What is a materiality assessment?

An important part of making ESG easy for our clients at ReGen Strategic is starting with a materiality assessment.

We know some professionals still wonder what exactly a materiality assessment is and we’re here to answer this question. Materiality assessment is a process where you systematically whittle down the seemingly endless number of potential ESG topics into a manageable number of areas for your organisation to focus on in your sustainability strategy.

What is materiality assessment in sustainability?

The concept of materiality in accounting is not new, with information being material if it would impact a reasonable user’s decision making. If information is significant, it is material. If the information is insignificant, it is said to be immaterial. Organisations then have a responsibility to ensure that material information is not omitted or misstated in financial reporting.

Materiality in sustainability is similar, but thought of in terms of single and double materiality. Single materiality refers to the impact each ESG topic may have on your organisation’s financial performance, with double materiality also considering the impact your organisation might have on people and planet in each of the ESG topics.

There is no right or wrong way to do a materiality assessment, but there is no doubt that the more you seek the views of your stakeholders in the process, the more robust your result will be.

This is because the value of most organisations is increasingly intangible and driven by the quality of stakeholder relationships. And the perception stakeholders have of your organisation, as well as the decisions they make in relation to your organisation, is increasingly driven by your organisation’s impact across the ESG spectrum.

Your performance on emissions and climate, your impact on the natural environment, your approach to data security, your commitment to gender equality, diversity and inclusion. These and many other topics can impact whether someone wants to invest in you, purchase from you, work for you, support your regulatory approvals, and so on.

But the ESG topics that drive these stakeholder perceptions, and their relative importance, will be different for every organisation, just as the topics that drive financial performance will be different for every organisation. Which is why a materiality assessment is such an important starting point for every organisation on its sustainability journey.

Materiality Assessment with ReGen Strategic

The ReGen Strategic approach to materiality assessments involves assessing a list of potential ESG topics for both impact and influence. This process provides the ability for organisations to:

• Identify the most important topics to focus on to maximise the organisation’s positive impact on people and planet, while minimising its negative impacts; and
• Identify the most important topics to focus on to create business value, through direct impacts on financial performance, as well as through the creation of intangible value, driven by positive stakeholder relationships and reputation.

In addition to focusing your organisation’s sustainability strategy on the ESG topics that will make the most difference, a materiality assessment delivered by ReGen Strategic can deliver a broad range of additional benefits across your organisation, including:

• Stronger and more trusting stakeholder relationships because of far reaching internal and external engagement;
• An enhanced understanding of your organisation’s regulatory obligations, boosting compliance and avoiding potential legal and reputational risks;
• Improved decision making through collation and analysis of data relating to your risks and opportunities;
• Greater access to finance and funding as you have robustly identified and addressed the risks and opportunities to your financial performance across the ESG spectrum;
• Increased access to the supply chains of major corporates and governments, who are increasingly considering the sustainability performance of their suppliers; and
• Attracting and retaining a workforce which values a commitment to sustainability and expects transparency on ESG performance.

ReGen Strategic materiality assessments are delivered through our sustainability & ESG practice. Talk to us today about how we can deliver a bespoke materiality assessment that sets your organisation’s sustainability strategy and ESG reporting up for success.

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