A materiality matrix is a tool that is often used by companies to determine their sustainability focus areas. Taking into account business and stakeholder influence, the matrix outlines the most critical areas of a company’s sustainability program. According to the WBCSD the purpose of materiality matrices is fourfold:
However, developing a credible materiality matrix is not an easy task and requires engagement and support from senior management. Additionally, businesses have to overcome business-induced complexities related to their specific business models and so risk losing focus on what matters most during the process, ending up with a long list of materialities in their matrices. So what is the impact of this?
A study conducted by Harvard Business Review researchers Khan, Sarafeim, and Yoon in 2015 examined whether a focus on material and/or immaterial ESG issues had an impact on the total shareholders return. The study revealed that companies focused on achieving a high performance on selected material topics outperformed their peers in terms of total shareholders returns by almost 5%. Companies that focused on both material and immaterial ESG issues also showed better returns than companies that only concentrated on immaterial topics (+1,5%). Concentrating on fewer material ESG issues and acting upon them is evidently bringing higher shareholder returns than having a long and undifferentiated list of sustainability-related material topics.
It is clear that focusing on a selected amount of issues that are material to the company is therefore crucial. But how does this work in practice? In order to come to the most effective materiality matrix, the following steps are recommended:
Finch & Beak has developed a state-of-the-art approach to materiality concentrating on real impact. The Re-Fresh Materiality Update follows the above steps and uses a big data tool to come to the most effective and easy-to-organize materiality assessment. An additional action plan is also delivered and intended to be used to accelerate performance on top material issues.
Are you interested in this agile, low-cost high-value big data approach to materiality assessment? Please contact Bas Nuijten, Senior Consultant at Finch & Beak via email@example.com or call at +31 6 28 02 18 80.