Most of us are familiar with the phrase, “drinking from a fire hose.” Whether you are a production supervisor, accountant or human-resources manager, you’ve faced situations in which you were working as hard as possible to complete a project and experienced a moment when you became overwhelmed and thought there was no way you could keep up or complete the task.
The same feeling holds true for sustainability professionals. It can sometimes feel like you are drinking from a firehose when you try to identify what is meaningful and relevant to your company and its stakeholders. A materiality assessment is a trending tool for those in sustainability who are trying to determine which programs, activities or partnerships their company should be focused on from a sustainability perspective.
Specifically, a materiality assessment is a stakeholder engagement exercise designed to identify environmental, social and governance issues that could potentially have an impact on a business and its stakeholders. The objective is to prioritize the issues into a short list that can be used to inform a company’s sustainability strategy, goals and reporting plan. Often, the results of a materiality assessment are presented on a matrix, as shown on page 33. The company then focuses its attention on the issues located in the upper right corner as these are considered high priority with real business and stakeholder impact.
Tyson Foods recently completed its first sustainability materiality assessment. The insight and guidance we gained from our internal and external stakeholders through this process in invaluable. Below are a few lessons from our materiality assessment experience.
1. Stakeholder Engagement is Critical
A sustainability materiality assessment must include multiple stakeholder groups such as internal senior leaders and decision-makers, customers, investors, non-government organizations and academia. This exercise should not be limited to an internal, informal review. Every facet of a company and its operations has potential to affect, or be affected by, stakeholders. Internal and external stakeholder engagement can help better define a business strategy, sharpen decision-making, enhance a company’s sustainability performance, and drive communication and transparency.
2. All Companies Can Benefit from a Materiality Assessment
Whether new to sustainability or further along in the journey, all companies can benefit from a materiality assessment. For companies new to sustainability, a materiality assessment is a great tool for opening the lines of communication, informing a sustainability strategy, and honing in on what is most important and where a company can have the greatest positive impact. Companies further along in their sustainability journey can use a materiality assessment on an ongoing basis to validate their existing strategies and activities are making the impact the company intended.
3. All Issues are Important
When looking at a materiality matrix, we must remember all issues on the matrix should be considered important. The issues in the upper right corner, however, may need more active engagement, demonstrated progress and transparent communication. The issues in the upper left corner may require active management and engagement but are typically managed to ensure stakeholders are informed and satisfied. For the lower half of the matrix:
- Any issue to the left can, if poorly understood or managed, result in significant exposure; and
- Issues to the right need active management and progress but less external engagement and reporting.
Additionally, your company may find it wants to combine several issues into one focus area. For example, if your materiality matrix shows water stewardship is a key focus area, you may want to include energy management as a part of this focus area since these are likely issues you will work on together.
There are many ways to conduct a materiality assessment and a lot of great resources are available to assist companies. The process should, however, be systematic and unbiased to ensure the final results are meaningful and offer guidance and confidence on focus areas.
When properly done, a materiality assessment will result in a sustainability strategy that guides a company down a path of collaboration and continual improvement. NP