Using Materiality Assessments - … · 5/15/2014 · Using Materiality Assessments May 12, 2014...

WMSBF - Using Materiality Assessments 12-May-2014

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The world’s leading sustainability consultancy

Using Materiality AssessmentsMay 12, 2014

Elsie Rivera PalabricaERM, Senior [email protected](317) 697-4606


ERM Sustainability Services

ERM – 20 years of sustainability services

■ Sustainability disclosures

■ Public reports, including GRI reports

■ DJSI questionnaires

■ CDP and CDW

■ Customer and NGO other surveys

■ Equator Principles reviews and risk assessments

■ Project impact assessments

■ Materiality assessments

■ Strategy and stakeholder engagement

■ Metrics and goals

■ Data management systems

■ Report assurance and reviews

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[email protected]

+1 317-697-4606

Elsie Rivera PalabricaSenior ConsultantIndianapolis, IN


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Materiality Assessments

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Materiality Process and ExamplesMateriality Process and Examples

Q&AQ&A

Materiality Background


Why conduct a materiality assessment?

■ Inform or validate sustainability strategy, programs, and initiatives

■ Provide foundation for public sustainability reporting

■ Engage with stakeholders

■ Identify new opportunitiesand unknown exposures

■ Comply with GRI G4

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BASF Materiality Analysis- 300+ stakeholders


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What is a material issue?

International Accounting Standards Board – An issue is material if its omission or misstatement in financial statements could influence the decisions of users.

SASB – An issue is material if the omission of related disclosures would be viewed by the investor as changing their perception based on the “total mix” of disclosures made.

GRI – Issues related to a company’s significant economic, environmental, and social impacts; or that could influence the decisions of its stakeholders.

AccountAbility – Issues that will influence the decisions, actions, and performance of a company or its stakeholders.5

An issue is material if information on that issue could be used by stakeholders to make decisions that may impact the company – in other words, it can generate

risk or opportunity.


GRI G4 Raises the Bar on Assessing Materiality

■ Increased emphasis on materiality as a foundational GRI process

■ Need to identify what is material and where the issue is material across a company’s value chain

■ Must disclose list of material issues and process used to identify and prioritize them

■ Specific aspects and disclosures on management approach (DMA) will depend on results of the materiality assessment

– At least one indicator for “core”

– All relevant indicators for “comprehensive”

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GRI G4 Recommended Process

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GRI G4 – Key Changes from G3

1. Overarching structure

2. “In Accordance” model

3. Materiality process and disclosures

4. Supply chain/value chain

5. Disclosure on management approach (DMA)

6. New governance and ethics and integrity disclosures

7. Other new indicators

8. GRI index

9. Reasons for omission

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GRI Recommended Process

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Materiality Process and Examples

Q&AQ&A

Materiality BackgroundMateriality Background


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Developing a Materiality Assessment

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1. Review Business Strategy

2. Identify Stakeholders

3. Identify and Map Material Aspects

4. Prioritize Issues

5. Plot Results

6. Define Strategy and Next Steps


1 Review business strategy

■ What is your business model?

■ What are your goals and objectives?

■ By region

■ By business unit & product

■ By function

■ Where are your key operations and what regions are you targeting for expansion?

■ What are your supply chain management priorities and key challenges right now and in the near future?

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2 Identify stakeholders

■ Who are your primary stakeholders – up and down your value chain?

■ Who matters to you and how do you go about understanding what matters to them?

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Customers

Consumers

Employees Suppliers

NGOs/Activists

Investors

Community Members Regulators


3 Identify and map issues

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Materiality Filter

Material Aspects

■ Considerations for identification of issues

– Key industry resources(e.g., GRI, SASB)

– Categories

– Level of detail

– Governance and systems issues

– Product issues

– Issues related to megatrends

– Issues unique to the organization

– Issues unique to the specific communities or urban areas


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Example: GRI G4 – Across the value chain

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Example

Governance

■ Board oversight

■ Ethics

■ Stakeholder engagement

■ Supply chain environmental & social impact management

Product Stewardship

■ Innovation

■ Design for sustainability

■ Product compliance

■ Conflict minerals

Environmental

■ Air emissions

■ Water use and discharges

■ Ozone depleting substances

■ Waste management

■ Hazardous materials

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Energy Efficiency & Climate Change

■ Climate leadership

■ Vehicle efficiency

■ Building efficiency

■ Resilience to climate disruptions

■ Greenhouse gas (GHG) emissions

■ Fleet/transport management & composition

■ GHG emission regulation

Social

■ Community involvement & investment

■ Political involvement

■ Human rights

■ Occupation health & safety

■ Talent management/training

■ Diversity/gender participation

■ Labor/management relations

■ Supplier diversity


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4 Prioritize issues

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via interviews


Example

Stakeholder Groups■ Suppliers

■ Customers

■ Investors

■ NGOs

■ Industry groups

■ Labor group

■ Trade press

■ Academia

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Stakeholders were grouped into categories, and category averages were used to determine the “importance to stakeholders” scores. This provided a balanced approach to scoring.

