In 2020, Spectris, the British expert providing insight through precision measurement conducted a materiality assessment as a starting point to accelerate its sustainability journey. This was triggered by the rising sustainability expectations across key stakeholders, which was agreed to have reputational, commercial and valuation implications for Spectris.
Undertaking a materiality assessment was essential to determine what sustainability means for Spectris, thereby allowing the company to set focus, and best measure success. In identifying what ESG topics were material to the company, Spectris engaged with several stakeholders to understand what they would like to see Spectris do to be a sustainable proposition in the next 10-15 years. The process resulted in a materiality matrix of 15 topics relating to operations, people and the environment, and organized by importance to stakeholders and business impact.
Based on the materiality assessment, Spectris then developed a two-year sustainability strategy around selected materialities. Given the decentralized nature of Spectris’ business, these are addressed at group or business-unit level. As such, actions tailored to the different business needs were established, while progress would be monitored by the company’s Sustainability Steering Group and the Group Executive.
By setting focus on the topics that were most material to the business, specific action could be taken, using resources in the most optimal way and yielding tangible results. For instance, with the adoption of credible and SBTi-approved Net Zero targets, a STEM strategy under development and the roll out of a Sustainable Products Pilot to improve the products’ impact. Spectris’ sustainability efforts and progress were recognized in substantial improvement in S&P Global’s ESG score and in a B-score obtained in CDP Climate Change rating.
Spectris presented an excellent example how a winning sustainability strategy results from setting direction and speed. An important element to consider in undertaking a materiality assessment is that of double materiality: considering how the company could be impacted by the topics (outside-in impact) as well as how the company could impact the topics (inside-out impact. Applying double materiality is essential to set focus and prepare to comply with the upcoming Corporate Sustainability Reporting Directive (CSRD).
Several challenges may arise in materiality activation: translating the results of the materiality assessment into tangible action to prepare for the risks and opportunities associated with the topics and measure progress. Examples and solutions outlined during the webinar included ensuring a global materiality matrix also works at local level, measuring progress on material issues, and defining programs to drive stakeholder collaboration and impact.
Materiality assessments are generally undertaken by the company’s headquarters and therefore take place at global level, to align priorities. However, some of the topics defined in the materiality assessment require a local strategy and implementation to be managed most effectively. As such, it is essential to undertake a lean approach to the materiality process and integrate local/business units early in the materiality process to best define and approach the materialities.
Example: Liberty Global defined ‘Social Product Responsibility’ as a material topic at group level, but the implementation was driven at a market level by the different countries to consider and adapt to the local social issues at hand.
The materiality assessment should be used as input for KPI development and SMART target setting, and targets and KPIs are also to be set on a local/business-unit level. Implementing an internal reporting tool that helps to collect data and enhance oversight on global level is essential to monitor and communicate progress. One best practice is also to link these KPIs and targets to management pay where relevant, to show commitment.
Example: DSM is moving from a specialty chemical company to a health & nutrition company, which is also reflected in its materiality assessment. DSM activated its materiality matrix by having three identified focus domains accompanied by roadmaps, long-term targets and action plans to measure progress.
Develop flagship programs for corporate focus areas, allows a company to better drive stakeholder collaboration and impact.
Example: Novozymes’ Hello Science flagship program, an open innovation platform, creates a strong and diverse network of people, partners and start-ups with the common goal of solving real world challenges.
If you are ready to take activate your materiality assessment to enhance your company’s (sustainability) strategy, get in touch with Josée van der Hoek, Director at firstname.lastname@example.org or call +34 6 82 04 83 01 to discuss how Finch & Beak can support you in meeting your ambitions.