Hit the Materiality Assessment Easy Button: A Primer for Conducting Your Inaugural Assessment with Less Pain and More Gain
When you think about a materiality assessment, this might be the visual that comes to mind:
This grid, featured in Unilever’s 2019/2020 Materiality Report, is a great example of a materiality assessment best practice. It’s comprehensive, statistically significant, and . . . it took a lot of work to get there.
That last point can be a big turnoff for executives, especially in companies that just aren’t ready (yet) to put their ESG strategy in stone.
The good news is, materiality assessments don’t have to be all-or-nothing endeavors.
Conducting a “starter” assessment is a perfectly acceptable way to get your feet wet, gain invaluable insight, and score points with stakeholders, all without a significant investment of resources on your part. And, doing a preliminary study can lay the foundation for the more robust, official materiality assessments you will need to begin doing at some point down the road. So, it’s time well spent.
3 Keys to an Effective “Starter” Materiality Assessment
Here’s how to make your inaugural venture both simple and rewarding.
- Define your objectives.
- A materiality assessment is the process of identifying, refining, and assessing numerous environmental, social, and (potentially) governance issues that could affect your business and your stakeholders, and then condensing them into a short-list of topics. This short-list is intended to inform strategy, targets, and reporting. It’s a far-reaching initiative and can be a lot to get your arms around.
- But, it can help if you boil it down to the core purpose: gleaning market intelligence that can help you set the right ESG priorities for your unique business and all of your various stakeholder groups. Most ESG corporate ratings agencies and frameworks cover this objective in a “Stakeholder Engagement” section. Ultimately, they want to make sure you are asking more than just your shareholders about more than just governance topics.
- Gather pertinent insights from conversations you’re already having.
- The best way to make a starter assessment easy is to leverage the tools you already use to solicit input from your different stakeholders. Here are three ways you can double dip:
- Add questions to employee engagement surveys. Most companies field some form of employee engagement survey at least once a year, or they may do quarterly topical surveys. You can easily insert a small subset of ESG-related questions into your next regularly scheduled assessment. Since your employees are already familiar with the survey, and especially if they have seen the past impact of survey results on corporate action, then you can count on a high degree of engagement. You should gain some extremely valuable input into what matters most to your employees along with potential suggestions or ideas for how to prioritize these issues.
- Integrate questions into off-season conversations with your investors. Fourth quarter is not a particularly busy season for active portfolio managers. But it is a time when they know they have a chance at impacting proxy season. So, you may find them more willing to engage in ESG conversations. This is especially true if you invite someone from their ESG stewardship or compliance department to join and if you bring your own ESG expert to the table as well.
- Off-season is also a great time to connect with purely passive managers who are usually inundated with meeting requests just prior to proxy season, but may have windows open in their calendars in October, November, and December. With any investor conversation, remember to show up ready to listen. You’ll also need to be very conversant and forthcoming with your ESG ratings, past voting season results, and current state of climate reporting. Be ready to discuss any ESG frameworks you have or are considering aligning with along with any diversity commitments and measures your company has already made.
- Review customer information that’s already public. Companies are often most hesitant when it comes to assessing customers’ ESG priorities. But you may find that you don’t have to actually directly ask your customers anything this first time around.
- For B2B sales, you can review buyers’ publicly stated ESG priorities and the public commitments they have made. (You’re unlikely to uncover priorities through a survey that the company hasn’t already made public.) And, if your customers are often large public companies, there’s a good chance they’ve done a materiality assessment of their own and set corporate ESG goals as a result, which you can easily find on their corporate or investor-facing websites.
- You may also find helpful fodder in industry mandates, such as the Personal Care Product Council’s 2020 sustainability report or the American Cleaning Institute’s industry materiality assessment.
- If you do need to dig deeper, call on salespeople to review customer RFPs or pose the questions in their normal quarterly or annual touch bases with clients. These conversations can be informal and extremely insightful and directionally helpful at the same time. And, if you’re part of a B2C company, your sales leaders can likely share useful intel on the focal points and priorities of consumers.
- Speak to your findings whenever and however you can.
- Even though your starter assessment won’t be considered statistically significant, and you may lack the snazzy grid and the formal research to back it up, the insights you gain will still be valued by your stakeholders. Just the fact that you’ve made an effort to uncover pertinent topics will be appreciated. And it will give you a base level of understanding that can facilitate more meaningful discussions with all stakeholder groups as you speak to what you’ve learned and what your company is doing as a result. So, as you build ESG disclosures accordingly, be sure to clarify for stakeholders that you did your research – even if it’s not the full, standard materiality assessment process.
Materiality assessments don’t have to be difficult. But they do need to start somewhere, and soon.
Even 80s pop singers would have to agree that times have changed and we’re now living in a materiality-focused world. Bi-annual or annual materiality assessments are rapidly becoming table stakes. And a starter assessment is a great way to get your company started down the path, lay the groundwork for meaningful conversations with your stakeholders today, and build a more formalized and relevant ESG strategy for tomorrow. Reach out to us if you are interested in conducting your own starter materiality assessment.Back To Blog