Thoughts and ideas from AIPHORIA Consulting
Conducting a Solid Materiality Assessment as a First Step To Sustainability
July 8, 2019 at 12:00 AM
by AIPHORIA Consulting
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Sustainability remains a hot buzzword in both government and business communities. Many companies have performed materiality assessments. These help to prove or to ensure that the company or other organization has adopted best practices to participate in sustainable initiatives. They also can keep a company from the danger of falling out of compliance with regulations or out of favor with the surrounding community and other stakeholders. 

What is a Materiality Assessment?

A materiality assessment studies a company or organization’s role and impact in environmental, social, and governance issues. This is commonly referred to as ESG.

The report provides insight on the following:

  • previous company performance in meeting ESG benchmarks
  • increasing awareness of communication and reporting practices
  • assisting in informing decisions concerning strategy, management, and investment.

The process involves thorough engagement across as many stakeholder groups as possible to determine total impact and possible strategies for improvement. It involves more than a typical internal review. A true materiality assessment must involve other businesses, government agencies, concerned non-profits, the general public, and others.

In certain industries and other economic sectors, the assessment goes beyond guidance on future decisions. It also can create a competitive advantage over those who have not yet adopted a future-facing strategy.

Having a good materiality assessment, along with evidence of implementation, demonstrates commitment to sustainability. And this commitment attracts both partners and clients.

Some states and a number of local governments have incorporated ESG concepts into their laws and regulations. A well-crafted materiality assessment will help the company remain in compliance.

What a Materiality Assessment Should Do

In most cases, a materiality assessment should touch every aspect of a company’s operations. No company can thrive, or even exist for long, on a virtual island. Its operations from production and distribution to marketing, even of trash disposal, have an impact on the environment. Reducing negative impacts while establishing positive engagements should serve as the foundation for any plan.

Taking a Systematic Approach

The best path toward crafting an effective materiality assessment lies in taking a systematic approach:

1. Engage External Stakeholders

First, the company must reach out and engage external stakeholders to determine what issues remain important to them and what role your organization plays in them. Here, a company can discover the unknown unknowns that can have a powerful effect on operations and direction.

2. Evaluate Past Work in Future Plans

As the plan comes together, those involved should look at others who have done the same without making the mistake of simply grafting someone else’s work. Each company and community have unique priorities and preferred ways to address them.

3. Compare Progress and Develop Benchmarks

The plan should also include ways to compare progress relative to others in the field. This should use these data points as benchmarks to mark progress in implementation.

4. Emphasize Communication and Transparency

Finally, once the plan is in place and the company has started working on making it a success, stakeholders who form a key part of progress must receive regular communication that emphasizes transparency. Internal and external monitoring should be planned ahead of time and be allowed to occur without interference.

Other Important Issues to Remember

Not every business aspiring to sustainability has the resources to conduct a thorough study in house. Small businesses in selected fields may have the most to gain, but they lack the resources to conduct a proper study. Businesses that can benefit the most include those involved in commercial fishing, green energy production, public infrastructure development in certain states, and many more.

Businesses that have the will but not the ability should reach out to professional consultants to assist in creating a plan. They can also receive expert advising in management and communication strategies once implemented.