Materiality analysis model in sustainability reporting: a case study at Lite-On Technology Corporation

An increasing number of companies involved in stakeholder engagement demonstrate social responsibility through sustainability reporting. However, a key challenge for most reporting organizations is on how to identify relevant issues for sustainability reporting and prioritize those material issues in accordance with stakeholder needs. This study utilized failure modes and effects analysis to construct a model of materiality analysis for determining material issues to be included in sustainability reporting as in the case of Lite-On Technology Corporation in Taiwan. This study employed three FMEA indices: occurrence (O), which can be determined from the percentage of concerned stakeholders; likelihood of being detected (D), which refers to the level of concern among stakeholders; and severity (S), which can be quantified from the impact of issues on the strategic communication objective. The analytic network process was applied to determine the relative weights of the three indices. A risk priority number of materiality analysis was then calculated for each issue, which is provided by the companies to identify material issues of information disclosure in sustainability reporting. The proposed model not only helps firms systematically determine the material issues of sustainability reporting in accordance with stakeholder needs but also facilitates the effectiveness of corporate social responsibility communication.