of
workers, performing audits on their factories globally, and working with NGOs to actively monitor factories. Subsequently in 2005,
Nike became the first in its sector to publish a report on wages and working conditions in their factories, and continues to post its
commitments, the standards it complies with, and audit data in its corporate responsibility report.
This example demonstrates how Nike managed the social issues affecting its operations and was then able to rebuild
its brand and reputation.

3. Stakeholder engagement. The process of sustainability reporting provides companies with opportunities for
stronger engagement with their stakeholders, which in turn can result in better relationships with them. Stakeholders would feet
empowered while the companies can gain valuable insights beneficial to their sustainability journey.

A "license to operate" (also known as "social license to operate") refers to implicit community-approval of an
organization's business operations. It does not refer to a legal or regulatory license to operate.

Organizations are increasingly recognizing the link between ongoing business success and their 'license to operate',
especially in the natural resources sector (e.g., mining) where the concept has been central for some years. A "license to
operate" can help organizations realize opportunities (e.g., the local community co-managing a project with the organization) and
manage risks to their business (e.g., boycotts or legal challenges).

Communities and various stakeholders are likely to be more supportive of organizations that engage and openly
communicate their management of EES matters.

CASE STUDY:
In India, there is an increasing pressure for companies to support and contribute to the community. Tata Steel
demonstrates its community commitment through services it offers to its company town, Jamshedpur, and the neighboring
community. Tata installed sanitation and clean water sources to the town. It supported the building of schools, hospitals and
community centers, provided financial support for the schools and medical centers (staff and supplies) and bore the cost for the
community to attend these programs through tuition payments and free health and medical benefits. Commentators have noted
that, in many respects, Tata provides a cradle-to-grave corporate welfare system that is perhaps uniquely possible in India due to
its low-cost structure. The company has trimmed operations to make it more global-efficient and competitive, cut its work force in
half, and yet still pays salaries to its laid off workers - and it hasn't had a strike in 75 years.
With the community's support, Tata was able to ensure smooth operations and avoid work stoppages

4. Competitive advantage. Awareness on sustainability reporting is still quite low for most Philippine companies. As
such, having a sustainability report may provide companies with a competitive advantage. This competitive advantage may be in
any of the abovementioned internal and external benefits.