Whether it is through integrated reports or sustainability reports, investors and other stakeholders require businesses to report transparently on their efforts with regards to sustainability topics. However from the company's perspective, if too much time is spent on reporting, less time remains to generate impact and turn strategy into action. Already in 2013, Finch & Beak named this issue the reporting trap. Instead of positive impact, reporting itself becomes the objective. Therefore, companies need to set their focus in order to find a balance between reporting too little and too much.
Several standards have been implemented to guide companies in their reporting on material issues. In November 2018, the Sustainability Accounting Standards Board (SASB) launched 77 updated, industry-specific standards across 11 sectors, including consumer goods, food & beverage, technology & communications and transportation. For each industry, the standards outline a minimal set of topics for communicating on sustainability information. SASB takes an investor-perspective and helps companies to report on financially material issues that matter most to this stakeholder group. Applying these standards, therefore, results in more informed decision-making and a focus on issues that really matter.
The SASB industry standards furthermore help companies in the development of materiality matrices to outline business risks and opportunities. SASB’s Materiality Map is an interactive tool that allows for the comparison of financially material sustainability issues on industry-level. Research by HBR researchers Khan, Serafeim and Yoon, has shown that a focus on a selection of core material issues results in superior investor returns by almost 5%. However, even after several years, we still see materiality matrices with over 20 topics. With so many material issues to report on, it is hard for companies to avoid the reporting trap. Selecting of a limited set of core material issues thus helps companies create targeted impact, in turn, improving sustainability reporting.
This topic and the principle of Less is More when it comes to materiality is further explained in the “Winning Sustainability Strategies” book, co-authored by Finch & Beak’s Managing Partner Jan van der Kaaij.
Get started by updating your materiality matrix and start focusing on a selection of issues that matters most. Finch & Beak has developed a Re-Fresh Materiality service that guides companies in the process of developing a (new) matrix building on renowned sustainability reporting standards such as SASB and GRI. Get in touch with Lars Gielen, Consultant, at firstname.lastname@example.org to find out more.
Image source: Pixabay