Interviewees selected and rated their top sustainability topics and discussed others at length. Gaps (in gray) were filled using publicly available information on the organization’s activities, initiatives, and stated topics of interest.

* Illustrative, not comprehensive scoring sheet


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Internal Engagement

■ For materiality assessments …the importance of issues to businesssuccess or achieving business objectives

■ Growth

■ Profit

■ Efficiency

■ Risk

■ Beyond the bullets

■ Nature & extent of current engagements on sustainability issues

■ Identification of operations or areas where issues represent unknown risk

■ Discovery of unidentified and unexploited trends across stakeholder categories

■ Opportunities for cross-functional collaboration

■ Experience with collaborative efforts on shared goals/outcomes19


External Engagement

■ Determining issue importance to stakeholders

■ What issues impact their opinions,actions, decision making…

■ What their performance expectations are

■ How they perceive existing action (inaction)and performance

■ Beyond the bullets

■ Their predictions for issues and issues management

■ Who they respect and why

■ What irks them most

■ What approaches work or are not working with them

■ What are they working on that they are most proud of(and with whom!)

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5 Plot and analyze

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Importance to Business

Imp

ort

ance

to

Sta

keh

old

ers

Stakeholder Engagement

Product Life Cycle Impacts

Energy and Climate ChangeInnovation

Recycled ContentManagement

Systems

Recyclability

x

Recycling Capacity


Regional and Value Chain Considerations

■ GRI G4 wants organizations to understand and speak to issues across the value chain and by region if relevant

■ Research and engagement strategies should reflect that

■ Engage regional and business unit leaders as well as functional leaders

■ Consult local leaders (e.g., plant managers) at key locations

■ Graphical presentation of related information may suffice for your sustainability report but feed strategic planning with insight

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6 Define strategy and next steps

■ Identify ways to mitigate risks and capitalize on opportunities for highest priority issues

■ Say “no” to lower priority issues

■ Create and implement an enhanced stakeholder engagement plan

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Sustainability Approaches

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A megatrends approach…. A values, ethics, and systems focus….


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Strategically targeting societal issues with core company capacities….



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Key Questions

■ What are your objectives for conducting the assessment?

■ What existing analyses have been done that can be leveraged?

■ What level of stakeholder engagement is desired (for internal and external stakeholders)?

■ What level of desktop review is appropriate?

■ What is the best method for prioritizing issues?

■ Are there other ways in which the assessment could bring value?

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Case Study

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ERM created clear definitions for a comprehensive list of 40 economic, environmental and social issues and rated those issues on two central elements: importance to key stakeholders and potential impact on the company’s North American business objectives.

The project was informed by dialogues with key external stakeholders and internal decision makers as well as a thorough media scan, reviews of peer company activity and the frameworks and methodologies of respected sustainability raters and rankers (e.g., DJSI, CDP).

ERM’s recommendations to the client justified the need and established the foundation for a U.S.-focused sustainability strategy.

Client: Fortune 100 Pharmaceuticals

Location: Global

Sector/Practice: P&A - Sustainability

A global company in a highly scrutinized industry is provided with a solid foundation for well informed strategic planning and enhanced, more effective stakeholder engagement.

Impact to the Business

Inte

rest

to

Sta

keh

old

ers


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Materiality Process and ExamplesMateriality Process and Examples

Q&A

Materiality BackgroundMateriality Background


Other Trends in Disclosure

■ Mandates from governments and stock exchanges

■ Materiality assessments as astakeholder engagement tool

■ Materiality assessments in strategic planning

■ Board interest and engagement

■ Use of digital and social media

■ Alignment among reporting frameworks

■ Focus on governance andand supply chains

■ Integrated reporting

■ Assurance32

Using Materiality Assessments - … · 5/15/2014 · Using Materiality Assessments May 12, 2014...

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