Sustainability teams are often working with limited resources and high pressure. Processes like materiality analyses can therefore seem overwhelming, costly, and unnecessary. However, with a sound plan of action, a materiality analysis can help you identify which economic, social, and environmental issues impact the health of your organization, as well as how future trends, risks, and opportunities will affect your business. A materiality analysis should be a journey, focused on aligning expectations, building reporting capacity, and making sure that keeping a pulse on your organization’s sustainability does not burden your internal stakeholders.
To start off, many major research initiatives provide guidelines and frameworks for businesses to build upon. Most sustainability ranking organizations are starting to provide some industry-specific insights or at least sector-level data, enabling you to specialize your reporting and utilize metrics specific to your industry and tailor them to your company’s context. Today, we will focus on the Sustainability Accounting Standards Board (SASB), whose ESG accounting metrics can be particularly useful when starting a materiality analysis or overall sustainability program.
SASB spent over six years focused on industry-level research. They convened investors, companies, consultants, and experts to find out how specific environmental, social and governance (ESG) issues affect the financial health of organizations.
To ensure transparency, the SASB followed a process similar to that of the Financial Accounting Standards Board (FASB), working with standards and metrics experts as well as integrating public comment periods.
SASB also collaborates with issue-specific organizations and utilizes best practices adopted by each industry. This provides a robust foundation of evidence to support SASB’s metrics and standards.
SASB catalogues 77 industries under 11 sectors. Finding the category—or categories—that best fits your company is a good starting point to narrow down a more manageable set of ESG topics that makes sense given your specific context.
For example, an oil and gas operation may be integrated across production (upstream), transportation (midstream), refining and marketing (downstream), and even services around each of those. These are four distinct industries under the SASB standards, and an organization in this sector may look to find what set of metrics from some or all of these industries may best represent their operations.
In addition, you may benefit from finding examples of how other companies have sought to address the topics most relevant to you, in order to expand on that context. Find specific initiatives that illustrate at least three levels of action: minimal/non-existent action, common practices, and more innovative approaches. For now, simply compile what you can gather directly from free sources of information such as competitors’ websites. You can do more robust research later on in the process.
Analyze, Optimize, Move Forward
After gathering the set of SASB standards that most closely apply to you and setting some market context through researching competitors, create simple surveys to send to key stakeholders. The idea here is to get a broad sense of what direction will make sense for your sustainability program in order to have the most engagement across the organization.
You will receive a range of opinions from different groups. Use this as an opportunity to start conversations and foster communication, trust, and collaboration in the long-term. Focus on documenting feedback and incorporating it to refine your analysis. Using sliding scales in your survey and following up with face-to-face conversations will give you a better sense of where specific departments and stakeholders stand on particular issues, improving your overall analysis.
Once you have initial data to determine which issues your organization is best prepared to take action on, work to align any new ESG data collection with current reporting schedules and practices. This will help integrate your new sustainability program into the everyday operations of your company. This is easier said than done, of course. At each stage, make sure to let your colleagues know that this is a journey and you are simply looking to understand how best to incorporate ESG information into their existing collection/reporting channels and cycles.
An actionable materiality analysis cannot be accomplished by one enthusiast alone. You want as many internal champions and supporters as possible—especially if you have a global footprint and many reporting channels. Find colleagues with the necessary experience and capacity to help you manage the more labor-intensive tasks as well as to brainstorm creative, strategic solutions for incorporating data-collection timelines and standards in the long term.
Look to leverage compliance-ready technology such as CleanChain to lessen the burden of bringing in new processes to your organization. As you build and add to your sustainability program every year, you may benefit from bringing in experienced consultants that can help you integrate more frameworks into your strategy, such as the UN Sustainable Development Goals (UN SDGs), the Task Force on Climate-related Financial Disclosures (TCFD), and CDP (formerly, Carbon Disclosure Project). A consultant can also help you improve your ESG performance across rankings—such as DJSI, EcoVadis, and others—which can help you build out your program’s goals and actions, as well as quantify your results.
At ADEC Innovations we help you optimize specific, short-term initiatives or create long-term strategic roadmaps with actionable KPIs that can generate buy-in from internal company leaders as well as from external stakeholders (i.e. regulators, investors, customers, communities, etc.) in the market. Whether you have a full team to conduct a thorough materiality analysis, or reach out for support, it is important to get started by leveraging the work done by SASB and managing the narrative of your sustainability journey to avoid being overwhelmed by external questionnaires, surveys, or even investors’ proxy votes around ESG topics.
ADEC ESG Solutions is a leading provider of ESG solutions, including fully-integrated industry expertise, software solutions, and data management. Contact us to learn more about our sustainability data management services.
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