Article Highlights

• Material assessments are most useful if designed to inform (1) reporting and (2) strategy.Material assessment for reporting, under the GRI Standards, ranks topics based on organizational impact and things that influence stakeholder decisions.

• Material assessment for strategy development ranks topics based on what the organization should do going forward.

Introduction

Material assessments are the backbone of sustainability reporting and strategy. They determine the most “material issues” for an organization. This material assessment guide reviews material assessment using the Global Reporting Initiative (GRI).

An issue becomes material where it is sufficiently important to report to a target audience. In financial reporting, an issue becomes material where it influences the financial decisions made by investors. In sustainability reporting, an issue becomes material based on a wider range of decisions, issues and stakeholders.

To identify the issues, obtain input from internal and external stakeholders. This is the time to also obtain input on strategy too.

Material assessments are most useful if designed to inform (1) reporting and (2) strategy.

Start with a clear understanding of the information you look to obtain. You can then focus on the right (1) questions, (2) stakeholders and (3) methodology. You can visually present the results to inform decisions. Since the strategy information and sustainability reporting information are typically different, they can be reported separately.

What is material?

The GRI provides guidance on assessing materiality and sustainability reporting. The GRI’s G4/Standards state that material issues are the topics that are “reflecting the organization’s economic, environmental and social impacts” or “influencing the assessments and decisions stakeholders.”

GRI states that there should be a link between materiality and strategy. THe guidance under the GRI is focused what to report - not what to do for strategy.

What is material for a report may be different from what is the priority for a strategy.

Reporting vs. Strategy

For reporting, an organization that aligns with GRI standards will rank topics based on organizational impact and things that influence stakeholder decisions.

For strategic development, rank topics based on what the organization should do. Formulate questions that are within the company’s power to change. Look at the various tools, new innovations and industry groups to help achieve the organization’s strategy.

Different people may be consulted for reporting purposes compared to strategic development purposes.

The results of your material assessment findings can be visualized in charts. One chart can provide the results for reporting purposes. Another chart can provide the results for strategic development purposes.

The reporting chart can follow the GRI guidance on reports.

The strategic development chart can show information relating to strategic development i.e. “what are the biggest impacts on the business” and the companies “ability or opportunity to influence or control them” those impacts on business. Impact and control are powerful forces to shape strategy.

Here is a visualization of the two charts:

You can show the priorities for reporting and strategy using one chart with two different Y-axes and the same X-axis.

By combining the reporting chart and strategic development chart into one chart for the material assessment, it allows senior leaders to look at backward-looking (reporting) and forward-looking (strategy) priorities at the same time.

Key Takeaways

Tasks to help you prepare

• Set specific and time-bound targets that fit with the company’s strategy.

• Focus on effective targets that are carried out with internal accountability to achieve the targets, employee performance reviews, appropriate remuneration structures to achieve targets, monitoring of progress, and public reporting.