However, it is vital to decide which topics to focus on. This is where materiality assessments come in. Put simply, a materiality assessment is a process in which you identify and refine the sustainability topics that are most relevant and important to your company and key stakeholders.
What does materiality mean?
In sustainability, materiality refers to factors, both social and environmental as well as financial, that can significantly affect your business. The GRI defines material topics as those “that represent the organisation’s most significant impacts on the economy, environment, and people, including impacts on their human rights”1.
A company assesses these factors and decides how important they are to the business and its stakeholders. As a result, materiality allows businesses to research actual impacts and events rather than simply focusing on compliance.
The first step to a materiality assessment is identifying the relevant and important topics. We’ve listed some things to consider when choosing:
- What are others in your industry doing? Maximise your impact by looking at issues relevant to your specific sector. For example, waste disposal may be incredibly important to a construction company, but less so to a marketing agency.
- What do international standards recommend for your industry and/or sector (SASB, GRI, SDG)? Research frameworks and reporting standards to highlight important topics.
- Your business culture and values. Are there any issues particularly important to your workplace?
- The direction of the business and the wider sustainability goals. It’s important to think about how you envision the business in the future and your strategy moving forward.
It’s important to carefully consider all these factors – your topics should have a solid rationale behind them. We can help you understand and assess these so you can choose the most important topics for your business.
Aligning with a framework
As we mentioned, aligning with a framework or reporting standard for your materiality assessment and wider sustainability strategy can be very useful. For example, the GRI G4 provides guidelines for the materiality assessment process and emphasises the importance of the process rather than any specific result. Based in the USA, the SASB standards offer another approach to addressing materiality. You can read more about it here.
Once the key issues have been identified, stakeholders should be given the opportunity to assess their importance too. Eventually, this can result in a matrix of sustainability topics mapped across dimensions – usually business impact across stakeholder importance. This can then be used to direct your sustainability reporting and strategy, as you’ll be able to clearly see which topics come out as the most important.
So, why do all of this just to choose some sustainability topics?
Reporting frameworks and standards have been generating an increasing focus on materiality. This has been accompanied by new regulations, such as the European Directive on non-financial reporting, motivating and requiring businesses to consider the ESG topics they should be reporting in detail. But the process of a materiality assessment can have wider benefits for your organisation:
- Maximise your impact – To make a meaningful difference with your sustainability reporting, it’s important to choose topics that are most relevant to allow you to maximise the impact of your sustainability strategy. Picking topics at random is unlikely to generate a useful sustainability strategy. It may even come across as an insincere attempt at appearing sustainable, bordering on the dreaded ‘greenwashing’. A materiality assessment means that you will be focusing on topics that pose the biggest environmental, social and economic risk.
- Engage with your stakeholders – A materiality assessment is a perfect opportunity to engage with key stakeholders in your company. Involving employees, customers and the C-suite in the process can improve relationships and allows people to voice their priorities for your organisation.
- Focus your time and resources – Not every business has a dedicated sustainability team, it may be that you are the only sustainability champion in your workplace! Conducting a materiality assessment helps you narrow down the topics you want to focus on and assess the associated risks. This allows you to prioritise and allocate resource accordingly.