Determining Material Issues

After an organization decides it will move forward with developing a sustainability strategy to mitigate its impact while maximizing opportunities, there is a series of commonly recognized steps that it can take. 

A first step is determining what issues are relevant, or put another way “material,” to the company and to its many groups of stakeholders. Materiality is the “conceptual bedrock” of sustainability activities, write sustainability consultants Robert Eccles and Michael Krzus in their book One Report: Integrated Reporting for a Sustainable Strategy.

The term materiality was adopted from financial accounting, where it describes “financially influential activities and those that carry no financial risk,” according to Liad Ortar, head of the Corporate Social Responsibility Institute at Haifa University, Israel.

The process of discovering what is and is not material begins by asking internal and external stakeholders what their priority issues are. Their opinions are likely to diverge on some points and converge on others. Through this consultation – known as a materiality assessment often in the form of a questionnaire – material issues emerge that are specific to the business and sector. The assessment informs the company’s longer-term sustainability strategy, helps set targets and shapes how sustainability activities thus far can be disclosed to what audience.

These material issues can be prioritized and plotted in a diagram, or matrix, so they can be easily understood. (See Visualizing Data.)

Lastly, the company can assign targets a set of key performance indicators to measure and report progress using one of a number of reporting frameworks or guidelines, depending on the audience. (See Metrics, KPIs, Goals, Targets.)

A company might at this juncture take stock of what it is already doing that could be included in its sustainability profile. Is it already using packaging made from a high proportion of recycled plastics? Is the feedstock from a renewable resource, such as biomass or rerefined oil? Does the production facility have solar panels and is there a system that can reuse grey water in other processes? Is there a ridesharing scheme for employees or paid maternity leave? Existing activities can be included later on when it’s time to collate sustainability data into a single document. (See Disclosure.)