Materiality Assessment for ESG & Sustainability

Article

September 13, 2022

An ESG (Environmental Social Governance) materiality assessment gathers and highlights which sustainability factors are perceived as most important and impactful for organization stakeholders -- a key first step in building an effective ESG strategy.

In this ESG materiality guide, we discuss the basics of materiality, how to conduct an assessment, and how to create an ESG materiality map that visualizes where factors rate for importance and impact.

Table of Contents

ESG Materiality
- What Is ESG Materiality?
- How Is ESG Materiality Measured?
ESG Materiality Assessment
ESG Materiality Map

ESG Materiality

What Is ESG Materiality?

ESG materiality is environmental, social, and governance factors that matter most for an organization. “Material” factors with both high stakeholder importance and business impact are often tied to long-term success of an ESG strategy.

How Is ESG Materiality Measured?

ESG materiality is measured through a variety of methods -- qualitative and quantitative assessments, data analysis, and stakeholder feedback. Each ESG factor is then typically mapped on a materiality matrix to visualize its importance and impact.

ESG Materiality Assessment

What Is an ESG Materiality Assessment?

An ESG materiality assessment is an exercise that helps organizations determine which sustainability factors are relevant and important to an organization and its stakeholders. This includes measuring the organizational impact of each factor in consideration to determine which factors should be prioritized.

When and Why You Need an ESG Materiality Assessment

ESG materiality assessments are necessary when organizations are working to build effective ESG strategies with stakeholder buy-in and alignment. Materiality assessments reveal factors that the strategy should focus on, giving organizations a roadmap forward. It’s impossible to focus on all ESG factors at once, so prioritization is critical.

These assessments can also provide insight into cost benefits of each factor while ensuring the resulting ESG strategy meets stakeholder and consumer expectations.

It’s important to note that ESG frameworks, including the Global Reporting Initiative (GRI) and B Corp Certification, recommend organizations complete materiality assessments.

How to Conduct a Materiality Assessment

While the process of conducting a materiality assessment may differ slightly between organizations, assessments will typically follow some form of this process:

Build your stakeholder assessment team: Stakeholders are required to give their input on which ESG factors should be considered. This team should consist of internal executive leadership, management personnel, and employees as well as external stakeholders.
Determine initial ESG factors: Organizations should work with stakeholders to draft initial ESG factors. These factors should include environmental, social, and governance factors. For example, environmental factors may include waste management and pollution control. During this stage, organizations will benefit from selecting and following ESG frameworks that help define potential factors.
Gather feedback from stakeholders: Once initial factors are determined, organizations should design and share a ESG materiality survey that will allow stakeholders to rate each factor based on perceived impact, relevance, and importance.
Synthesize feedback to determine materiality: Organizations should compile and analyze all survey feedback and rank each factor. Map results using a materiality matrix to show the significance of each factor. Eventually, this matrix will be published with ESG reporting for ESG disclosure.
Develop ESG goals based on materiality: Based on determined factors, organizations can move forward to design specific and measurable ESG goals as part of their ESG strategy efforts.

ESG Industry Materiality

Various “factor finders” and mapping tools exist to help organizations determine ESG materiality. Check out these resources to help jumpstart your materiality assessment:

SASB Materiality Finder: Allows users to quickly look up companies and industries to compare materiality factors (topics) side-by-side.
SASB Materiality Map: Compares 26 sustainability factors (issues) across 77 industries to see how they’re prioritized.
MSCI ESG Industry Materiality Issue Lookup: Allows users to search sub-industries to find key ESG factors (issues) within that sector. This lookup follows the MSCI ESG Ratings model, one of the top ESG rating agencies.

ESG Materiality Assessment Survey

The ESG materiality assessment survey is perhaps the most critical piece of performing an assessment because it gathers data from YOUR stakeholders. While surveys might differ substantially across organizations, there are a few key tips to keep in mind:

Surveys should be as straightforward as possible
A simple numerical scale for rating ESG factors will suffice
Avoid checkboxes that ask stakeholders to select which issues matter
(All matter. Surfacing the perceived most important is the objective.)

ESG Materiality Assessment Survey Examples

Here are some survey question examples for inspiration.

SurveyMonkey - ESG Materiality Assessment Survey Example

Evergreen Marine Corp - ESG Materiality Assessment Survey Example

ESG Materiality Map

What Is a Materiality Map?

A materiality map (also referred to as a materiality matrix) is a visual representation of ESG factors plotted along importance and impact axes.

Note: A materiality map is not specific to ESG, so there are many methods and examples available online. Many materiality matrices map factors for internal vs external importance. Since ESG uniquely includes both internal and external for stakeholders, those traditional axes aren’t value-added for strategy.

How to Create an ESG Materiality Map

The ESG materiality map or matrix compares all three groups of factors, including environmental, social, and governance. To develop an ESG map, follow these steps:

Determine how to plot the data: Data can be plotted in a variety of ways. Most ESG matrices plot factors based on their importance to stakeholders (Y-axis) versus impact to the business or industry (X-axis). The resulting matrix shows the most material ESG factors in the upper right quadrant.
Select a matrix type: Various matrices can be used, depending on how an organization wants to showcase their data. For example, many businesses use scatter plotting to create a matrix due to the number of factors to visualize. Others use L-shaped or X-shaped matrix diagrams. (See ESG Materiality Map Examples below for inspiration.)
Insert data into the materiality map: This step will vary greatly depending on how ESG survey data is gathered and stored. This can be as simple as uploading an Excel spreadsheet into a graphing tool or as complex as developing a diagram and manually inputting data.
Review for accuracy and usability: A materiality map is only as useful as it is accurate. Data should be reviewed and updated as needed before being shared.

ESG Materiality Map Examples

Many organizations have published their ESG materiality maps, which can be very useful in considering visualization factors for developing your own.

The Coca-Cola Company - ESG Materiality Map Example

Danone - ESG Materiality Map Example

Cisco - ESG Materiality Map Example

Bank of America - ESG Materiality Map Example

H&M Group - ESG Materiality Map Example

ESG Materiality Map Best Practices

While best practices are still developing, here are some tips for consideration:

Don’t attempt to plot everything; most maps plot 15-30 factors
Consider a visual indicator (color or icon) to identify E-S-G factors
Include labels with plotted points for usability
Provide clear labels on both axes
Ensure text labels use adequate font size and color contrast for legibility

Ready for a ESG Materiality Assessment?

Completing a successful ESG materiality assessment, especially the first time, can be a bit challenging. Reach out to our ESG consultants today for help with planning and executing effective assessments to inform and guide your ESG strategy.

ESG Questions?

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