The Expansion of Materiality in CSR Operations

The Expansion of Materiality in CSR Operations

These days, there are all sorts of pressures on organizations to "go green," contribute to their communities and get involved in a whole range of activities that would once have been frowned upon. Even quite recently, the dominant view was that companies existed to make profits for shareholders, not to do good deeds.

Companies are increasingly taking a more enlightened stance. Businesses are part of our communities and have responsibilities, just like everyone else. They are expected to care for the environment, for example, and behave responsibly in their relationships with others. Additionally, it makes good economic sense to do these things. You save money if you save energy, and any hint of mistreatment of employees -- even those working for your suppliers -- can inflict huge damage on your company's brand.

The big question, though, is just how far should you go? What exactly should your company be working to achieve, and why? And how should it inform shareholders and other stakeholders about its progress?

BT has thought long and hard about these questions. The result is a "materiality" process that focuses our efforts on what matters most and makes it easy for us to track (and report on) our progress.

The concept of materiality will be familiar to those involved in the financial side of business. There, information is deemed material if it could influence investors' decisions, and companies have an obligation to disclose it to the markets.

With the help of AccountAbility and LRQA, a part of the Lloyd's Register Group, we have applied similar thinking to sustainability and other aspects of corporate responsibility. Issues are judged material if they are relevant to our business and our response could have a significant impact on our performance, especially in the long term.

The process we've developed provides a framework for judging individual risks and opportunities, and for ensuring those that could have real influence on our future receive the right levels of attention.

It has been informed by extensive research. Customers, shareholders and employees were asked to identify the social and environmental issues they most expected a company like BT to act on. Responses to investor questionnaires helped us understand what's of most interest to them. And levels of societal interest were assessed through a media review that covered seven countries.

In most cases, issues were deemed material by both BT and its stakeholders. These were automatically included among those against which we report our performance. But there were also issues that were considered to be more important by BT than its stakeholders. In these cases, we sought the views of leading experts in sustainability and other aspects of corporate responsibility. Based on their guidance, some have been included in our reporting.

In all, we adopted 12 key performance indicators, ranging from measures of customer and employee satisfaction to others that address our environmental performance and conformance to ethical trading standards.

The structure this has brought to our reporting on corporate responsibility and sustainability has benefited both BT and its stakeholders. It gives us a real focus for our efforts -- one that's based on the real needs of our business and not just on a general desire to do good -- and makes it much easier for us to judge our progress. It doesn't preclude us from doing things that aren't judged to be material to our business, but it does ensure that those that are get the attention and support they deserve.

For investors and other stakeholders, it delivers clarity. They can see how the initiatives we undertake respond to their needs and concerns, and it gives them meaningful measures against which to evaluate our performance.

Customers in particular have benefited as the process has enabled us to balance our consideration of the threats sustainability issues could pose in the years ahead with a view of the opportunities climate change and other issues could create, both for BT and its customers.

The products and services we develop and sell have plenty of scope for helping other businesses reduce their impact on the environment, for example. Flexible working solutions and conferencing services have reduced our costs, increased our efficiency and have reduced the CO2 emissions of our U.K. business by some 100,000 tons a year. But there's nothing special about BT, except that we have more experience of using such solutions in our business than most. It therefore makes both commercial and environmental sense for us to make our expertise more widely available.

Tesco, Britain's biggest retailer, is among those to have benefited. Using our conferencing services, it has reduced its carbon emissions by 2,446 tons and cut travel costs by more than £10 million ($20 million) a year. Reductions in time spent travelling increased the productivity of the staff involved by 18 percent.

And while we developed our materiality process to add structure to our own decision making and reporting, it soon became clear the thinking behind it could benefit other businesses. With customers, legislators and others all taking a greater interest in sustainability and other aspects of corporate responsibility, companies are going to have to be much more structured in their response than they were in the past.

A report we produced with AccountAbility and LRQA explores the concept of materiality, reviews our experience and that of other businesses and proposes a generally-applicable framework that everyone can use. By helping companies align their strategies with emerging social and environmental constraints and opportunities, we believe it makes a material difference.

Kevin Moss has responsibility for implementation of BT's Corporate Social Responsibility (CSR) strategy for BT in North America. More information about the materiality process developed by BT, AccountAbility, and Lloyd's Register Quality Assurance is available at bt.com/betterworld.
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