Meet the companies we have produced materiality assessments for
Why you need an ESG materiality assessment
Companies benefit from a materiality assessment when they:
-
Need to comply with Corporate Sustainability Reporting Directive (CSRD).
-
Plan to produce a Sustainability Report and want to know what subjects to cover.
-
Want to align with the Global Reporting Initiative (GRI).
-
Want clarity on the business case for an ESG strategy.
-
Want insights into where to dial-up ESG efforts, and where to dial them down.
The two types of materiality assessment
Companies can potentially impact a huge range of environmental, social and governance (‘ESG’) issues. A materiality assessment evaluates the relative importance of these different ESG issues, identifying what is 'material' and what is not and presenting this in a materiality matrix.
This is valuable for two main reasons. Firstly, it defines the scope of topics which companies should ideally be publicly reporting on for full stakeholder transparency. Secondly, it establishes the business case and priority ESG issues for an ESG strategy.
All materiality assessments aim to do the above but there are two different approaches to conducting them. The 'traditional materiality assessment', as first defined by GRI and the 'double materiality assessment', as defined by CSRD legislation and associated EFRAG guidance.
-
Traditional materiality assessment. A traditional materiality assessment evaluates ESG issues through two lenses - the importance of an ESG issue to a business, and the importance of the ESG issue to stakeholders. Issues of high importance to both are material issues.
-
Double materiality assessment. A double materiality assessment (DMA) evaluates the potential an ESG issue has to impact on a business's financial performance, and the potential a business has to impact (positively or negatively) on that ESG issue. Issues with high impact in both areas are material issues.
As well as differences in the analysis lens, the two types of materiality also involve different processes. For a traditional materiality, the process is not formally defined and typically involves a combination of direct and indirect stakeholder engagement to gather and evaluate views, often in a subjective manner. In contrast the process for a double materiality assessment can be fluid as per the traditional route, but if the DMA is wanted for CSRD compliance purposes, then the legislative guidance must be followed. This guidance, although still draft, is very prescriptive in the steps that need to be taken and the numerical quantification of impacts, which makes it a more resource intense option.
Materiality assessment steps
The precise approach we take depends on the type of materiality assessment being conducted and the stakeholders involved, but the general process is as follows:
01