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  • Annual Report 2023

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Strategy Report

Materiality

GRI
3-1, 2

Determining Materiality

A subject topic is considered material to an organisation’s strategy and performance, if it is anticipated to have a substantial impact on its ability to create value in the short, medium and long-term. This could be value created for the Bank, its stakeholders, or both. DFCC Bank effectively showcases its integrated thinking, a key objective of integrated reporting, by illustrating the interconnectedness of significant issues with its strategy, governance, performance, and future outlook. In the course of its value creation process, stores of value are consumed, transformed, and created by assessing the risks and opportunities in the immediate operating environment, studying the changes to legal and regulatory frameworks, analysing global trends, scrutinising research reports and other published information as well as through insights gained from stakeholder interactions.

Material matters determining process can be explained as follows:

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Identification of Material Matters
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We identify the material drivers impacting our strategy, stakeholders and value creation. In doing so, we analyse both external and internal environmental factors, considering the combined outcome of the potential magnitude of impact, and the probability of their occurrence.

(Materiality = Relevance X Magnitude of Impact X Probability of Occurrence)

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Analysis and Prioritisation
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We assess material matters, categorise and prioritise them upon analysing the organisation’s objectives, risks and impact on stakeholders in a way that influences our ability to successfully execute our strategy and deliver long-term value to our stakeholders.

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Validation and Integration
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Integrate the topics that are material to the value creation to meet stakeholder expectations. Business and individual targets are set through key performance indicators which are linked to the strategic objectives.

The Bank has consistently engaged with stakeholders over the years to gain deeper insights into their concerns, and the significance of these issues in relation to their priorities. This ongoing dialogue encompasses economic, environmental, governance, and social considerations. Firmly believing in stakeholders’ entitlement to voice their opinions on the impact of diverse issues on them and vice versa, the Bank ensures that their perspectives are heard and considered.

As an integral aspect of its sustainability initiatives, DFCC Bank consistently involves stakeholders to identify and resolve the following:

  1. Substantial effects linked to business operations and strategy;
  2. Stakeholders experiencing significant impacts; and
  3. Stakeholders holding significant potential to influence the Bank, its operations, profitability, and reputation.

The external landscape encompasses current and emerging trends in the economic, environmental, governance, and social spheres. This could be both national and international. DFCC Bank diligently assesses these pertinent trends in the external landscape, regarding them as material to its continued success. Through materiality analysis, the Bank successfully identifies and evaluates aspects that are crucial to both its stakeholders and its operations. This scrutiny extends across economic, social, and environmental dimensions, aligning with the Bank’s commitment to creating sustainable value.

The Bank engages with various stakeholder groups to identify the issues needed to structure its portfolio of activities. This alignment of activities with the distinct needs of each stakeholder group enables the Bank to create and deliver optimum value to them while also deriving reciprocal value. Consequently, this approach maximises the benefits for all involved parties. This approach will achieve the Bank’s two-fold objectives, namely:

  1. Strategic goal:
    • - Ensuring the credibility of the Bank’s sustainability plans and its operations.
  2. Relationship goal::
    • - Fostering relationships and nurturing bonds with customers.
    • - Empowering employees by offering rewarding career opportunities.
    • - Generating consistent returns for investors.
    • - Establishing mutually advantageous and profitable partnerships.
    • - Demonstrating responsible actions towards both society and the environment.

Material Topics

In 2020, when the DFCC Sustainability Strategy was formulated, the Bank conducted a materiality assessment. In the 2020-2022 annual reports, the Bank depicted the key matters that were identified in that assignment. We identified that the same topics are to be continued. However, we segregated those into identified key material themes as follows while considering the financial materiality and impact materiality of the topics.

Accordingly, compared to previous years, a few material topics are collated and presented in the table below.

