"Materiality" was 2013's sustainability buzzword. This is largely due to the Global Reporting Initiative's (GRI) G4 framework, launched in May, that moved the concept of materiality into the heart of sustainability reporting and consequently into the bedrock of sustainability strategy.
According to the GRI, material issues are those that have "direct or indirect impact on an organization's ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large" — a jam-packed definition covering just about every business activity. So who decides which issues are the most material to creating and preserving value, whether economic, environmental or social?
This is where stakeholder engagement comes in. By consulting and engaging both internal and external audiences, companies can set priorities in a holisitic and systematic way, and back up decisions with evidence.
Survey says …
GlobeScan and SustainAbility's latest 2013 Issues Survey does just that. It asked 881 sustainability experts from 91 countries which social, environmental and economic issues they thought were the most urgent and which industries they considered the most accountable for tackling each issue. The resulting matrices allow us to see clearly the most material issues for each industry, as ranked by sustainability experts from positions in companies, governments, NGOs, academia and the media.
An all-industry overview, aggregating ratings of urgency and accountability, shows two groups of industries emerging: first, industries facing high levels of both urgency and accountability on a number of fronts, and second, those dealing with less overall urgency and accountability, for which only particularly material issues stand out.
The former are high-impact industries such as oil and gas and agriculture/food and beverage. For companies in the oil and gas industry, climate change tops the matrix as both most urgent and the highest level of accountability. Nearly three-quarters of respondents (73 percent) consider climate change to be of major urgency to the oil and gas industry. Sustainability stakeholders also consider air pollution, access to energy, and bribery and corruption issues to be pressing for this sector.
The latter group of industries includes pharmaceuticals and electric utilities, where materiality is focused on a smaller number of crucial issues. For pharma firms, for example, access to medicines and health care is unsurprisingly considered the most material issue. Infectious disease is another pressing issue on which the pharmaceutical industry is expected to act.
A directive for companies
In the context of the rising urgency of global and local issues such as food security and water scarcity, companies need to ensure that they meet expectations, minimize risk and reap opportunities to be at the forefront, leading solutions. Materiality assessments can be invaluable in determining both where to begin and what to aim for when developing and deploying a leading sustainability strategy.
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