What are the most important things to your company’s sustainability? What would your internal leaders say about it? How about your customers? When creating reporting on your emissions and other critical sustainability parameters, it’s important to not only know what you need to report based on compliance, but what you should track based on what is known as materiality, or the materiality assessment.
What is Materiality in Sustainability?
According to NYU Stern’s Center for Sustainable Business, “A material sustainability issue is an economic, environmental, or social issue on which a company has an impact, or may be impacted by.” So, what does that mean? If you watch Law and Order or a similar crime-based show, you’ve probably heard the term “material witness” come up. A material witness has a close, logical connection to the case at hand. Keeping this context in mind, materiality in the sustainability world identifies key environmental topics relevant to your organization and stakeholders.
Assessing materiality helps businesses determine the most important factors to include in sustainability reporting and the core components of an environmental strategy. As a part of an ESG report, components of a materiality assessment may focus on social or governance as well as environmental ones. It’s a tool that every forward-thinking company should use to their advantage.
Why Materiality Matters
Deciding which environmental, social, and governance topics your organization will focus on shows investors and consumers that you’re not only environmentally conscious, but you also pay attention to their values. Think about it: One out of every four U.S. dollars is spent with the environment in mind, and that is only projected to grow. There is also a growing demand for businesses to be transparent in their sustainability efforts. As consumers get more knowledgeable about sustainability, they want their favorite brands to be a positive force on the planet.
For now, sustainability reporting is not mandatory in every industry. But as we’ve seen at the COP26 summit, that’s changing. Smart businesses are starting their sustainability journey before the sustainability switch flips, and a materiality assessment is a smart start.
Once you integrate environmental solutions into your organization via a materiality assessment, you will:
- Gain clarity into what really matters in your sustainability plan.
- Build stakeholder favor by addressing their concerns.
- Be able to budget resources strategically.
- Gain a competitive advantage by “out sustainability-ing” the competition.
Keys to Assess, Measure, and Report Materiality
Materiality depends on the needs and goals of internal and external stakeholders. Assessing materiality is a collaborative process. Each organization has its own process, but if you’ve ever created a survey you should get the gist:
- Choose a tool to survey your stakeholders
- Build a list of reporting parameters and ESG factors you’re assessing.
- Run the survey.
- Collate and cleanse the results (you could use a weighted system if some stakeholders are more valuable to the assessment than others).
- Build some charts showing the results.
- Strategize and align your teams based on the outcomes.
When pulling together parameters for the materiality assessment, consider the United Nations’ Sustainable Development Goals for ESG. Other helpful frameworks to hone your company’s focus include:
- The Sustainability Accounting Standards Board (SASB)
- The Global Reporting Initiative (GRI)
- The Science Based Targets initiative (SBTi)
Revisiting your materiality matrix every couple of years will ensure your organization stays on track. This process can always be adjusted or redone if new business goals or world events inspire new focus areas.
With a materiality assessment in hand, it’s up to the sustainability leaders and team to execute. Gathering data and leading carbon-reduction efforts can be tricky though. That’s where a platform like SustainaBase comes in. With a platform that collects data from around the organization, tracks parameters, and pulls out insights, the business can focus on real change instead of data management. Not convinced? See how the team at City Furniture uses SustainaBase to track their path to carbon neutrality.
It might be helpful to see a materiality assessment to borrow some ideas and a framework. Waste Management’s 2019 materiality assessment reflects where stakeholder interest and business impact meet for various ESG topics. It shows that health and safety, leadership accountability, and recycling reporting are key material issues with the highest impact for external stakeholders. It also shows that health and safety, business ethics, and leadership accountability are key material issues with the highest impact for internal stakeholders. We think it’s great that the company displays this information publicly. It’s a fantastic way to show commitment to sustainability. Even more importantly, it brings transparency to a strategy that internal and external stakeholders can get behind.
Materiality Assessments are the Beginning of Something Big
Starting a sustainability initiative without knowing the top focus areas is like playing pin the tail on the donkey with corporate responsibility and brand image. With a little planning, a materiality assessment will set your company on a strong, strategic path to environmental consciousness. It’s a north star every business should use.