With sustainability reports becoming increasingly important for organizations, the materiality matrix is a tool used by companies to evaluate their CSR issues. Evaluating the “materiality” of an action allows a company to isolate financial elements relevant to the economic performance of a company as well as environmental, social, and governance-related indicators.
Why analyse materiality?
CSR reporting has become an increasingly common practice in companies, but requires prioritization of many sustainability-related issues as they relate to the activities of the company as well as the different interests of stakeholders. Materiality matrices allow companies to class economic, environmental, and social issues and to identify those that are important for economic performance and for stakeholders.
Materiality matrices help companies, public organizations, and non-profit associations in:
- Piloting their sustainability strategies
- Anticipating risks and innovations – by filtering, choosing, and tracking the most relevant CSR issues for the organization while anticipating potential risks and opportunities that arise
- Transparently communicating to relevant stakeholders with concise and relevant reporting
- Adapting to regulatory changes
How to conduct a materiality analysis?
Goodwill’s materiality analysis relies on works by the International Integrated Reporting Council and the Global Reporting Initiative. The tool takes into consideration both the company’s and outside stakeholders’ perspectives. In the end, only issues that are significant for both the company and outside stakeholders will be taken into account.
Consulting with stakeholders is a key step in materiality analysis. The materiality threshold is then determine by the organization with respect to ethical, social, and environmental issues determined to be relevant and significant given the context.