You've recently been tasked with one or more of the following:
- Drafting your company's first Corporate Social Responsibility (CSR) Report
- Creating your company's first CSR strategy
- Telling your leadership team how to allocate your company's CSR resources
Where do you begin?
One of the most common and effective starting points is to conduct a materiality assessment, a process by which a company evaluates and prioritizes environmental, social, and governance issues in order to define priorities, develop strategies, and allocate resources. They are frequently conducted as part of the reporting process. In fact, according to the Global Reporting Initiative, "Materiality is the threshold at which…sustainability topics become sufficiently important that they should be reported.” But materiality assessments can inform much more than the outline for a CSR Report.
Here are a few practical reasons for conducting a materiality assessment, beyond the report:
Identify or validate your issues
Often, the response of leadership when asked to approve a budget for a materiality assessment is, "we already know what our most important issues are." However, in the absence of a formal materiality process, stakeholders cannot evaluate how the company determined which issues represent the greatest risk or reward. This can cause stakeholders to then ask: do the material issues represent those that were the least expensive and easiest to implement? Do the issues represent only those areas of the business the board and leadership are willing to disclose publicly? Do they represent problems for which solutions have already been developed? The outcome of the materiality may well demonstrate that leadership has a firm understanding of the company's material issues. But more likely, it will demonstrate the company has an understanding of some of the issues, while also enabling new issues to emerge through a structured process and ensuring careful evaluation of existing issues through multi-stakeholder dialogues. Further, it allows you to identify risks before an external stakeholder does it for you.
Educate your company and colleagues about your CSR efforts
When embarking on your first materiality assessment, a core component is to ensure the people who will be helping to implement your CSR strategy understand a few key points:
- How does your company define CSR?
- How do you approach strategy development?
- Who cares about these issues?
- Why do they matter to your company?
Many people have never heard any of the terms used to define CSR and even if they have, they usually don't know what the terms mean or how they apply to your company and to their role. Take advantage of the materiality process to engage with your colleagues on the issues that matter to them, to their role and work, and to the industry at large.
Effectively allocate resources for your CSR strategy
The materiality assessment represents the foundation of your CSR strategy. Every company can create a laundry list of dozens of issues it could address. The materiality assessment enables you to narrow that list to those issues that represent the greatest impact to your business. By following a deliberate and systematic process, you build credibility for the strategy and goals that are based on the outcomes of that process. While you can and will continue to monitor the broader set of issues, your resources can be directed at the narrower set of material issues. As a result, your strategy becomes more focused, more directly relevant to your business, and easier to embed into business. As a result, your budget and staffing are structured to support implementation against those issues where the company can have the greatest impact and ROI.
Strengthen credibility with external stakeholders
A defining hallmark of the materiality assessment is stakeholder engagement, both internal and external. Increasingly, shareholders are evaluating company sustainability reports and strategies based on the quality of the materiality assessment process.
Further, companies that are targets of activist NGOs can leverage the materiality assessment to demonstrate an understanding of the risks across the organization's value chain and how the strategy focuses on addressing and mitigating these risks in the short- and long-term.
None of us have the endless resources required to address every issue facing our company in an increasingly complex and interconnected world. However, a materiality assessment provides a firm foundation for strategy development, focusing resources, engaging with stakeholders, and strengthening the credibility of your sustainability initiatives. For a summary of Samsonite’s materiality assessment and matrix, please refer to our 2019 ESG Report, found here.
Christine Riley Miller, Director of Sustainability