In any good book of ESG best practices, one of the first steps for any business is to undergo a materiality assessment. This is an exercise performed once every two-to-three years whereby a company engages with stakeholders to identify shared priorities and understand the impacts of their business. The end result is a visually appealing ...
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By design, there are a lot of moving pieces to a materiality assessment. Sometimes the process itself can be overwhelming enough that you just push through to get it done, plop the results in a report, then call it good. But you might be missing the most valuable part.
Having delved into this process from all angles with a range of companies, I can tell you that if approached the right way, an assessment has the potential to change your ESG game. The key is to know what you are getting into, and to keep in mind 5 things every materiality maestro should know when the band starts playing:
A materiality assessment is necessary input for creating a GRI-aligned ESG report. But why stop there? The results of the assessment can be used to inform other company priorities, initiatives, goals and broader ESG strategy. Often times when sustainability practitioners are charting course for the year, they don’t know where to begin because they aren’t sure what to focus on. A materiality assessment changes that. Understanding what stakeholders and business leadership care about is the key that unlocks a thousand treasure troves – so don’t let it go to waste. Create a new suite of goals; launch a new philanthropic initiative; create a new cross-functional team. Whatever it is, use your work to make it happen.
A great way to do a materiality assessment is by surveying stakeholders. An even better way of doing a materiality assessment is to follow up the survey with a conversation. The point is to establish a continuous dialogue with your stakeholders, whether through formal engagements or just sharing updates. Stakeholders are often happy to provide input for materiality assessments, but they first and foremost appreciate continued conversations that keep them in the loop.
Half the fun of materiality assessments are the surprises you see in the results, but sometimes those results cause headaches. What if an issue championed by your company is ranked low by stakeholders – or worse – by stakeholders and your company? It is important to remember that every issue that has made its way into the materiality matrix is already important – it wouldn’t be there otherwise – so low-ranking assessed topics are still overall important. Another important thing to keep in mind is that you don’t need to chain yourself to the top quadrant or tier. Those issues shouldn’t be ignored, but it’s ok to pull rank and say you still think issue-X, which fell to the bottom, is something to focus on for reporting or strategy.
Has your in-house counsel sent a nervous e-mail about the ramifications for deeming any particular topic a “material” issue? You wouldn’t be the first. The term carries certain connotations, especially as eager audiences await pending ESG regulations from the SEC. The first thing to note here is that it is perfectly acceptable, and common, to call the exercise a “materiality” assessment – just make sure you include a note explaining what you mean by materiality when you publish. The second thing to note? If it’s still a problem, don’t call it a materiality assessment! Whether you call it an “issue prioritization exercise” or a “tally of topics,” doesn’t matter. As long as you are doing the assessment the right way and disclosing the results, stakeholders will get it. A rose by any other name is still the same.
A materiality assessment is hard work, requiring a lot of time and resources. Once it’s all said in done, you deserve to get a lot more out of it than just putting it in your sustainability report. Chances are the output includes a nice matrix, some interesting data points and (hopefully) a plan for the next steps. Those kinds of materials make for a nice set of slides to show off at your next big meeting – maybe even to the board of directors? The point is that you’ve done something that is actually incredibly important to your company, having connected with a wide range of stakeholders to see what they care about most. Armed with these insights, you should plan to show that work off – and connect to your broader ESG goals. This is your chance to get attention and eyes on your work, don’t let it go to waste.
VOX Global has worked with companies of all shapes and sizes to undertake materiality assessments. If you are interested in learning more about our approach and how we might be able to work with you, let Kevin know and he will schedule an introductory conversation.
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