MATERIALITY:

BREAKING OUT OF THE…MATERI

ALITY:

BREAKING OUT OF THE…

Quarterly/Summer 2016Using materiality to drive outcomes not outputs

InsideWhere’s it all going wrong? Five fundamentals for effective outcomes

MATERIALITY: BREAKING OUT OF THE STRAITJACKET

Narrow-minded: When reporting is the main focus materiality almost always disappoints. For it to be valuable there has to be more to it than reprioritising topics. At the same time, too many companies view materiality as a way of justifying business as usual. This only reinforces the use of ever more narrow and formulaic approaches, and engagement with the same types of stakeholders. This inevitably gives the same answers. Innovation is stifled and important signals are ignored. Lack of context: Not enough companies ground materiality in a consideration of where they are on their wider sustainability journey and where they are trying to get to. Even fewer embed this cleverly into their approach to drive real progress.

Silver bullet: Others expect too much. Materiality is a useful tool but it can’t solve everything all at once. Being realistic about what you can achieve and what you can’t in the context of a single materiality project is more likely to yield results. Specific objectives can, and should, change each time you do it. No red-thread: Very few companies set objectives, design an approach that can deliver, and assess whether objectives have been achieved. Materiality is a skill that should be developed over time. This means continually refining your approach.

Materiality can help to deliver a range of valuable outcomes, and while we see great examples all too often the process ends up being nothing more than a costly rubber-stamp.

Of course, many businesses manage to use the materiality process as a useful way of managing risk – getting a head start on emerging topics or uncovering blind spots. But we think it can, and should, do more besides.

There’s too much emphasis on GRI box-ticking and not enough on the wider opportunities the materiality process presents. The result is often tactical outputs rather than valuable outcomes, and while many companies continue to feel constrained by reporting standards we think there are ways to break free from the materiality straitjacket.

WHERE’S IT ALL GOING WRONG?

Huw Maggs Strategy Director, Salterbaxter

The world of sustainability is dynamic and constantly changing. An effective materiality assessment will not only focus attention in the right areas but also help to identify the emerging risks, issues and consumer trends which could have reputational impact for a brand.

James Pitcher Corporate Social Responsibility Director, Premier Inn

2.SEE THE BIGGER PICTURE:Start with a wide-angle lens. Think carefully about where the business is and what challenges and opportunities lie in front of you. Do this forensically. What outcomes do you want to achieve? What role can materiality play? What can’t it do? What else do you need to build around it? Thinking this through is critical and should guide your approach.

The materiality process needs to be relevant to where you are on your sustainability journey otherwise you get a disconnect with the business. You can completely overwhelm the organisation.

Neil Burns Group Head of Sustainable Development Mondi

1.FOCUS ON CHANGE:First and foremost materiality should help drive a change in the status quo. At its core it’s about translating a dynamic external landscape into prioritised action, but it can also be used to shift internal thinking, strengthen external support, accelerate integration into the business, and much more. The minute it’s viewed in this way, opportunities open up.

3.SET CLEAR OBJECTIVES:Once you know what you want to achieve, actually formalise a small number of objectives for the process. This may seem obvious but so few companies do it. It will encourage greater scrutiny of the approach and you’ll be much more likely to achieve what you set out to.

BREAKING FREE

So, how to make materiality more effective without adding more and more workload on top of an already resource intensive process? Below are five fundamentals to bear in mind – important considerations that can help improve results no matter where a company is on the journey.

REFLECTIONS FROM DR. ERIC W. BISCHOF, VP CORPORATE SUSTAINABILITY, COVESTRO“The whole idea of a materiality assessment really makes sense. That being said once you have narrowed down topics to a few high priorities, you may find that from one year to the next there isn’t a big difference. The world is changing fast but within the same topics. So where are we getting value if we are just going through the motions of ticking the box?

So we think, how can we use it to create additional value? It’s about bringing the right people into the room, people who can give you that next level of insight about opportunities, about risks, about blind spots, and then brainstorming on where we can really make a difference as a company. This will result in a meaningful adjustment of the materiality assessment at a company level, but more importantly, it will start a thought process at a more detailed level.

