Golden rules for materiality?

How do you convert materiality from a boring box-ticking exercise in the midst of reporting season, to a key enabler of risk management, innovation and future proofing your organization?

Diageo, Network Rail, Prudential, Danone and the UK Global Compact might seem a rather diverse group of organisations to agree about the way to get value out of materiality, but at February's meeting of the Crowd in London, that’s exactly what they did. In a discussion I chaired (and preceded by talks from John Elkington and others on the unprecedented rate of change coming at business and society) they explored whether the often plodding business of materiality had a contribution to make to preparing for that change. Happily, the answer seemed to be ‘yes’ – but only if materiality processes meet some demanding specifications.

So, here’s the new rules:

1 Bring in uncomfortable voices.  It’s easy to go to the same old stakeholders, and get the same old answers. But the overwhelming change in society and business is coming from new quarters, and it’s vital to seek out people who are better connected to it. External advisory boards might help with this, but social media listening might be more surprising.

2 Bring in science and context.  There’s also a world of evidence beyond stakeholder opinion – much of it grounded in science or at least a systematic approach to evaluating the significance of issues. Seek it out and test your stakeholders’ assumptions.

2 Bring in the future.  Materiality’s traditional focus on ‘what mattered during the reporting period’ is all very well, but what’s going to matter in the future – including the longer term future – is where the action is.  Get some future focus, either by leveraging futurology already happening in the organisation (talk to the strategy guys) or by bringing in some specialists.

4 Make it adaptable.  There’s no standard method and, despite the plethora of matrices, no required format for presenting materiality. The key is to make it useful at minimum cost.  Participants in our discussion were using data from existing stakeholder consultations and staff surveys, bringing evidence in about impacts and opportunities, and creating frameworks and tools that people can actually use to evaluate what they are going to do next.

5 Connect to the commercial.   In the end, if materiality does not help you bridge from the specialist concerns of CSR and sustainability into the mainstream thinking of the business, what’s the point?  Finding ways to connect to strategic processes such as risk management, and making sure that a diverse senior group validates the assessment – by actually discussing it – will ensure that issues truly salient to the future success of the company get the traction they deserve.

Sound sensible? Or at least a good starting point? If you're wondering how to make the most of materiality, do get in touch!