Sustainability strategy is varied and encompasses a multitude of issues depending on the stakeholder landscape, industry of operations and the overall goals of an organization. The issues and impacts of sustainability can be a long list of potential areas of focus. Savvy organizations understand that channeling their resources in areas that have material impact on their performance is the best way to succeed. Many tools have emerged to define sustainability materiality and in this post we offer a short introduction to the topic and provide insights into some best practices.
The concept of materiality originated in the context of financial reporting. Information is deemed material if the omission or inaccuracy in reporting could influence the economic decisions of those using it. In the context of sustainability, materiality is viewed through the lens of environmental, social and governance factors that would impact the stakeholders. Stakeholders, in this case, reach beyond the investors or owners and include employees, customers, communities, governments, regulators, and other impacted parties.
1. Start with a clear understanding of your stakeholders
Think beyond just your shareholders and remember to consider your clients, customers, employees, suppliers, neighbors, opposition groups, and the communities your organization impacts. External facilitation of your stakeholder analysis can help to identify blind spots and emerging risks and opportunities.
2. Identify what key issues are the most material to business and important to stakeholders.
Aligning the stakeholder expectations to assist in achieving the strategic goals of an organization is really where material gains can be made. Operating sustainably can:
3. Develop a clear strategy on required reporting versus voluntary reporting
When we say “required reporting” we’re referring to sustainability reports mandated by law. If your company is required to comply it needs to have a strategy in place to develop these reports timely, efficiently, and accurately. An example of “required reporting” is the Greenhouse Gas Reporting Program (GHGRP) enforced by the United States Environmental Protection Agency (EPA), which demands annual reporting from large, emissions-intensive organizations in the USA . “Voluntary reporting,” on the other hand, is not required by law, but can elevate your corporate reputation significantly and help spur investment in your business. An example of “voluntary reporting” would be disclosure of your company’s Scope 3 Greenhouse Gas emissions.
4. Review different frameworks that could be used for your assessment
Each materiality assessment framework has pros and cons depending on your industry and target audience. While they can assist in starting the dialogue and ensuring you don’t miss anything common to your industry, additional elements are likely material to your stakeholders and strategic business plan.
5. Hire a consultant if you don’t have the expertise to navigate materiality assessment frameworks in-house
Materiality assessments are crucial to sustainability reporting. They are also time consuming, so you will want to do it right the first time around. If you feel overwhelmed navigating the frameworks in-house, don’t hesitate to source some help. The fact is there is substantial overlap between the many frameworks available to you, and a materiality assessment with an organizational maturity analysis can help you decide on the correct path.
6. Define your organizational maturity, profile your risk and plan to improve
Assessing where you are as an organization is important to set a baseline and then to establish short, medium, and long-range goals. A solid risk assessment can take the materiality tools offered in the existing frameworks and help to identify the true materiality of your risk. Plotting the risk tolerances of your organization in terms of financial, operational, and reputational impacts. Contact Frostbyte to find out how we can help you with this.
7. Align your reporting to your goals
Different stakeholders have different priorities. Align this to your strategy and disseminate the information accordingly.
8. Transparency is key
Sustainability is an evolving space that is being thrown into the spotlight as time goes on. People appreciate the desire to “go green”, and they understand that nothing is perfect. They value honesty where there are shortcomings as long as they are accompanied by plans to improve. Stakeholders understand the need for financial health of organizations, but they also expect this to be done in a way that is balanced and considers, and improves, the impacts to people and planet in the pursuit of profit.
9. The proof is in the data
Consistent use of valid and supportable data helps everyone improve. Access to data and trends can help you move business strategy into a proactive zone. Understanding the gap between where you are and where you want to be will support the resource demands to achieve your goals. Also, what if you are already achieving goals you thought were still developing? If so, you are, at a minimum, missing the opportunity to communicate success and more than likely not aiming at the true potential of your organization.
10. The expertise is available
Sustainability and materiality are developing quickly. Resources are available to help. At Frostbyte we have the experience, tools and leadership to help navigate the frameworks and help you to define all of the elements discussed in the previous tips. All of our clients to date have been gathering and performing in the areas of health, safety and environment in some fashion. All of that content is relevant and is the base of opportunity for sustainable operations. Our goal is to focus on what truly is material to you, to build on your previous successes and to help you to continuously improve.