1. Held in partnership with Creating Connections This document has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this document without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this document, and, to the extent permitted by law, PwC, IIRC or their licensors do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this document or for any decision based on it. Copyright 2014. All rights reserved. Permission is granted to make copies of these slides, provided that all logos, disclaimers, copyright notices and acknowledgements on the slides are retained, and each copy bears the following credit line: "Copyright 2014. All rights reserved. Used with permission of the IIRC and PwC." In this document, PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. IIRC refers to the International Integrated Reporting Council. Acknowledgements of third party source materials are contained on the relevant slides.

2. Held in partnership with Creating Connections Held in partnership with Creating Connections Approaches to materiality Robert van der Laan – Sustainability & Responsible Governance Partner, PwC Anouk Wentink – Sustainability & Responsible Governance Manager, PwC Stathis Gould – Head of Professional Accountants in Business, IFAC Denise G. Nogueira – Sustainability Manager, Itaú Unibanco

3. Held in partnership with Creating Connections Held in partnership with Overview  Introduction  Methodologies  Real life case  Determining materiality for your own organization  Recap and conclusion

4. Held in partnership with Creating Connections Held in partnership with Creating Connections Introduction

5. Held in partnership with Creating Connections Held in partnership with Key objectives Understand approaches to determining materiality in the context of Experience how to use the materiality concept Opportunity to share your experiences and learn from others about the benefits and to tackle difficulties and challenges facing materiality Be equipped with insight into the next steps to embed the analysis into decision-making and reporting Be able to demonstrate materiality in an integrated repo rt Be familiar with the IIRC technical project

6. Held in partnership with Creating Connections Materiality in the context of Integrated Reporting ‘A matter is material if it could substantively affect the organization’s ability to create value in the short, medium or long term’ refers to 6 capitals in its value creation model, including  Financial  Manufactured  Intellectual  Human  Social and relationship  Natural Source: The International Framework

7. Held in partnership with Creating Connections Poll question 1 The most important benefit of knowing your material matters:  Answer 1 – Clarifies emerging matters  Answer 2 – Clarifies relevant information  Answer 3 – Clarifies stakeholder needs  Answer 4 – Foundation for  Answer 5 – Other

8. Held in partnership with Creating Connections Held in partnership with Relevance Benefits of having a clear picture of what is material to the business  Reports include too much irrelevant information (time consuming and costly) Internal and external reporting is not aligned Reports are not adhering to (information) needs of investors/stakeholders Organizations face more and very diverse reporting requirements 1 It provides a clear analysis of emerging matters on the short and long term 2 It clarifies the real matters and relevant management information needed for strategy execution 3 It ensures that different investor/stakeholder (information) needs are taken into account 4 It is the foundation for integrated reporting Paul Polman (CEO Unilever) describes how a lack of foresight hurt Unilever: “We missed the issue of obesity and the value of healthy and nutritional food. We were behind, while Nestlé was riding that wave. Not being in tune with society, with the benefit of hindsight, can cost you dearly.” Risks Benefits

9. Held in partnership with Creating Connections Held in partnership with Creating Connections Methodologies

10. Held in partnership with Creating Connections Held in partnership with Determining materiality for Integrated Reporting Relevance Identifying relevant matters based on their ability to affect value creation Importance Evaluating the importance of relevant matters in terms of their known or potential effect on value creation Prioritization Prioritizing the matters based on their relative importance Disclosure Determining the information to disclose about material matters Source: The International Framework

11. Held in partnership with Creating Connections Held in partnership with Materiality Analysis – Intel – An Example of Disclosure Source: Intel Business Integrated Approach, 2013

12. Held in partnership with Creating Connections Materiality comparison between reporting standards and frameworks (Global)IFRS (Global)GRI (Global)SASB (US) Audience Providers of financial capital with a perspective on short, medium and long term All existing/potential investors, lenders and other creditors All stakeholders Investors of those companies that engage in public offerings of securities registered under the Securities Act Subject matter/report purpose Value creation over time Financial performance and position Sustainability impact (economic, environmental, social, and governance) Sustainability impact (environment, social capital, human capital, business model and innovation, leadership and governance) Nature of definition Multistep process: Relevant issues effect strategy, governance, performance, prospects and are discussed by board Disclosure of material matters based on user need, and guiding principles Information is material if omitting it or misstating it could influence decisions that users make based on financial information about a specific reporting entity. Relevance based on the nature or magnitude, or both, of the items to which the information relates in the context of an individual entity’s financial report Organisation driven materiality The report should cover aspects that: - Reflect the organization’s significant ESG impacts; or - Substantively influence the assessments and decisions of stakeholders SASB identifying minimum set of sustainability topics that have a significant impact on most, if not all, companies in an industry and which—depending on the specific operating context—are likely to be material to a company within that industry; guided by materiality definition adopted by U.S. Securities laws and case law Disclosure formIntegrated report Financial statementsSustainability (GRI) reportFor use in reports filed with the SEC

