The importance to companies to address material ESG issues becomes more and more apparent. A study from Harvard Business School found that companies with strong performance on material sustainability issues and poor performance on immaterial issues had the best future stock market performance. These results show the importance of focusing on ESG factors that are material to your company, while leaving the factors that are immaterial to your company out. But as the world is changing fast, issues that are immaterial today can become material tomorrow.
As we are experiencing now, the COVID-19 outbreak has an unexpected major impact for many companies. In a study by the World Economic Forum published in 2019, economists estimated that, in the coming decades, pandemics will cause average annual economic losses of 0.7% of global GDP. According to this study, the outbreak of infectious diseases is inevitable, but the economic impact that it may cause not. This study highlighted the importance of companies to understand the possible factors that make the company vulnerable to financial losses from infectious disease outbreaks in the future. Therefore, preparedness for such an event is key to build a resilient business.
That new global issues are emerging also becomes clear from the increasing importance of circular economy for the chemical industry. Back in 2016, research into the reported sustainability topics from the chemical industry demonstrated low interest for the circular economy. Only 4 from the top 10 performers of the industry actually mentioned circular economy and policy statements or management systems. But the companies in the chemical industry have made a shift the past few years, acknowledging the opportunities of the circular economy by integrating circularity into their strategy. An example of this step forward is the foundation of the ‘Alliance to End Plastic Waste’ in 2019. This alliance comprises, amongst others, of more than 25 major global chemical companies, with the goal of initially funding USD $1.5 billion over five years, to develop and accelerate solutions that minimize and manage plastic waste.
What the above mentioned examples illustrate, is the fast pace in which immaterial topics become material. For a company to build a resilient business, it should prepare for the impact of future material topics by equipping the company with a forward-looking approach to materiality. Obtaining this approach to materiality may bring companies the following advantages:
Looking at the high speed at which issues that are currently considered immaterial become material and the advantages that early identification of those future materialities may bring, equipping yourself with forward-looking approaches to materiality will help your company prepare for the future.
Get started by updating your materiality matrix and start focusing on a selection of issues that matters most, now and in the future. Finch & Beak has developed a Re-Fresh Materiality service that guides companies in the process of developing a (new) matrix in compliance with relevant standards such as SASB and GRI. Get in touch with Josée van der Hoek, Director, at firstname.lastname@example.org or +34 6 82 04 83 01 to find out more.