Looking ahead, I want to see more creativity in materiality workshops. I want colleagues to have that light-bulb go off and say “Next year I want to go deeper, because I get value out of the process itself”. Then we’ve made a step forward. That’s where I think we can get more value, by provoking insights and triggering deeper engagement within individual departments.”

4.THINK CREATIVELY:Think from the point-of-view of the people involved. What do you want from them, and what do they need to think, feel and experience? Then identify the approaches and tools you’ll need to succeed. Think, “what approaches will work” and not “what can we do using standard approaches”. We think there’s huge scope for creative thinking here.

5.INVOLVE THE BEST PEOPLE:Find the best possible people internally and externally with the most knowledge, influence and credibility. Focus most effort on those external stakeholder groups who have the greatest influence on the business – often customers and investors. They’ll help you capture and contextualise real insights and grab the attention of colleagues.

And… don’t stress, GRI allows for a range of methodologies to be used so there is the flexibility to apply the fundamentals above, and as long as there’s a sufficient balance of inputs – including the types of stakeholders you engage – and a sound process for prioritising issues then you’ll still get your rubber-stamp.

It helped us to surface important conversations with stakeholders we had not engaged enough with previously on sustainability, in particular investors.

HOW MATERIALITY CAN DRIVE VALUABLE OUTCOMES

Below are the main outcomes we think materiality can help to achieve. These may seem obvious but it’s surprising how infrequently they are prioritised.

Caroline Hill Head of Sustainability Land Securities

Matthew Swibel Director, Corporate Sustainability Lockheed Martin

More Common Outcomes Focusing minds and resources: Identifying and committing to a small number of priority topics will focus your efforts on ‘fewer, bigger, better’, deepening integration, driving momentum, increasing return on investment, and impact.

Informing sustainability strategy: Materiality is often used to evolve or shape new sustainability strategies, testing key priorities and opportunities, and testing ambitions relative to peers. But it’s not the final word on strategy. The company’s unique identity and strengths, corporate strategy and brand, and wider operating context need to be considered in parallel.

Heightening executive level awareness: Materiality can help demonstrate the strategic importance of priority issues and be used as a trigger for ongoing dialogue at the executive level. This can build the knowledge of top management and improve corporate governance.

Improving stakeholder relationships: Materiality can be used to establish new connections or evolve existing relationships. This can strengthen stakeholder support, surface new opportunities for partnership, and highlight groups or issues where ongoing engagement is required. But the experience must be meaningful, positive and rewarding from start to finish.

Informing messaging and communication: Designing in insights on the needs, expectations and knowledge of important external stakeholder groups can help inform communications planning – target audiences, channels, approaches, and key messages.

More challenging outcomesGaining scarce knowledge: Surfacing information and insights on important new risks and opportunities can provide a head start on competitors. Directly linking the right external stakeholders with internal colleagues can help speed-up thinking and translate insights quickly into new ideas.

Accelerating integration: Embedding the materiality process into risk management and corporate strategic planning can accelerate the integration of sustainability into the business. Using materiality outputs to engage directly with other departments such as investor relations, supply chain or human resources can also build capacity.

Breeding internal collaboration: Facilitating collaboration between departments as part of the process can foster internal alignment on priorities and speed up problem solving on key challenges and solutions. Over time this can translate into a hard-to-imitate capability.

Building confidence with financial stakeholders: Using materiality to demonstrate an awareness of priority ESG topics and their integration into business planning can breed confidence amongst shareholders and other investors, including SRI investors.

Now that we have gone through a core issues assessment and examined data that shows the sense of urgency and difference between topics we have channelled staff efforts and capital accordingly.

About Salterbaxter

We help businesses and brands step up to the challenge of the changing relationship between business and society. We combine smart strategy, sharp insights and creativity to help purpose-led businesses succeed. Whether it’s communicating to investors or opinion formers, engaging employees or changing consumer behaviour, our work delivers for our clients in three key dimensions:

1. Purpose Creating, defining, understanding and building more purposeful organisations, strategies, brands and communications.

2. Performance Strategies to drive better performance and communications to make this performance transparent and trusted.

3. Transformation Helping businesses and brands to reinvent, find new models and drive the changes needed to fulfil the new contract between business and society.

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CONTACT US: Samuel Griffin-Flynn | Business Development samuel.griffin-flynn@salterbaxter.com

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