There’s any number of ways to conduct a materiality assessment, and deciding how you go about it will determine what kind of value you get out of the exercise. Following the first post in this 2-part blog series "Getting More Value from Materiality", Jenn Clipsham looks at recent examples with Anthesis clients where materiality has delivered something more than the matrix.
1. A deep dive on key topics
After conducting a materiality assessment last year for a client in the ICT sector, this year we worked with that client to focus in on two specific emerging issues. We delved further into the risks and opportunities that this company may face in the short, medium, and long term from artificial intelligence (AI) and climate change. Focusing in on just two topics allowed us to go much deeper into those topics and develop clear action plans to address the financial risks and opportunities. Alternating assessments from one that is broad in its approach with one that focuses in on a few specific topic areas may serve other companies well.
2. Collaboration with the risk team
Some Anthesis clients are using the non-financial materiality assessment process as an opportunity to drive greater integration of ESG topics into the business by engaging and aligning with their enterprise risk teams on the criteria, thresholds and language they use for financial risk assessment. As a result, the outcomes of the non-financial MA are valuable inputs, and in some cases additional validation, for the ongoing work of the ERM teams. There’s also an important link to corporate governance, with increasing pressure on companies to elevate any non-financial or ESG risks they identify to the Board to ensure that their Board is fully informed on potential risks and what the company is doing to mitigate those risks. We are supporting a few of our clients now in developing governance structures that will better facilitate the integration of non-financial risks assessment into traditional enterprise risk assessment. We are referencing the draft guidance for Applying Enterprise Risk Management (ERM) to Environmental, Social and Governance-related Risks that the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and the World Business Council for Sustainable Development (WBCSD) released earlier this year.
3. Creating powerful communications
We structured the materiality assessment exercise with a client in the waste management sector as a mechanism to broadly engage with their customers, from municipal to small-scale commercial to large commercial customers. With responses from more than 1000 customers, the client can drill down into the expectations of each customer group and target sustainability communications appropriately. This client has also found it extremely valuable to use the Tableau Dashboard to communicate the outcomes of the materiality assessment with leaders across the business in a way that is professional, powerful and engaging. Because of the interactive, real-time update functionality of the dashboards, it is easy to engage leaders in the topic areas that interest them most.
4. Balancing opinion with science and evidence
There’s also a world of evidence beyond stakeholder opinion – much of it grounded in science or at least a systematic approach to evaluating the significance of issues. Two client examples:
Recently, we helped a major retailer who wanted to understand where the biggest sustainability impacts were in the value chains of their key product categories. We analyzed the impacts from their products in both the supply chain and use life phase, and identified materials driving these impacts in each product category. This work is now being used to refresh the focus areas of the retailer’s sustainability strategy.
With a client in the ICT sector we applied an additional weighting factor where we layered in “science-based impact” in our ranking of significance after stakeholders had weighed in on the topics. For this new weighting factor, we drew from existing research including the company’s carbon footprint and their risks assessments of suppliers related to human rights. This additional weighting helped ensure we were bringing a new measure of objectivity to the assessment process.
These examples show how materiality assessment can be tailored to meet specific business needs. With stakeholder expectations changing and growing and more formal requirements likely to follow, the case for materiality has never been more compelling.
Get in touch with us if you’d like to learn more about how to get more value from your assessment, and stay tuned for additional upcoming resources on this subject.