Conduct a materiality assessment - BASIC

Cost
LOW
Cost
MEDIUM
Cost
HIGH
EFFORT
low
EFFORT
medium
EFFORT
HIGH
IMPACT
low
IMPACT
MEDIUM
IMPACT
HIGH

Materiality assessment is the basis for the company's sustainability strategy. A solid materiality analysis will help you understand the importance of different sustainability issues in your business.

The purpose of the exercise is to include the most relevant ESG (environmental, social and governance) aspects of your business. You may choose to start with a purely environmental materiality assessment, but social aspects related to employees, human rights, and community relations should not be overlooked. Some industries are characterised by strong governance (e.g. anti-corruption, anti-bribery, data protection, etc.), which should also be covered.

The materiality assessment is commonly visualised in a materiality matrix, which shows the importance of sustainability impacts to your business (profit) on one axis and the importance of your business impacts to stakeholders (people & planet) on the other. Here are some examples of materiality matrices.

  • Approach the analysis with an open mind:

- FINANCIAL MATERIALITY (OUTSIDE IN) - Identify topics that will impact your business' ability to create value over time, which may depend on natural resources, a reliable supply chain or other issues relevant to the industry, region, and business context.

- IMPACT MATERIALITY (INSIDE OUT) -  Consider the impact that your business activities have on the environment and society, and their importance to your stakeholders.

  • Identify best practices:

Understand from reporting companies with similar activities what is most material in your industry, and consider SASB's recommended topics for your industry.

  • Start small:

Not all topics can be covered when you're first beginning your sustainability journey. With the right focus and simplified methodology, you can actually capture the small essence of the issues that are most material to the business. However, it is important to document the non-prioritised issues and the reasons for not including them, to justify your decisions and use them for future reassessment. SMEs need to narrow the scope and prioritise a smaller set of materiality issues in order to measure, manage and communicate their sustainability efforts.

Suppose you are a subsidiary of a multinational company. In this case, you should understand the group's sustainability strategy and objectives, and clarify the scope of influence and control that corresponds to your region.

71%

of companies identify material ESG topics
(KPMG survey's N100 companies)

80% of Fortune 500 companies

use materiality in their reporting
(Brightest)

ADDITIONAL RESOURCES