What is Materiality? The Basics of Defining What Matters

Get an overview of topics and reporting disclosures utilizing international frameworks 

Defining your material topics is crucial – not only to shape the most effective strategy, but also to know how to measure the results and what information to give your stakeholders. Already early on in the process it is important to get an overview of different topics that outline the scope of corporate sustainability, and use this as a basis for your analysis. For example, The Global Reporting Initiative gives you an overview of what information a company should report in order to disclose their impact on the environment, people, and economy. ISO 26000 is another standard, outlining the actions a company should or can take to improve in different areas of corporate responsibility.

Tip! Try Worldfavor Sustainability Insights, a free tool that gives you a benchmark on sustainability reporting in your industry.

define what matters 

Of all these outlined areas, it is then time to determine what your company should focus efforts on and report performance information on in the sustainability report. Two dimensions should be taken into account:

The organization’s economic, environmental, and social impacts

This is done by considering what effects your organization has on the environment, society/people and the economy (positive or negative). Considering the nature of your business and the activities in the entire value chain performed to generate and eventually consume your product or service – what effects do these activities have on the nature, people and/or the economy?

What is important to your stakeholders

This dimension should investigate what areas are important to your stakeholders and influence their decisions. Take into account both internal stakeholders’ perspectives, such as executive leadership, directors, shareholders and employees, as well as external stakeholders, such as customers, NGO’s, trade associations or local authorities. This gives you a wide range of perspectives across your value chain. In order to have a measurable result of your stakeholder analysis, conduct formal assessments such as surveys rather than informal workshop formats.

A good way to visualize the findings from the above two exercises is the GRI materiality matrix. Placing the company’s impact on one axis, and stakeholder priorities on the other axis, gives you a clear picture of what topics that could be considered as most material.

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THE GRI MATERIALITY MATRIX GIVES AN UNDERSTANDING OF WHAT TOPICS COULD BE CONSIDERED MOST MATERIAL. SOURCE: GLOBAL REPORTING INITIATIVE

Benchmark against industry peers 

Complementing your own analysis with a benchmark on what peers in your industry work with and report on can serve as a source of inspiration when getting started, but will also give a valuable view of how the scope you have defined looks in comparison to industry best practice. Are you missing something important? Is your scope wide or narrow compared to peers? Will the information you report be sufficient for the needs of your stakeholders?

We hope that this blog post has given you a little more understanding of materiality and of how to define what matters. Whether you conduct your materiality assessment internally or with the support from external consultants, understanding of the basic dimensions of materiality for your business is important and will help you shape a sustainable strategy for staying successful in the 21st Century.

Want to know what other companies on your industry report on? Worldfavor Sustainability Insights is a free tool that enables you to benchmark against sustainability reporting in your industry, get your free analysis!  

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