First things first! Materiality assessment

3 minutes   

written by Helena Ranängen

Interpreting and prioritizing which sustainability goals to implement and act on can be a major challenge for companies, especially when taking the needs of local stakeholders into account. One way of facing this challenge is to conduct a materiality assessment  (also known as materiality analysis). In a materiality assessment, each aspect, e.g., occupational health and safety, is assessed in terms of "importance for stakeholders" and "importance for business success".

Together with my colleagues, I explore how companies address sustainable development and which sustainability aspects they prioritize. So far, there is no standardized framework for materiality analyses. However, various methods for evaluating the significance of sustainability aspects have been published. To give you a good basis for developing or optimizing your own method, I will explain the relevant steps of our work using a company from the Nordic mining industry as an example, focusing specifically on their assessment of occupational health and safety.
 

What is a material sustainability aspect?

A material sustainability aspect is an economic, environmental, or social aspect that a company can impact or be impacted by. It can also be an aspect that significantly influences the assessments and decisions of stakeholders.

Step #1: List of sustainability aspects

Our goal is to create a sustainability aspect matrix relevant to the particular company based on a list of all sustainability aspects. To achieve this, we examine sustainability initiatives, guidelines, and tools for sustainability communication, some of which relate to a single topic, e.g., ISO 14001 for environmental management and United Nations Universal Declaration of Human Rights. Others include several topics, e.g., the GRI framework, the UN Global Compact, or ISO 26000. Additional sustainability aspects are identified through a literature review of relevant research on sustainability criteria and indicators for a specific industry. The identified aspects are then categorized into subsequent core subjects. "Occupational health and safety," for example, is categorized under the core subject "Labor practices": 

Step #2: Management workshops

The sustainability aspect list is then used as a basis for workshops with the company’s management team. They are asked to assess the importance of each aspect and rate the importance for business success on a scale from 1 to 5, where 1 is "not important" and 5 is "very important." For the core subject of "Labor practices", the chart below for this example case shows that "Occupational health and safety" as well as "Remuneration" and "Equality" were assessed as very important.

Step #3: Stakeholder interviews and surveys

The company’s management team identifies and groups their stakeholders and then prioritizes their requirements in terms of power, legitimacy, and urgency. My colleagues and I then evaluate the relevant sustainability aspects through structured interviews and surveys with the company’s external and internal stakeholders, which in this case could choose whether they preferred to be interviewed by phone or complete the survey by email. We recommend that companies conduct in-depth interviews with their stakeholders to ensure accuracy and collect more information on the business background. Both tasks are relevant for the "Evaluation" process and support strategic decisions regarding corporate social responsibility (CSR).

Step #4: Stakeholders and business success matrix

The combination of both assessments shows which aspects are significantly important to both stakeholders as well as business success. Factors such as "Occupational health and safety," which are positioned on the upper right corner of the matrix, are of material importance on both axes and should be prioritized in the company’s sustainability strategy. The final matrix of our case study includes 60 aspects from 7 core subjects. However, to keep it simple and answer the question "Should our strategy in sustainability management put safety first?" the example below only shows the results of "Labor practices":

Conclusion

The approach presented in this article can be used as a framework to ensure the quality of materiality analyses. However, it is important to highlight that companies need to evaluate their sustainability aspects and update their materiality assessment regularly in order to determine materiality and identify priorities.