13. Held in partnership with Creating Connections Poll question 2 Which materiality approach are you most familiar in applying?  Answer 1 –  Answer 2 – Financial (IASB/FASB/National GAAP)  Answer 3 – Sustainability (GRI/SASB)  Answer 4 – Regulated disclsoure  Answer 5 – Other

14. Held in partnership with Creating Connections Held in partnership with Creating Connections Real life case

15. Held in partnership with Creating Connections Most relevant issues/aspects for the organization’s performance Support the decision making of the management and stakeholders Orient the selection of indicators to be reported Diversity of approaches and methodologies Itaú Unibanco Methodology for 2013 Business strategy Investors perspective Stakeholders inputs Market references IDENTIFICATION 1 23 PRIORITY VALIDATION Influence on stakeholder’s appraisal and decision Significance of impact (social, environmental and economic) Internal validation External validation (technical consultants)

16. Held in partnership with Creating Connections Itaú Unibanco Learnings and challenges Materiality: restriction method vs focus definition Stakeholders involvement: direct vs indirect Internal validation is critical Capitals reporting: balanced vs proportional Integration to the different reporting models Makes sense  reflects on business decisions SustainabilityBusiness

17. Held in partnership with Creating Connections Held in partnership with Creating Connections Materiality for your own organization

18. Held in partnership with Creating Connections Poll question 3 What is your biggest challenge in determining material matters:  Answer 1 – Patchwork of definitions  Answer 2 – Difficulty in identifying intangible value  Answer 3 – Disconnect between financial and other data  Answer 4 – Investor/user decision needs unclear  Answer 5 - Other

19. Held in partnership with Creating Connections Benefits and challenges of materiality  What are the benefits and challenges of determining material matters (concept and process)? ChallengesBenefits

20. Held in partnership with Creating Connections What is material? Exercise  Rank a long list of subject matters on degree of importance to your value creation  Look back and reassess the draft of material items made during step 1 of “Your roadmap to ” Importance to value creation (1-10) Subject matter 1 Subject matter 2 Subject matter 3 Subject matter 4

21. Held in partnership with Creating Connections Held in partnership with The materiality outcomes linked to your information hierarchy What are the information needs of the providers of financial capital? What kind of information hierarchy do you want to create for your financial capital providers? What level of transparency do you want to provide to providers of financial capital? The high level “snap shot” The succinct story Integration and analysis of key information A data set, to support analysis and modelling activity Confidentiality filter 2 minute view 20 minute view 2 hour view 2 day view Materiality filter Internal information set

22. Held in partnership with Creating Connections Held in partnership with Link materiality to your value creation  Exercise Link your material matters to the strategic objectives or pillars, and performance measures (PM) for your own organization Strategic objective 1Strategic objective 2Strategic objective 3Strategic objective 4 Material matter 1 PMMaterial matter 2 PMMaterial matter 3 PMMaterial matter 4 PM

23. Held in partnership with Creating Connections Held in partnership with IIRC technical project  Address confusion and provide clarity  Understanding purpose, subject matter, and how information might lead to particular decisions by users appears to be critical in materiality process  Focus on practical application of IR materiality definition  Identify examples including of disclosure of the materiality determination process  Need input from organizations via project panel or wider network group: Please let IIRC know if you would like to be connected to this project

24. Held in partnership with Creating Connections Held in partnership with Creating Connections Recap and conclusion

25. Held in partnership with Creating Connections Held in partnership with Key learning points  ‘A matter is material if it could substantively affect the organization’s ability to create value in the short, medium or long term’  Determine materiality based on the four-step process: - Relevance - Importance - Prioritization - Disclosure  Keep it simple, just start!  Learn from others about the challenges  Make sure you embed the material matters in your strategy and reporting  Participate in the IIRC Technical Project, contact: stathisgould@ifac.org  Read the International Framework – section 3d

26. Held in partnership with Creating Connections Held in partnership with Thank you for your participation Materiality Is Important in Preparing an Integrated Report