Build a Materiality Assessment in 5 Steps

Materiality assessments are one way to illustrate to your stakeholders that your business is taking ESG seriously. They help your company identify the specific ESG topics that are most important to your stakeholders, most relevant to your company’s successes, and most closely tied to risk within your business model. They are also the best answer to stakeholder questions regarding issues that the company’s goals do not currently address. By showing stakeholders the process by which the company determined what priorities it has chosen to elevate, it will provide them confidence the company is not choosing to ignore topics that are tough to address.

Some companies elect to use the material topics outlined in reporting frameworks, such as those from SASB, GRI, and the UN SDGs, to guide their ESG strategies as well as their reporting efforts and ESG disclosures. Other companies take a more customized approach, choosing to tailor materiality topics to their specific businesses and stakeholders. While this approach requires additional effort, it also provides a way to more closely align ESG initiatives with top industry and stakeholder priorities. 

To conduct a customized materially assessment, companies need to:

  1. Identify internal and external stakeholders. Consider the simplicity of ABM’s approach on page 11.
  2. Field formal outreach surveys to both groups of stakeholders with the help of a consulting partner or software. Or, at a minimum, connect with stakeholders informally to specifically discuss ESG topics. Grief’s materiality discussion includes internal and external research in an easy-to-follow outline format.
  3. Use the results of surveys to build an ESG roadmap outlining the key environmental, social, and governance issues that the company will prioritize in its strategy and reporting. Cooper Tire’s CSR includes a straightforward materiality result graph on page 18.
  4. Use the roadmap to link ESG issues to corporate goals, establish specific ESG-related KPIs, and ensure board and management team engagement and oversight of the topics. Hilton Hotels’ CSR includes a very concise graphic on 2030 goals based on the materiality assessment completed.
  5. Publicize the results of the assessment in a Corporate Sustainability Report and on the ESG section of the website. Companies can also include language in the proxy that highlights the company’s commitment to material ESG topics.

Whether your company chooses an established framework or a more custom materiality assessment, the important thing is to demonstrate to your stakeholders that your business is doing its due diligence to identify and act on the ESG issues that matter the most.