A sustainability materiality assessment is a tool for determining the degree to which various sustainability risks and opportunities would impact your organization and how much they matter to stakeholders. It’s an essential component of conducting a materiality assessment.
As part of a materiality assessment, you’ll produce a list of potential sustainability “topics,” initiatives, or actions you could pursue, along with estimates of their expected cost, timeline, or general impact on the business. Stakeholders then rank these items based on importance. A sustainability materiality matrix creates a visual representation of the assessment results, using one axis to represent business impact and the other to represent importance to stakeholders. This visual depiction makes corporate and stakeholder sustainability priorities easier to understand, quantify, and prioritize.
After Tango conducted our materiality assessment, we created this materiality matrix. Yours may look entirely different, but it demonstrates how you can quickly evaluate and rank the various concerns of stakeholders.
Materiality assessments help businesses with sustainability reporting, setting sustainability goals, developing a sustainability risk management strategy, increasing organizational alignment, and more.
Once you’ve identified your priorities and mapped them out on a materiality matrix, it’s time to put this information to use. In this guide, we’ll walk you through what to do with your materiality matrix in the following steps:
- Bring your leadership up to speed
- Align with the risk-assessment team
- Make the necessary changes to targets and long-term goals
- Set and/or update current policies, initiatives, and governance
- Clarify your reporting and communications strategy
- Preserve a record of how the materiality matrix was produced
- Identify areas where resources need to be reallocated
1. Bring your leadership up to speed
It’s time to communicate the assessment to all the key players: leadership, shareholders, and stakeholders. These individuals have a vested interest in your company’s strategic organizational goals and priorities, and they’ll play an essential role in how the results will be used and communicated outside the organization.
After walking everyone through your materiality matrix, leading them through a SWOT analysis can be a helpful exercise for identifying the next steps. Your leadership team can explore the findings in a way that gets them thinking about the implications of the assessment and the strategic planning that needs to take place.
This means looking at every element in the matrix through a Strength, Weakness, Opportunity, and Threat lens. As you go over the matrix together, it’s helpful to ask yourselves questions like:
- What are we doing well? (Strengths)
- What is our strongest sustainability asset? (Strengths)
- Where are our biggest obstacles? (Weaknesses)
- Where are we performing the lowest? (Weaknesses)
- How does this align with trends in the marketplace? (Opportunities)
- What demographics could be impacted by a change here? (Opportunities)
- Where are we in comparison to our competitors? (Threats)
- Are regulations in danger of harming our operations? (Threats)
The materiality assessment gives your shareholders an opportunity to share their priorities and speak into the company’s sustainability focus. Processing the findings with a SWOT analysis further solidifies their buy-in by getting them invested in interpreting the assessment and thinking about what needs to happen next.
2. Align with the risk-assessment team
If your company has a risk-assessment team or a risk assessor, it can be helpful to get them on board early. Often, ESG-related risks fall under the purview of a sustainability team or chief sustainability officer. But for the overall health of the organization, it’s best when there is some cross-pollination between the team managing risk and the team managing sustainability.
This means looking at the various ESG concerns raised in the assessment and the areas that may be impacted. This means asking identifying questions like:
- What kind of financial risk does this represent?
- What customer groups are at risk for things like loss of service or supply-chain changes?
- Are we in danger of regulatory fines, censure, or action?
- How will this impact customer impressions?
Once you identify specific risks, you’ll need to identify where those risks fall. Are they mostly reputational? Financial? Regulatory? Operational? Client related? Knowing what buckets represent the most risk going forward can help you constructively map out your next steps and make more cohesive changes.
It’s important to note that getting various teams on board strengthens your company’s sustainability efforts in general. And looking at your sustainability matrix through the eyes of risk assessors can help you see the outcome in new ways and better prepare you to communicate effectively with stakeholders.
A materiality matrix allows various shareholders to speak into areas where they believe the largest potential risks lie. Taking this information to your risk-assessment team can help you consider the controls you have in place and isolate potential gaps that could be a threat to the environment, your people, and your business.
3. Make the necessary changes to targets and long-term goals
The valuable thing about a materiality assessment is that it allows you to gauge the focus and priorities of shareholders both inside and outside the organization. With these considerations and concerns in mind, it’s time to reevaluate your long-term goals and the targets you have in place in order to achieve them.
Are your findings in line with the priorities and metrics you already have or do adjustments need to be made? Are there areas where you could be more ambitious in your efforts or vice versa? In light of your matrix, are there targets that seem less relevant or policies that aren’t entirely hitting the mark?
4. Set and/or update current policies, initiatives, and governance
Your business likely has goals, initiatives, and policies that were in place long before your materiality assessment was started. It’s important to examine your current business policies and objectives considering these new priorities.
