Materiality is a hot topic in corporate sustainability, with CSR teams scrambling to communicate the benefits and successes of their projects to internal and external stakeholders. A resource-efficient sustainability strategy begins with identifying the important ESG variables that affect a firm. Materiality Analysis is just the right step in this direction.
Activities aiming at engaging stakeholders are the cornerstone of materiality assessments. In a way, it is an exercise to determine the significance of specific environmental, social and governance (ESG) issues to them. The knowledge acquired can then be applied to strategy and communication. It also allows organizations to concentrate their efforts on important ESG issues that affect their longevity.
Benefits of conducting a materiality analysis
1. Risk Mitigation
Companies can create a long-term strategy and select activities that will have the greatest impact on reducing climate-related risks and maximising possibilities of all-weather growth.
2. Stakeholder engagement
Conducting a materiality study gives an outlet for organisations to enhance ties and engage with stakeholders such as investors, C-suite executives, consumers, and employees by using interviews, surveys and other types of communication. Stakeholders can detect existing and emerging ESG trends by evaluating material topics. This gives businesses the opportunity to make proactive changes to their sustainability plan.
3. Reputation & Goodwill
Companies that demonstrate a commitment to sustainability is perceived more favourably than those who do not. A proactive attitude to risk management, climate action, social and governance challenges, and long-term strategy is also demonstrated by conducting a materiality study.
4. Efficient Resource allocation
Companies can better focus their time and resources if they know which ESG concerns are important. A corporation can assess the degree and possibility of risks associated with each topic, as well as the impact on various aspects of the business. This helps teams to prioritise resource allocation in the most efficient way possible. Companies can review and improve their present data tracking and monitoring methods for business evaluation.
5. Effective Sustainability reporting
By reporting on the listed material themes, companies can increase the quality and relevance of their Corporate Social Responsibility Report (CSR). This enables the company's external communications to be more effective in expressing the themes and details that are most important to stakeholders.
Steps to Conduct a Materiality Assessment
1. Identify stakeholders
Materiality assessments are most useful when information can be obtained from both inside and outside the firm. Begin the materiality process by compiling a list of significant stakeholder groups and then identifying key contacts within each group who can offer valuable insight into your company's sustainability plan. Consider both internal (executive leadership, directors, regional managers, employees) and external contacts (trade associations, significant clients, NGOs) to assess a diverse variety of viewpoints across the value chain.
2. Initial stakeholder outreach
The goal should be to communicate to the participants why their unique perspectives are valuable. There is a need to describe how the company's sustainability strategy and business practices will be informed by their findings.
3. Identify and prioritize
Determine what sustainability indicators to measure once you've identified and engaged with stakeholders so you can acquire the information you want and need. Three types of sustainability indicators are commonly used: Economically (e.g., revenue, profit, company turnover), a social situation (e.g., labor statistics, human rights, consumer issues, community impact) Environmentally friendly (e.g., water stewardship, greenhouse gas emissions, waste management)
4. Design a unique materiality survey
Materiality evaluations should be official, organised engagements with stakeholders to achieve the best outcomes. Conduct a simple survey. Ask stakeholders to rank the importance and impact of each indicator that the organization has identified in the survey. This will provide quantitative data that can be studied and visualised.
5. Gain & Analyze insights
It's time to invite people to do your survey now that you've identified your influencers, engaged with them, and written your survey questions. Reconnect with your stakeholders and provide a link to the survey as well as a deadline. Examine all of the results together, adding up the rankings for each reviewed indication. Depending on the stakeholder group, you can construct different roll-ups. Internal vs. external evaluations, management vs. employee evaluations, and so forth. Analyze each insight separately to see what concerns matter most to each stakeholder group. Bring all of the data together to see if there are any commonalities.
6. Put those insights into action
While materiality evaluations are clearly a form of stakeholder involvement, the process should not cease once the survey is completed. Share the findings and conclusions with stakeholders and any interested parties. This is usually done in a formal sustainability report or summary, but it can also be communicated via alternative methods. For example, the company's website or press releases. Sharing the results of your materiality evaluation can act as a springboard for further discussion and participation with the company's sustainability initiatives.
While a materiality evaluation takes time, effort, and resources, it's a priceless tool for gathering information that can help you develop a sustainable plan and provide meaningful reporting. The initial step in your BRSR strategy development process is a materiality assessment.
Conducting a materiality evaluation can be complex, and businesses may struggle to determine the best strategy to prioritise issues, define limits, and so on.
At Oren, we help companies identify the material ESG topics most important to their stakeholders. By evaluating widely recognized standards and frameworks, stakeholder engagement, and other research methods, we help effectively prioritize your BRSR roadmap to take your sustainability strategy to the next level.