We conducted a comprehensive materiality assessment with both internal and external stakeholders by means of online surveys, focus group meetings and deep dive interviews to identify 33 ESG material topics in 2022. Please see the summary in the next section below or refer to P.23-27 of our 2022 Sustainability Report to understand more on our stakeholder-driven materiality approach, key stakeholder groups and format of engagement, stakeholders’ concerns and our response.

In 2023, we took into account insights from the SASB materiality topics for the pharmaceutical industry, peer benchmarking and global trends in sustainability along with a review of the materiality assessment results from 2022. As a result, we have reorganized and consolidated the material topics, condensing the 33 topics to 20. This facilitates our prioritization of the most relevant sustainability issues that have a significant impact on our business and stakeholders.

OUR MATERIAL TOPICS

The materiality matrix maps 20 ESG material issues, with their importance to external stakeholders plotted on the y-axis and their importance to our business continuity and development plotted on the x-axis. Overall materiality was determined by the aggregate score assigned to each ESG material issue by our internal and external stakeholders. All material issues have been addressed in this Report in accordance with the various reporting standards. The top five material issues to internal and external stakeholders have been identified as Business Ethics and Anti-Corruption, Affordability and Access to Healthcare, Product Quality and Safety, Product Innovation, and Employee Development. The rankings are outlined in the following materiality matrix.

OUR STAKEHOLDER-DRIVEN MATERIALITY APPROACH

We believe that material issues should be prioritized to ensure our efforts remain focused on those areas where we can have the greatest impact and be in a better position to anticipate evolving sustainability trends. Getting a better understanding of our sustainability position and the insights collected can help us in embedding sustainability practices into our operations. We follow a four-phased approach to assessing materiality: 1) Issue Identification; 2) Identifying Stakeholders and Format of Engagement; 3)Prioritization; and 4) Evaluation and Validation.

Step 1: Issue Identification
We first identified an initial list of sustainability topics that are potentially relevant to HUTCHMED. This study included a review of our material topics list disclosed in our 2020 and 2021 Sustainability Reports against the sustainability industry landscape, global and local sustainability megatrends, peer benchmarking, as well as emerging regulatory developments which can have an impact on HUTCHMED’s business. Considerations were also given to sustainability topics and rating requirements of various international sustainability standards and frameworks, ESG reporting guides published by the HKEX, the LSE Group and the Nasdaq Stock Exchange, and the UN SDGs.

Step 2: Identifying Stakeholders and Format of Engagement
Our stakeholders have been defined as groups on which our business has a significant impact on, and those with a vested interest in our operations. We proactively engaged for deeper stakeholder relationships, not only to strengthen communication with key stakeholders but also to inform them of HUTCHMED’s efforts and plans on our sustainability development through appropriate channels.

Of the stakeholders involved, internal stakeholders include management representatives of significant business units, while external stakeholders include general employees, investors, customers, suppliers, business partners, NGO partners and communities, media, industry associations and academia, government and regulators.

With reference to the AA1000 Stakeholder Engagement Standard, stakeholder selection was based on the criteria of necessity, diversity, willingness to participate, influence and dependence on HUTCHMED.

Step 3: Prioritization
Following the identification stage, we engaged our stakeholders through an online survey as well as stakeholder interviews to provide feedback on our priorities and performance. Approximately 2,400 responses with a total response rate of 44% to our online surveys from both internal and external stakeholders on the importance and relevance of a list of predetermined sustainability issues were assessed by our independent third-party consultant.

In order to reach a deeper understanding from our stakeholders, we have also conducted 6 focus groups and 4 one-on-one deep dive interviews with a total of 25 key stakeholders, including employees, investors, suppliers, business partners, and subject matter experts. The interviews enabled us to pinpoint the critical areas and steer resources to support the business strategies of the Group.

Step 4: Evaluation and Validation
According to the methodology of AA1000’s materiality process, 33 critical and highly material issues were prioritized, and further validated. The outcome of the materiality review, which comprises the identified issues, along with the perception of sustainability, trends and opportunities was reported and discussed at both the Sustainability Committee meeting and the Board Meeting. The assessed aggregated results were reviewed and approved by senior management, the board-level Sustainability Committee, and the Board.