Now that you better understand stakeholder preferences and concerns, you’ll need to align this information with every area of your business that might be impacted. This includes, but isn’t limited to:
- Governance priorities
- Sustainability initiatives
- Company policies
- Management systems, programs, and procedures
- Key performance indicators (KPIs)
This will help set you up for the communication part of the process. Leaders and stakeholders will quickly recognize areas where the information gleaned from the materiality assessment doesn’t align with current protocols and values. And when they raise these observations (especially when they’re presented as a critique), it’s helpful to have thoughtful responses prepared and be ready to show how a pivot is possible with the lowest impact on daily operations.
Your materiality assessment likely highlighted risks and impacts not entirely covered by your current policies and procedures. But before you start making changes, you need to identify places where priorities and policies are not aligned.
5. Clarify your reporting and communications strategy
Sustainability reporting and transparency isn’t one-size-fits-all. Regulators like the SEC (US) and FCA (UK) require specific mandatory disclosures, but your business has many different audiences that may benefit from various levels of disclosure and explanation. Sometimes, it’s a matter of framing information in a way that makes the most sense to the receiving audience. For instance, a report given to a regulatory board might include insider language and figures that wouldn’t necessarily make sense if you were to put it on your website for customers, clients, and the public. This means carefully weighing what you share and how you communicate it.
If you want to enhance clarity and consistency, create a policy that aligns internal and external communication to benefit each audience the best. For instance, many organizations have chosen to publish their materiality matrices and assessments in the past, but they might struggle with the best way to do so.
On the positive side, publishing your materiality matrix can improve your company’s credibility and give weight to your sustainability reporting and ESG initiatives. It tells people you’re taking the process seriously and shows the progress made toward identifying your sustainability goals and promoting positive next steps. It also demonstrates a broad awareness and buy-in among all stakeholders for your sustainability goals, which can improve impressions of your brand.
But companies that don’t post their materiality assessments argue that they might not offer the most concise information for the public. For instance, ESG issues like maternity leave or investing in a greener fleet might show up as a low priority on your materiality matrix, but that doesn’t give a clear picture of its priority within the organization. And it can lead people to assume those topics aren’t prioritized within the business, which might not be accurate at all. A lot of factors could go into why stakeholders prioritize one element over another. In most cases, you probably don’t want your materiality matrix to speak for itself, and your report should include a thorough explanation of the implications.
Transparency and clear communication are key for sustainability. Crafting a strategy for how information is rolled out and communicated to various audiences is vital. Shareholders understand sustainability communications differently than employees, and each group will need to play a distinct role in this information. How the information is presented and explained should cater to the specific needs of each. The same is true for the public. If you choose to publish your assessment findings, make sure that your audiences will understand them.
6. Preserve a record of how the materiality matrix was produced
A materiality matrix should serve as a crucial reference for years to come. And while the result may be a simple visual, it’s vital that stakeholders and those in charge of implementing changes have clarity about the process and reliability of the matrix itself.
Internally, your organization should have a clear, documented record of answers to the following questions:
- What was the scope of the assessment?
- Which stakeholders were involved?
- What trends, benchmarks, and norms were considered when putting together the assessment?
- Which sustainability guidelines were used as the backbone for the assessment?
- How was “business impact” (or whatever variable you used) evaluated for each item?
- What scoring rationale was used?
- Were there any surprises that became evident during the assessment process?
Once you identify the key information and the ideal process for documenting your materiality matrix, future leadership can easily vet the process to ensure it’s still relevant. And as the industry and organizational priorities change, decision makers can determine whether they need to conduct another assessment in the future or update the existing matrix.
7. Identify areas where resources need to be reallocated
On top of readdressing policies and targets, you’ll want to take a look at areas where your resources might be better utilized. This means examining where your focus is and what areas are taking up the lion’s share of your attention, labor, and resources. Then analyze them against your materiality assessment to identify areas that may have the most potential for resource reduction or reallocation to match your updated priorities.
What would be the environmental, social, and economic implications of adjusting your resources in keeping with your assessment findings? Do you need to create specific plans to invest in technology or software upgrades, process improvements, or shifting operations to make your practices more sustainable? What key performance indicators (KPIs) need to be adjusted to ensure that these reallocations have the impact they should?
Simplify sustainability and energy management with Tango
A materiality assessment determines the degree to which various sustainability risks and opportunities would impact your organization and how much they matter to stakeholders. After you share the findings with key stakeholders, you’ll use the insights to develop or refine your company’s sustainability strategy by setting or readjusting your targets and action plans.
One of the most significant obstacles to pursuing your organization’s sustainability goals is the lack of visibility into your ESG data. You can’t set achievable goals or measure progress without a transparent system for monitoring your energy consumption. Tango Energy & Sustainability by WatchWire helps simplify the upgrading of your goals and monitoring of adjusted KPIs by consolidating and standardizing your utility data, even going so far as to automatically audit your data for common errors like duplicate entries and billing period gaps. Direct integrations with ENERGY STAR Portfolio Manager, LEED Arc, GRESB, CDP, and more also help streamline the reporting process. And you’ll also have convenient dashboards for tracking new sustainability goals, renewables, and more.
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