Materiality Assessment

The material sustainability topics identified by the Group in 2018 were expected to be valid in the medium- to long-term. Given the unprecedented turbulences in 2020, the earlier results warranted a review to understand if and how CLP‘s underlying strategic objectives have been affected.

GRI reference: 102-44, 102-46

CLP's materiality assessment was updated in 2018 to consider the operating environment and the Group's strategy in the medium- to long-term. Building on that result, engagement with external stakeholders was broadened in 2019 to validate the results and to gauge feedback on the level and quality of disclosure.

The tumultuous events of 2020 have emphasised the importance for management teams to not only identify business risks and opportunities, but also to understand how these risks and opportunities might interplay in unexpected ways. As a result, companies around the world need to retest the currency of their strategic priorities to ensure that shareholders and other stakeholders remain confident in their agility, adaptability and resilience in the face of change. The review process is outlined in the diagram below:

Evolution of CLP’s materiality assessment process

In 2020, an internal review assessed whether the material topics identified continue to be valid and to evaluate the impacts of the external environment on the Company. While CLP‘s strategic priorities and the material topics had not changed, the urgency to tackle these challenges had accelerated. Moreover, the importance of good corporate governance was recognised. Guided by the CLP Value Framework, governance at CLP has provided clear direction and a solid foundation to respond promptly to the challenges arising from COVID-19.

Read more about CLP‘s materiality assessment process  

The relative importance of each material topic to different parts of the Company’s value chain is schematically represented below, showcasing the linkages to CLP’s business model.

Value Chain and Material Topics

The table below further explains why the topic is material and outlines key concerns in the CLP context. Further discussions are included in the relevant sections in this report.

Material topic

Why this is material

Key concerns in the CLP context

Responding to climate change

Climate change is unquestionably the biggest issue CLP is facing. The electric utility industry offers great opportunity to slow down climate change by coupling electrification and decarbonisation. For instance, the IEA WEO 2020 Sustainable Development Scenario (SDS) projects that the share of coal in the generation mix falls rapidly from 37% in 2019 to 5% in 2040. Renewable energy is projected to displace fossil fuel generation assets, and its share in global electricity generation grows from 27% to 72% over this same period.

  • Accelerate the low-carbon transition

  • Embrace renewables-led economic stimulus

  • Manage policy uncertainty for investments and legacy assets

  • Protect assets against physical changes in climate

  • Respond to stakeholder demand for transparency and climate action

  • Support electrification of transport and other economic activity

Harnessing the power of technology

Digital technologies including artificial intelligence, the Internet of Things (IoT) and big data offer energy companies new ways of enhancing performance and serving customer needs. As more renewable energy is introduced into the electricity system, its intermittent nature could pose challenges to system stability and reliability. Digital platforms offer a solution by balancing dynamic customer demand against different generation profiles to optimise cost efficiency, reliability and environmental performance.

  • Adapt technological innovations to enhance performance and safety

  • Create opportunities for customer engagement via digital channels

  • Develop new business offerings relating to energy management

  • Build capacity and partnerships across the innovation ecosystem

Reinforcing cyber resilience and data protection

CLP's operations are becoming underpinned by digital solutions, with more information stored in cyber space. This makes the organisation more vulnerable to cyber attacks. Effective cyber defence becomes fundamental to protect the business. The Group is expected to detect and respond to any incident promptly, and have the ability to maintain normal operations and minimise inconvenience to its customers.

  • Enable workforce decentralisation

  • Respond to changing scale and sophistication of cyber attacks

  • Enhance cyber detection and responsiveness

Building an agile, inclusive and sustainable workforce

Digitalisation and decarbonisation of the energy sector, together with intensifying demographic and labour supply issues and social and political uncertainties, present significant workforce opportunities and challenges. CLP must ensure business continuity through: managing generational knowledge transfer; attracting and retaining the new skills, talents and mindsets of a more diverse workforce; building greater organisational agility; and meeting higher social expectations as a responsible employer.

  • Create safe, resilient workplaces

  • Attract and retain tomorrow’s workforce

  • Build organisational agility and help CLP deliver its strategy

  • Support diversity and inclusion

Ensuring continuity and validity of the
materiality assessment results

The CLP materiality assessment process is guided by the Applying enterprise risk management to environmental, social and governance-related risks guidelines published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the World Business Council for Sustainable Development (WBCSD) in October 2018.

CLP's materiality assessment was updated in 2018 to consider the operating environment and the Group's strategy in the medium- to long-term. The validity of the results was confirmed in 2019 through external stakeholder engagement, and further reviewed in 2020 to closely consider the immediate challenges arising from COVID-19, geopolitics and other developments that unfolded throughout the year.

The process is summarised in the diagram below, with further details outlined in the following sections.

Materiality Assessment

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