How to start a materiality assessment
The first step in implementing a good environmental and social (E&S) or sustainability strategy is to carry out an E&S materiality assessment – and the good news is they can be simple to do with the right tools!
Through an E&S assessment, you can identify and then prioritise your areas of E&S risk and opportunity. This provides you with clarity and focus about what you should spend your time and energy on. It also demonstrates to your stakeholders – investors, banks, customers, and staff – that you have analysed, understood, and prioritised the E&S risks and opportunities that are most relevant to your business.
It is a good way to pre-empt or answer “what are you doing to…..?” questions from stakeholders. Your materiality assessment should be shaped by two questions:
- “What is important to my business?”
- “What is important to my stakeholders?”
Your focus should be where the answers to these two questions overlap.
Our top tips for conducting your materiality assessment are:
- Start broad – your initial assessment, which you can do by completing a simple questionnaire like Triplo ESG’s Free E&S Checklist, should cover a range of different topics that span numerous E&S categories. For example, social issues typically include labour statistics, health and safety, and workers’ rights. While environmental issues cover matters such as waste management, greenhouse gas emissions, and water consumption. By answering a series of easy-to-understand questions, you will begin to understand where your E&S strengths and weaknesses lie.
- Consider your stakeholders’ views – a lot of companies involve external and internal stakeholders’ opinions in their materiality assessment by sending out surveys. Typically, stakeholders – such as customers and employees – will be asked to rate the importance of certain E&S topics. This does not need to be a complicated survey and you can base the survey questions on the results of your initial assessment. Understanding which issues are most important to your stakeholders will help you in the next step – prioritisation.
- You should prioritise – no company can address everything! To help you prioritise, consider the following questions:
- Does this issue pose a significant reputational, financial, or operational risk? What is the risk of inaction – would you lose customers? Could you fall short of existing or incoming regulations?
- Does focusing on this issue provide business opportunities such as cost-savings, improvements in productivity, access to new customers, strengthening supplier relationships and tendering processes, and/or improved access to finance?
- How difficult would it be to address this issue? Think not only in terms of human and financial resources, but also your products, revenue model and operations.
- How important is this issue to your stakeholders? Consider both external (customers, investors, etc) and internal (employees).
It’s not just about risk, it’s also about opportunity. We cannot say it enough – there are huge value creation benefits associated with sustainability initiatives. Whether it be cost savings through improved water efficiency, or improved employee productivity and engagement by creating a better workplace.
How to start a materiality assessment
The first step in implementing a good environmental and social (E&S) or sustainability strategy is to carry out an E&S materiality assessment – and the good news is they can be simple to do with the right tools!
Through an E&S assessment, you can identify and then prioritise your areas of E&S risk and opportunity. This provides you with clarity and focus about what you should spend your time and energy on. It also demonstrates to your stakeholders – investors, banks, customers, and staff – that you have analysed, understood, and prioritised the E&S risks and opportunities that are most relevant to your business.
It is a good way to pre-empt or answer “what are you doing to…..?” questions from stakeholders. Your materiality assessment should be shaped by two questions:
- “What is important to my business?”
- “What is important to my stakeholders?”
Your focus should be where the answers to these two questions overlap.
Our top tips for conducting your materiality assessment are:
- Start broad – your initial assessment, which you can do by completing a simple questionnaire like Triplo ESG’s Free E&S Checklist, should cover a range of different topics that span numerous E&S categories. For example, social issues typically include labour statistics, health and safety, and workers’ rights. While environmental issues cover matters such as waste management, greenhouse gas emissions, and water consumption. By answering a series of easy-to-understand questions, you will begin to understand where your E&S strengths and weaknesses lie.
- Consider your stakeholders’ views – a lot of companies involve external and internal stakeholders’ opinions in their materiality assessment by sending out surveys. Typically, stakeholders – such as customers and employees – will be asked to rate the importance of certain E&S topics. This does not need to be a complicated survey and you can base the survey questions on the results of your initial assessment. Understanding which issues are most important to your stakeholders will help you in the next step – prioritisation.
- You should prioritise – no company can address everything! To help you prioritise, consider the following questions:
- Does this issue pose a significant reputational, financial, or operational risk? What is the risk of inaction – would you lose customers? Could you fall short of existing or incoming regulations?
- Does focusing on this issue provide business opportunities such as cost-savings, improvements in productivity, access to new customers, strengthening supplier relationships and tendering processes, and/or improved access to finance?
- How difficult would it be to address this issue? Think not only in terms of human and financial resources, but also your products, revenue model and operations.
- How important is this issue to your stakeholders? Consider both external (customers, investors, etc) and internal (employees).
It’s not just about risk, it’s also about opportunity. We cannot say it enough – there are huge value creation benefits associated with sustainability initiatives. Whether it be cost savings through improved water efficiency, or improved employee productivity and engagement by creating a better workplace.