Why you should care about your organisation’s ESG materiality assessment

Not many communication professionals appreciate the importance of their organisations’ materiality assessment because normally they are not part of the conversation, design, and planning.

Materiality assessments help firms identify their ESG priorities

And this is where the issue lies, because if anyone should be at that table, it’s your communication teams, both internally and externally. Why? Well, here’s why.

The materiality assessment is an important first step for building a robust environmental, social and governance (ESG) strategy. It helps identify which issues are most relevant to your organisation, its employees, and its community ― and how they affect each other. The result of this process is a clear understanding of what issues matter most to your organisation, which ones can be mitigated with existing tools or resources, and which ones may require new investments or partnerships. Once completed, it’s much easier to develop an effective action plan that addresses the most critical issues in your industry sector or geographic location.

It can take up to a year for a materiality assessment to be finalised depending on the size of the organisation, pressure from investors, or the regional regulatory requirements. So, it’s not a quick fix as many people think. If you are wondering where this assessment lives, it will be part of your ESG strategy and sustainability report if you issue one.

But remember, the priorities will differ from one organisation to another based on its location, size, budget, and regulatory requirements. For example, Barclays identified human capital, diversity and inclusion, and colleague engagement and development as highly significant ESG factors, whereas Klarna identified financial wellness, data security, and climate change.

So, as you can see, there is no standard set of rules to identify these priorities – and there lies the issue of comparing apples to pears instead of apples to apples when deciding which organisation investors should invest in… but that’s another story.

To design a thorough materiality assessment, here are the questions we ask our clients. These are questions that have been tried and tested by numerous organisations and fellow ESG specialists:

1. What does your organisation stand for?
2. What do you aim to accomplish from integrating ESG within your business model?
3. What are the values you want your organisation to embody?
4. Which of these values are most important to you?
5. What would happen if you did or did not address this issue?
6. What are the regulators expecting of you?
7. What data do you need to gather if you choose this ESG priority over another? And do you have the budget and resources for it?
8. How do you want to be perceived by your customers, partners, employees, and investors?
9. How do you define success within your organisation and in the industry at large (e.g., profitability or revenue growth)?

The assessment also enables you to identify the areas where your organisation has the greatest value in terms of its impact on society and what initiatives are most suited to have the impact you’re looking for. Not only that, but it helps you prioritise which issues matter most for your strategy.

A materiality assessment not only helps identify your organisation’s ESG priorities, but it also helps the communications team to design their campaigns and messages around these priorities and be aligned with your company’s growth strategy.

For me as an ESG business model integrator and communicator, I find the materiality assessment to be the easiest and clearest document out there and use it as my go-to communication playbook, because it will state outrightly what the organisation’s most important ESG priorities are and how these priorities link together. But don’t get me wrong, sometimes these priorities are not the right ones for the organisation, and this is where the above questions will be handy when testing the effectiveness of the priorities after a year of committing to them.

Understanding your priorities will help you with your ESG communication strategy narrative and storytelling and it will help you avoid what I call “campaign vomiting”, i.e., designing the campaign, rolling it out, and then forgetting all about it or the reasons why you rolled it in the first place.

So, stop vomiting campaigns and start pushing to be there when the assessment is being designed by your leadership team. Otherwise you will miss the mark in telling a compelling and meaningful ESG narrative.

About the author

Gihan Hyde is the award-winning communication specialist and founder of CommUnique, an ESG communication start-up.

She has been implementing ESG campaigns in eight sectors, across six countries over the past 20 years.

Her campaigns have positively impacted over 150,000 employees and 200,000 customers and have closed over £300m in investment deals. Some of the clients she has advised include The World Health Organisation (WHO), HSBC, Barclays, M&S, SUEZ, Grundfos, Philip Morris, USAID, and the Saudi Government. 

Get in touch with Gihan through LinkedIn or Twitter @gehanam.