Materiality Assessment – the starting point of a sustainable business

16 November 2022 


Starting your sustainability journey

In recent years, the importance of having a strong environmental, social and governance (ESG) strategy has become more and more important for companies keen to make the most of their business opportunities. ESG can be linked with stronger company performance, sustainable business practices and overall company value.

Every company encounters ESG issues that are relevant to sustainable business management. As part of any ESG journey, organisations need to know what ESG issues they should be prioritising and focusing their time and limited resources on. The starting point for anyone on their ESG journey should always be identifying which ESG issues are the most important to the business, and then outline action plans needed to reach their goals. This process is known as materiality assessment.

What is a materiality assessment?

Simply put, a materiality assessment is the process of identifying, refining and then assessing a broad range of environmental, social, and governance issues (ESG) that matter most to your business and to your stakeholders. A well-structured materiality assessment helps determine which ESG issues should be considered in sustainability strategy development, in performance measurement and in reporting.

In a materiality assessment, relevant material issues are evaluated from internal stakeholders (e.g., senior management, board of directors, employees) and external stakeholders (e.g., investors, suppliers, business partners) to gain a holistic view of your business’ environmental and societal impacts and the expectations of your business. Certain topics must be excluded deliberately in order to prioritise the most relevant areas. A clear focus allows effective sustainability management.

Once you have decided on the key areas to focus on for your ESG strategy, only then can you begin to further align your strategy and reporting with present and future societal expectations, business needs and market developments.

Why is materiality assessment important?

Materiality assessment enables you to understand how ESG relates to every aspect of your business, so it means you’ll be far better placed to make informed decisions on your business strategy, risk management and other processes throughout your business operations.

A broad and inclusive assessment that includes stakeholder engagement can deliver a range of benefits:

  • Gather insight into stakeholders’ needs
  • Better placed to communicate with your stakeholders about the ESG issues and strengthen stakeholder engagement
  • Contribute to sustainable development
  • Identify the risks and take advantage of opportunities to generate innovative yet sustainable solutions to stay ahead of competitors
  • Set targets and action plans to meet the goals of the Paris Agreement
  • Ensure your overall business strategy aligns with your stakeholder expectations
  • Provide better quality of sustainability report which aligns with your material issues
  • Be better prepared for the future, giving you visibility to constantly monitor your company’s material issues

How do you get started?

Getting started on drawing up a shortlist of the most important topics for your business is not without its challenges. There will, no doubt, be more material issues than you can manage and so it’s crucial to prioritise. Stakeholder engagement can also be difficult and time-consuming but should never be ignored because the views of people across the entire business are essential to a successful assessment.

There isn’t a universally agreed way of implementing a materiality assessment so companies are often left trying to figure out the process for themselves, which can be both problematic and time consuming.

We can help you start the journey, using our expertise and experience to guide you through this process. While our approach is changeable and tailored to each individual company’s needs, it’s proven to work no matter the size, sector or location of your organisation.

Our general approach

The first step is to understand your business operation and the interrelationships within the organisation and external stakeholders. We’ll then review your current business and risk management strategies. This ensures a better understanding of your company which enables an effective strategic planning of your materiality assessment process.

Define objective and scope

The next step is to clarify with you the purpose of the materiality assessment: Are we defining the thematic focus for the sustainability reporting or are we focusing on the identification of the ESG risks and opportunities in your company? We’ll also define the scope of the assessment, considering which parts of the business and stakeholders you would like to involve in the assessment. Understanding your requirements will enable us to design and customise the process to meet your expectations.

Identify potential topics and stakeholder engagement

We’ll then recommend and review topics that are relevant to your business before drawing up a list of finalised topics and participants across a range of internal and external stakeholders. We’ll support you with stakeholder engagement and identification to obtain valuable feedback.

Gather Information, Analyse and Report

Information gathering is achieved using various methods such as surveys, interviews and workshops. Using our survey tool platform, we carry out an in-depth analysis of the opinions of stakeholders across your entire business and supply chain before consolidating the results and aggregating the feedback to give you a ranking of topics. Finally, we’ll work with your company’s management team to prioritise material topics based on the strategic importance to the business and stakeholders and generate a report to be reviewed by the stakeholders.

What are the next steps?

It’s one thing knowing the importance of carrying out a materiality assessment and another knowing how to build a robust process for doing so. Once we have guided you through this process you’ll be well placed to know which material topics to focus on for your business to grow, prosper and be sustainable.

However, this is just the start of your ESG journey and the next step comes in drilling down into these focus areas and drawing out data that can inform your business decisions moving forward.

Our team of expert advisors can help you understand the metrics you should be reporting on from each area you have identified from your materiality assessment. Using our technology platform, Sustainion, we can easily collect and aggregate a combination of qualitative and quantitative data from your focus areas. 

Looking for a materiality assessment? Want to know how you can take the next step in your ESG journey? Contact our team today.

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