How do you validate and review your materiality analysis with internal and external stakeholders?

A materiality assessment can be performed based on the guidance outlined in one of the globally recognized voluntary ESG frameworks, such as SASB or GRI. Companies can also develop their own materiality assessment approach or use a hybrid method. It’s important to remember that the world is transitioning to the regulatory ESG disclosure frameworks that will impose their own requirements on performing materiality assessment. The EU’s ESRS draft exposures requires companies to perform a double materiality assessment to evaluate the impact “inside out” and “outside in”. The SEC Climate Disclosure proposal based it’s materiality requirements off the accounting threshold of 1%.

Make sure you know your supply chain. Map as far as you can up and downstream. And challenge yourself to have more inofrmatoin and transparency every year.

What I do with my clients is conduct both a survey and interviews to collect data, in addition to conducting a competitive analysis search for areas within the materiality matrix that are meaningful to my clients. The competitive analysis allows my clients to gain industry insight and helps them decide if they want to be leading edge, bleeding edge or somewhere else along the spectrum.

To make internal stakeholder engagement successful in materiality assessment: 1)Carefully select your team of internal stakeholders. Ask yourself how their role, considerations and perspectives can be valuable for the materiality assessment. 2)Provide ample information and instructions regarding the materiality assessment exercise. The better it is understood, the more meaningful and complete responses you will generate.

Stakeholders offer diverse perspectives and insights that can help ensure the relevance and accuracy of your assessment. By soliciting feedback and input from these groups, you can gain a better understanding of their priorities, concerns, and expectations. This engagement not only enhances the credibility of your materiality analysis but also fosters transparency and trust with key stakeholders. Additionally, it allows you to identify emerging issues and trends that may impact your business, enabling you to proactively address them in your sustainability strategy. Overall, engaging with external stakeholders is an essential step in ensuring that your materiality analysis effectively informs your sustainability decision-making processes.

When working with external stakeholders ensure that you share a common language. The world of ESG is constantly evolving and varies from region to region and even across industries. Your materiality assessment questionnaires and surveys sent to external stakeholders have to be accompanied with detailed explanation of technical terms and any frameworks applied. Do not leave anything to guess.

To validate and review your materiality analysis, collect input from internal and external stakeholders using various methods such as surveys, interviews, focus groups, and workshops. This approach allows you to gather comprehensive quantitative and qualitative feedback on what sustainability issues stakeholders consider most critical, ensuring that the analysis accurately reflects their priorities and concerns.

Many external stakeholders—especially NGOs—exist along a broad spectrum, from extremely open and collaborative to extremely agenda-driven, non-collaborative, and activist. It’s important to choose the external stakeholders carefully when doing a materiality assessment to get the right representation of a cross-section of stakeholders.

Every change in a business environment, be it internal operations, value chain, macro-economic terms, may impact materiality status. New materially important topics may emerge while the status of the previously identified topics may change. Decide what changes would trigger a new iteration of a materiality assessment to keep it current.

Your materiality analysis is a dynamic and ongoing process, not a one-time exercise. It requires regular updates to reflect the evolving context and expectations of your business and stakeholders. By continuously reassessing material issues, you can ensure that your sustainability strategy remains relevant and responsive to changing circumstances. This iterative approach allows you to identify emerging risks and opportunities, adjust priorities, and maintain alignment with stakeholder expectations. Ultimately, by keeping your materiality analysis up-to-date, you can enhance the effectiveness and credibility of your sustainability efforts.

The time of manual materiality assessment and must-have consultants is coming to an end. Leading risk management software providers offer an automated functionality that allows companies to efficiently perform materiality assessments based on voluntary (eg. GRI) and mandatory (eg. ESRS) frameworks. Technology solutions allow you to eliminate a manual process, bring a lot of efficiency to the process, create an audit trail and scale according to the needs of your ESG program.

Something else to consider is how the materiality results fit into the larger story - the company's ESG vision, goals and roadmap. I find it a very helpful exercise to take the materiality issues and get a sense if over the timeframe of the current strategy and/or roadmap, if those risk factors/issues will become more or less important over that same time frame.

It’s important to make the distinction between traditional materiality (now often referred to as single or financial materiality) and double materiality (which is a term coined thanks to very recent regulations in the EU). Double materiality incorporates financial materiality and also includes impact materiality. Now, comprehensive Materiality Assessments should include looking at the financial and other risks posed to a company by external factors, as well as the impacts that a company’s activities have on people and planet.