Material Issues

Identifying and reporting on the most relevant issues for a company and its stakeholders is the foundation of sound disclosure. Today, the demand for and interest in environment, social and governance disclosure has never been greater. At AEP, we have seen this firsthand. The issues investors and other stakeholders are asking us about are material to AEP.

We recognize that material issues can directly or indirectly impact AEP’s ability to create long-term value for its customers, employees, investors and society at large. Sustainability considers a broader scope of action and issues in determining what is material compared with the origins of materiality in the auditing and accounting processes of financial reporting. That is one reason our approach to integrated reporting seeks to emphasize connections between financial and nonfinancial performance and to demonstrate a high degree of transparency.

AEP views material issues to be those that have affected, or are reasonably likely to affect, the company’s reputation, liquidity, credit standing, capital resources or operational results. These issues also take into account the concerns and interest of our many stakeholders.

AEP conducted a materiality assessment in 2012 during which we identified 18 material issues for AEP. In 2013, the electric utility industry conducted an industry-wide materiality assessment that identified 15 material issues. It was conducted by the Electric Power Research Institute’s Energy Sustainability Interest Group, of which AEP is a member. The industry-wide materiality assessment will be refreshed in 2016.

We check the relevance of our material issues through discussions with our Enterprise Sustainability Council, meetings and discussions with our stakeholders and by reviewing the company’s risk reports to seek alignment. Some issues have risen to the top while others have become lower priorities but overall, the two assessments continue to line up with the material issues most relevant to AEP and its stakeholders.

Material Issues of the Electric Power Industry

Sustainability Pillar Issues
Environmental Greenhouse gas emissions
Reductions of other air emissions
Water Quality
Water availability
Habitat protection and biodiversity
Waste Management
Social Public safety and health
Employee safety and health
Job satisfaction
Community support and economic development
Engagement and collaboration
Economic Energy reliability
Energy affordability
Skilled workforce availability
Economic viability of electric utilities

Source: Electric Power Research Institute Energy Sustainability Interest Group