Materiality – 7 ways to make it work for you and your business by Alasdair Marks, Director, Simply Sustainable
Sustainability and corporate responsibility practitioners from a range of national and global businesses recently gathered in London for an exclusive discussion forum hosted by Simply Sustainable, to explore current approaches to materiality – the process through which companies identify and prioritise the social, environmental and economic issues they will focus on – and how they are evolving to keep up with the rapid pace of change: Declining trust in governments, business and the media; extreme climate change & resource depletion; growing social divides; and the Fourth Industrial Revolution. How does a business seek to understand emerging risks and opportunities, the changing nature of known issues and the evolving expectations of stakeholders?
Here are 7 pieces of advice from the great and the good who assembled to tackle these questions with us.
1. Engage internally and externally
Although it depended on the scope and size of the company, the materiality process was for the most part a combination of internal and external engagement which was encouraging. Those that had been through a more formal stakeholder mapping process had uncovered some broader but nonetheless important societal groups that previously hadn’t been consulted – this added value to the resulting process. Good advice given included that the stakeholder list should align to a company’s purpose and what it wants to be known for, with a related example being Parish Councils; a vitally important stakeholder to build trust and a license to operate at a very local level, but not necessarily a ‘typical’ stakeholder group.
There was a sense of frustration though that it was so difficult to establish the right system to harness stakeholder feedback on an ongoing basis. Very often, two-way communication channels are in place throughout the business, but it is another story encouraging colleagues to use the opportunity to ask relevant questions or pass information back
2. Undertake materiality assessments (more) regularly
An important question regarding materiality has always been how often companies should undertake or refresh an assessment – and weighing this up against the demands on time and resource.
There was general agreement in the room that materiality needed to be refreshed more frequently than perhaps it has been in the past against the backdrop of rapid pace of socio-economic and environmental change and similarly evolving societal expectations of business. This was true for a number of businesses in the room which had recently amended policies and practices which were felt to be too rigid and infrequent. The important point made here was just how quickly emerging issues can change what is material for a company. Just think about the sudden prominence of issues such as air pollution and (ocean) plastic pollution in the public consciousness.
3. Take advantage of technology
Following on from the point above, we talked about the concept of continuous materiality and how new approaches are now on the market which take advantage of new technology. One such example is harnessing the power and potential of Artificial Intelligence (AI) to enable the monitoring of social, economic and environmental data; from sources such as news, social media, regulations and company reports. As a forward-thinking consultancy which serves this market, this is something which Simply Sustainable is looking at closely to complement the assessments we undertake for our clients – allowing us and them to divert precious resources towards more meaningful and in-depth stakeholder engagement.
4. Use materiality to engage colleagues and leaders
We were reminded a number of times throughout the discussion about the value and importance of (re-)engaging colleagues on sustainability. And similarly, to engage different businesses or business units within the group around a common cause – although there are notable challenges, particularly between geographies or between group and country-level. Ultimately, successful engagement depends on practitioners’ ability to communicate far and wide internally before, during and after an assessment. For one company for example, it was an important process to get sustainability back onto the Board’s agenda as it prompted them to sit up and take notice of the changing nature of issues and stakeholder expectations of the company.
Digitalisation and digital disruption was cited a number of times as an example of a major emerging theme. As the output of a robust process, the value is that it can give practitioners important leverage to engage across different functions and locations to re-educate colleagues about the breadth of sustainability and how it affects their role. Ultimately, the insights and evidence a company gets from an effective materiality process is precious and should inform how it manages risk, harnesses opportunity and how its strategy evolves to ensure relevance and responsiveness.
5. Don’t go in with preconceived ideas
Companies learn surprising things through the process about the increasingly broad expectations of their stakeholders. One example given was wellbeing in the context of increasingly prominent issues like air pollution, a challenge issued to a facilities management company. In cases like this, it is important to go in with an open-mind and not simply a desire to come out of it without any surprises.
6. Consider the part that established global frameworks and agreements will play
It was notable from the discussion that the UN Sustainable Development Goals are increasingly being used as part of materiality assessments against which the business might be mapped. This can be hugely valuable in helping a business understand where it should go and to test this with stakeholders – particularly for those companies which are looking to align their work and accelerate commitments to the global sustainable development agenda. This too is something we are increasingly recommending to clients to enhance the value of the assessments we undertake on their behalf.
7. Be as broad and ambitious as you can afford to be
There was interesting debate around how wide companies will and should go externally to seek feedback. For some, it is about identifying and prioritising a few key stakeholder groups (typically employees, customers, suppliers, investors and local communities), with one attendee sharing experience of a previous study where some 30 stakeholder groups were consulted. However, this caused too much contradiction and it was challenging to establish priority issues. On the flip side, for another, consulting a very wide range of stakeholders was what the business needed in order to fully understand its impact on society and to understand what it needed to do to make a real difference.
So what is the future for materiality?
We believe materiality needs to evolve in order that it has more impact and better enables companies to keep up with fast-changing operating environments and societal expectations. And there is certainly evidence from the companies to whom we spoke that they are starting to change, or at least thinking about changing the way they approach it.
As a critical building block for corporate sustainability, it is also vital that it changes if we are going to achieve the transformational changes required to tackle the enormity of the issues we are often dealing with here. New collaborative reporting platform, Reporting 3.0, sets out its concept of ‘integral’ materiality, a significantly enhanced and much broader approach, as part of a context-based approach to sustainability – that is, a company understanding its own proportionate contribution to macro issues and recalibrating its approach accordingly. It recommends three main steps:
- Identify positive and negative company impacts on capitals (ecological, social & economic resources) vital to stakeholder wellbeing.
- Determine if company impacts compromise the carrying capacity of capitals.
- Ascertain if the impact lends itself to strategic innovation opportunities with the potential to enhance or event regenerate capitals to achieve net positive impact.
The exciting part for Simply Sustainable, as advocation partners for this movement for change, is looking at how we can innovate and deepen the materiality process for our clients to help them achieve greater value from it as part of this vital transition.
Do get in touch with us if you are interested in finding out more.
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