Gearing up for G4. 07
G4’s expectation on reporters to base their communications on a materiality process not only helps shape a more succinct and relevant report, it can trigger a conversation with business strategists on long-term value creation. Material issues are topics that contribute to creating economic, environmental and social value for a company and it can influence stakeholders’ perceptions of that company. A materiality process helps define the point at which an issue becomes important enough to be included in the business strategy and way of managing and reporting on sustainability. Although a materiality assessment was recommended practice in G3, G4 has been the trigger to introduce a formal process for many companies. In our study, we see that the approach companies use to conduct materiality varies considerably. Some do not have a formal process in place, and some have a list solely based on an analysis of the outcome of stakeholder dialogue. Others have a more comprehensive and inclusive process engaging both stakeholders and internal representatives of the business. Some interviewees tested their process for the first time this year and others conduct bi-annual revisions. A ticket to the strategic level The benefits of a material ity process go beyond reporting. It is regarded as useful for internal buy-in on sustainability imperatives. Five of our respondents state that top-management enga-
“Materiality is about putting everything together and everybody shares their piece of the puzzle.” / Kristina Gabrielii, PEAB
gement in sustainability was enhanced by their involvement in this analysis.
”We would have appreciated clearer guidance on how to conduct the materiality process – including step-by-step instructions.” / Anna Rogmark, Apoteket.
Swedbank. H&M and NIBE took their processes one step further this year, and analyzed major societal mega-trends and their medium and long-term impact on their businesses. H&M, Lernia, Vattenfall and PEAB merged their processes with the business’ strategy process. G4 recommends using relevant GRI aspects — issues that are associated with GRI’s indicators — as the foundation of the process, which is a generic way of defining issues. This was not a widely applied approach by our respondents. Many of them defined their own issues and definitions aligned their process in ways that were more closely linked to their business. Translators needed! Rather than acting as a bridge for engagement with main stream business representatives, three of our respondents found that the materiality process as described by G4 was vague and framed in a language difficult to grasp by non- sustainability professionals. These companies seek greater clarity of the process and what it will lead to. Stakeholder analysis informs materiality The companies that spent time conducting a thorough stakeholder analysis have the edge on identifying their most relevant issues, but we see that some companies mistake this analysis for a full-fledged materiality process. The former focuses on understanding stakeholder views, their impacts on issues and the degree of their influence over the business. The materiality process applies this knowledge and thereafter maps potentially relevant issues against business priorities. By solely focusing on stakeholders’ views in materiality, a company risks developing a reactive approach. By analyzing issues in the context of the business, materiality delivers the strategic analysis needed for integrating sustainability.
Conan
A focus on what really matters.