...MATERIALITY ANALYSIS EASILY EXPLAINED.
Do you ponder about the essence of a good CSR strategy? The first steps of setting up a good CSR strategy require identification of company stakeholders (i.e. people, institutions or organizations that are affected by your company or those that affect it) and the definition of your material topics.
Quite simply, identifying material topics is a principle that helps businesses to define the economical, social and environmental topics, that are key for their operations, as well as for the satisfaction of all of its stakeholders. It is also needed when writing a non-financial report in line with the most widely used international reporting framework, the Global Reporting Initiative (GRI).
So where to start? We have put together four easy steps that can help you with the process.
Step 1: Identify your stakeholders
Materiality is all about stakeholder impact. The first step is to define the important stakeholders of your business. As soon as you list all of the groups your business can impact or those that have an impact on you, you can go through prioritizing or grouping them. Stakeholders can include anyone such as investors, employees, customers, suppliers, NGOs, public institutions or media.
Step 2: Identify your indicators
Once you have identified your stakeholders, it’s time to set up the materiality topics and the indicators that will help you measure them. In this phase, it is important that the scope of your indicators meets the requirements of all your stakeholders. Often, the businesses focus their metrics internally despite their wide external impacts.
You should revise all the indicators your company already measures that could fit in the sustainability debate. The metrics are different for every organization but mostly they include data on economy, environmental impact, health and safety, human rights, product responsibility and others. The amount of metric tools will be dependent not only on the size of your company but above all on how many and what type of activities your business engages in. In order to determine the importance of indicators, you can set up a workshop with your employees, a survey, a media research or you can gain some insights from internal documentation.
Step 3: Conduct a survey
The next step is to conduct a survey across your organization (workshops or questionnaires) and with your important stakeholders. This will enable for ranking of your indicators according to two main criteria: importance and impact.
The best for the survey questions is to make them quantitative (for instance ranking from 1 to 10). In some cases the answers can be straightforward, such as evaluation of greenhouse gas emissions, as there are legislative limits. In others, such as the human rights, the scale of social impact may not be so clear. That is precisely where the stakeholders play such an important role, as they can provide you with good quality feedback.
Step 4: Materiality matrix
Now, you’ve compiled all the necessary data and you can move on to setting up your materiality matrix graph. Plot your sustainability indicators into a graph and it will show the relative materiality of your sustainability indicators. The graph is a perfect tool for learning about corporate CSR and sustainability priorities.
All sustainability indicators are evaluated based on two values - their influence and impact on business and their importance and impact on business stakeholders. The top right corner of the graph is where the future focus areas are, key for your business operations and prosperity. They are the economical, environmental and social areas your company impacts the most. They are also the topics most important to all of your stakeholders (and those, where you can influence change).
One important thing to remember is that materiality matrix is not designed as a measurement tool, but only as a guiding tool to help you compare the relative materiality of your sustainability topics. The materiality matrix should also serve as a guiding tool in terms of all strategic decision-making within the company.