Environmental, Social, and Governance (ESG) is now a “must have” and is the new standard for business excellence. To help businesses capitalize on ESG and develop long-term, effective ESG programs, VelocityEHS hosted our Virtual ESG Conference to educate businesses and EHS professionals on a variety of ESG topics. One of our conference sessions featured a panel discussion with VelocityEHS experts David Staples, Sr. Solutions Strategist for ESG, and Phil Molé, EHS & ESG Expert, along with Dr. Christine Haman, Sustainability & ESG Manager with Trinity Consultants.
During this session, panelists answered questions about materiality as they guided a discussion about the importance and benefits of materiality assessments and how they can be used to identify meaningful ESG strategy, goals, targets, and tactics. Here is a summary of what the experts covered.
What are the Different Types of Materiality?
The overarching concept of materiality is relatively simple, but it can seem complex when figuring out how to best engage with stakeholders and how to rank questions on the materiality assessment. Having an understanding of the types of materiality makes it easier to understand how to best approach your materiality assessment. There are two types of materiality: financial and impact materiality.
In the past, the most commonly referenced type of materiality has been financial materiality. This is all about economic value-creation, and addresses issues that internally impact your business’s financial performance and its ability to create economic value for investors and shareholders.
Impact materiality, which is becoming more and more central to organizations, focuses on the external impacts your business has on the community, environment, and social sustainability of the business.
When you apply both financial and impact materiality with your ESG materiality assessment and subsequent ESG strategy, you’re applying double materiality. Double materiality casts the wide net needed for your business to determine sustainable development risks and impacts to both its financial performance and its corporate citizenship.
What Is a Materiality Assessment?
A materiality assessment is effectively a “relevancy filter” to identify the ESG issues that matter most to your business. Whether your business is just getting started in ESG or has a mature program in place, it is important to perform materiality assessments as a path to:
- Help identify the risks and opportunities that matter most
- Stay focused on critical ESG performance
- Shape ESG disclosures
- Reduce over-reporting
- Help drive stakeholder engagement and communications
When building your materiality assessment, it’s important to consider, identify, and evaluate all the different internal and external stakeholders in your business. A stakeholder is anyone who affects, or is affected by, your ESG performance and overall business activities. You’ll need their engagement to identify the ESG issues that matter most to them, and to you. With that prioritization in-hand, you can then quantify the ESG issues and topic areas that are most material to your business.
How Do You Use Materiality Assessment Information?
After you receive the results from your materiality assessment, a materiality matrix can be generated providing a visual graph that makes it easy to identify higher priority ESG concerns. Try to focus on the top four or five concerns so you can really make them the priority and delegate enough resources to strategically address each concern.
It is also important to note this is not a one and done process. You should periodically revisit your materiality assessments because what’s material to your company today may not be material in the future.
How can I Make Collection and Reporting of ESG Metrics Easier?
ESG tracking and reporting is heavily reliant on data, having the ability to identify and communicate performance data to your stakeholders is central to ESG. Smart, purpose-built ESG software solutions make the gathering, analysis, and communication of ESG performance simple. For example, you can quickly build, deploy, and analyze your ESG materiality assessments then generate a standardized materiality matrix that better informs ESG strategy and communicates stakeholder priorities in a clear and concise format.
The best modern ESG software even offers integration with utility provider data to streamline utility data collection across multiple locations, saving time and resources. This also improves accuracy by automatically applying correct emission factors and unit conversions to easily quantify your greenhouse gas (GHG) emissions and carbon footprint. Modern ESG software tools offer you the accurate and accessible data you need to understand where your business is at and track your ESG goals.
What Comes After the Materiality Assessment?
Knowing what issues are material to your business helps to build a foundation for a strong, effective, and strategic ESG program. The experts discussed next steps in ESG management, including:
- Identifying ESG mandatory and voluntary reporting standards that apply to your business
- Tracking key ESG initiatives and related metrics, like GHG emission scopes 1, 2, & 3
- Establishing good corporate governance practices
For the full, detailed expert discussion on materiality assessments and these next steps, watch the on-demand session.
VelocityEHS Can Help!
Our ESG Solution, part of our VelocityEHS Accelerate® Platform, makes it easy for businesses like yours to conduct materiality assessments and improve your ESG performance right out of the box. In addition to facilitating materiality assessments, our software gives you a single platform for management of all three scopes of GHGs while simplifying the collection, analysis, and reporting of key ESG data.
Contact us today to learn more about how we can help you to improve your EHS & ESG programs.