Abbreviations/icon guide for the “Material Topics” table

Financial Capital

Institutional Capital

Investor Capital

Customer Capital

Employee Capital

Business Partner Capital

Social Capital

Natural capital
Resilient Business and Inclusive Economic Growth
DFCC Bank believes that sustainable practices and inclusive economic growth are vital to ensuring stakeholder value creation. Economic resilience enables the Bank to survive in rapidly changing environments, continuing to deliver superior performance. Hence, we consider the following topics to be material to ensure resilient business and economic growth:
  1. The anticipated surge in demand for green financing, specifically catering to environment-friendly projects and investments which require sector-specific expertise to ensure an overall reduction in environmental impact, notably through initiatives such as renewable energy. This aligns with the Government’s environmental conservation policy and resonates with the Bank’s commitment to environmental stewardship.
  2. Embracing emerging technologies designed for customer investment and utilisation, including innovations such as smart/precision agriculture, pollution control mechanisms, energy-efficient technologies, smart buildings, renewable energy solutions, and more.
  3. Aligning economic performance with national policies and priorities.
  4. Complying with the Sustainable Banking principles of the Sri Lanka Banks’ Association (SLBA) under its Sustainable Banking Initiative (SLBA-SBI).
  5. Formulating suitable strategies for improving the Bank’s contribution towards achieving UN Sustainable Development Goals (UN SDGs).
  6. Implementing initiatives to counteract the negative outlook and trends in the banking sector.
  7. Being better prepared on all fronts to prevail in a highly competitive business environment.
  8. Developing resilient business strategies with renewed focus on sustainability.
  9. Reducing negative environmental and social impacts resulting from economic activities and raising awareness among stakeholders on addressing such issues.
  10. Addressing concerns related to declining trends in exports and implementing suitable strategies to reverse such trends.
  11. Strengthening business resilience.
Relevance to the Capitals
Inclusive Growth in Resilient Communities
DFCC Bank believes growth is sustainable when it supports not only the businesses in an inclusive manner but also the communities in which the business operates. The Bank tries to improve the lifestyles and livelihoods of broader population segments to promote inclusivity. Hence, we identify that the following key topics are material:
  1. Adapting to the growing trend towards purpose-driven and socially responsible businesses dedicated to creating a positive impact on society. These businesses aim to address societal challenges while ensuring profitability.
  2. Improving financial literacy and inclusion, especially among vulnerable individuals and communities.
  3. Offering specialised services for Micro, Small, and Medium Enterprises (MSMEs), encompassing both financial and non-financial offerings aimed at capacity building and boosting their performance.
  4. Collaborating with professional apex bodies to foster partnerships, leading to improved knowledge and productivity.
  5. Increasing and broad-basing the involvement of entrepreneurs and MSMEs in creating positive social and environmental impacts.
  6. Investing in sustainability initiatives, reducing resource consumption, addressing environmental and social impacts, and participating in CSR and disaster relief efforts.
  7. Offering entrepreneurial skills training for self-employed individuals to help them enhance their potential.
  8. Providing education, skill-building and training opportunities, including reskilling and upskilling when needed.
  9. Implementing strategies to address the increasing frequency and magnitude of natural disasters, as well as improving both preparedness and response times to effectively meet the exigencies of such occurrences.
  10. Supporting the growth of MSMEs, and acting as a catalyst for their enhanced role in national development and employment generation.
Relevance to the Capitals
Equal Opportunity Employment and Employee Wellbeing
DFCC Bank always considers that all our employees have a right to equal opportunities, and we strive to protect their interests in all employment decisions. Hence, we consider the following are material to ensure equal opportunity employment and employee well-being:
  1. Renewed focus on the health and wellbeing with a strong emphasis on work-life balance.
  2. Empowerment initiatives for staff, particularly focusing on female staff and other vulnerable groups.
  3. Encouraging collaboration and teamwork across all levels of seniority and functional divisions.
  4. Boosting productivity and operational efficiency by investing in staff training and development, with emphasis on the current and emerging needs in knowledge and technology.
  5. Cultivating a healthy workplace culture to attract and retain a diverse workforce of exceptional talent and to optimise their performance.
  6. Well-defined and clear pathways for career progression, offering mentoring and other required support for staff members who exhibit slow progress.
  7. Ensuring decent working conditions condition and fair compensation for all workers.
Relevance to the Capitals
Customer Centricity and Future-proofing Business
DFCC Bank believes that customer-centricity is critical in driving a business in a dynamic environment. We differentiate ourselves by implementing a customer-centric approach leveraging the customer experience. The following topics are identified as material:
  1. Providing customer-centric services and engagement across all geographic areas and functional divisions.
  2. Adapting financial services to meet evolving customer needs while adhering to international standards and local requirements.
  3. Responding to the rising demand for convenient, remote, and flexible services.
  4. Innovating to offer new and convenient services that maximise customer benefits.
  5. Recognising organisational reputation as a competitive advantage while devoting suitable resources towards its expansion.
  6. Embracing new technologies such as digitisation, Artificial Intelligence (AI), Machine Learning (ML), and Robotic Process Automation (RPA) while increasing their adoption across functional divisions and specialities.
Relevance to the Capitals
Sustainable Procurement and Resource Efficiency
DFCC Bank follows a consistent, efficient, and best practice approach to procurement, to ensure that an organisation acquires goods and services in a transparent, timely, cost-effective, sustainable and ethical manner. We amended the procurement policy to add social, environmental and governance aspects for supplier assessment/sourcing to improve resource efficiency, ethical sourcing and sustainable procurement. Six Guiding Principles (i.e. value for money, ethical sourcing, support of enterprise and growth, transparency, no conflict of interest, no bribery and corruption) underpin the core values and premise of the Procurement Policy of the Bank, which applies to all procurement decisions of the Bank, including procurement in the context of implementation and execution of funding proposals approved by external funds. We identify the following key topics as material:
  1. Reducing energy and paper usage; minimise waste and use appropriate processes/technologies to ensure resource efficiency.
  2. Establishing dependable and sustainable sourcing and supply chains.
Relevance to the Capitals
Transparent Reporting and Communication
DFCC Bank believes that transparency, reliability and accountability for the information we communicate enhance value creation for our stakeholders. We pay attention to regulatory reporting requirements, good reporting practices, market changes, stakeholder concerns and accessibility to information in reporting;
  1. Enhanced utilisation of social media for targeted and efficient communication.
  2. Addressing the increasing demand for transparent reporting on non-financial information, including environmental and social issues.
Relevance to the Capitals

Materiality Matrix

A materiality matrix is a visual representation used in integrated reporting to assess and communicate the significance of various factors to an organisation’s strategy, performance, and stakeholders. This tool aids in prioritising reporting and engagement strategies, emphasising what matters most to both the organisation and its stakeholders.

The Management Discussion and Analysis section in this Annual Report will include details and analyses of the initiatives undertaken by the Bank during the period under review in terms of various materiality topics discussed above.