Materiality in Sustainability Reporting

Why Materiality Matters More Than Ever in Sustainability Reporting

March 19th, 2018

Over the past two decades, corporate sustainability disclosure and reporting has evolved dramatically. It’s not only become more mainstream and engrained within business operations, but also more complex and time-intensive as stakeholders—and third-party reporting institutions—demand higher levels of detail and transparency.

So, as organizations rise to meet evolving demands and expectations, as well as tell their sustainability stories in a meaningful way, materiality in all contexts can no longer be sidelined. It needs to be embedded in the DNA of your sustainability strategy and reporting initiatives.

Why? Let’s dive in.

“Materiality” Is No Longer Rooted Solely in the Financials

The blending of financial and non-financial materiality is on the rise—and a necessity from our perspective as reporting requirements evolve and transparency demands escalate. As a GreenBiz article pointed out back in 2014:

“Right now, often a disconnect exists between what ESG information companies disclose to their stakeholders and the data that actually drives management and investment decisions. Most agree that it is hard to know which information is business-critical for the long run.

“For these reasons, focus is increasing in the sustainability world on the principle of materiality as the essential filter for determining which ESG information will be useful to key decision makers.”

Fast-forward to today, materiality in all contexts is a renewed focus in the sustainability world, with many organizations using materiality assessments and other stakeholder engagement activities to uncover what matters most to their business. In fact, some of the most forward-thinking companies are conducting one-on-one stakeholder interviews and focus groups to inform their materiality assessment. As our own Pamela J. Gordon recently told us:

“This is allowing [companies] to go beyond a collection of survey results, helping them dig deeper into the minds of stakeholders to reveal more context, as well as help them pivot and coach stakeholders in a more strategic way.”

The bottom line? Materiality is growing in scope and relevance, and your company needs to embrace it.

Materiality Builds Bridges Between All Parties

Over the past couple years, the world has experienced intense political, social, and economic upheaval. As a result, people are losing their faith in key institutions. In fact, the 2017 Edelman Trust Barometer Survey stated that trust around the globe is “imploding.” However, the report also defined business as the “last retaining wall” of trust.

By uncovering what matters most to your employees, customers, investors, and other stakeholders, you can tap into their thoughts, attitudes, and ideas. This not only provides strategic business insights and focus for your reporting initiatives, but also helps you show stakeholders they matter—helping build rapport and bolster trust.

Read: The Importance of EHS & Sustainability Stakeholder Engagement: 3 Insights From The 2017 Edelman Trust Barometer

Materiality Can Help You Answer the Call for More Transparency

We now live in an age of hyper-transparency. Stakeholders expect and demand information about the companies they invest in, the products and services they buy, and the suppliers they hire. As a result, it’s critical to stay proactive with information sharing and control your story to the greatest extent possible—and that’s where materiality can lend a helping hand.

Materiality is in the eye of the be(stake)holder. By digging deep to understand the issues that are most important to your various stakeholder groups, you can turn sustainability reports into compelling narratives that speak directly to their top concerns and answer their specific calls for more transparency, getting to the heart of what really matters.

Define Materiality for Your Business

As people become increasingly aware and engaged around the sustainability challenges we face—and policymakers drag their feet—the world is looking to businesses to be agents of change. As a result, it’s more important than ever to use materiality to align your business strategy, engage stakeholders, and effectively communicate how you’re reaching your goals.

To uncover what’s most important to your business and key stakeholders, a materiality assessment is a great place to start—here are some clear, actionable steps for conducting your own materiality assessment.

Need some help getting started? Check out our corporate reporting services.

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