6 ways companies benefit from materiality assessments
published 9.22.20
Having worked in the non-profit sector for nearly a decade, I have always had conflicting feelings about corporate philanthropy. Individual and corporate donations allow organizations to increase program offerings, offer more competitive salaries, attract volunteers, and meet more needs overall, but that comes at a cost. Grants dictate direction, often more so than the values of the organization itself. Donors can withhold funding if they don’t agree with the demographic being served. Corporate volunteers lack buy-in into the mission and can show up for very transactional exchanges.
Philanthropy has historically been, more or less, a mutually beneficial relationship between organizations and corporations. Organizations fulfill their impact-driven missions and corporations benefit from positive publicity and better reputations among stakeholders. That said, philanthropic giving gets messy when too many private interests are involved. Coca-Cola is just one example of reputation-washing: selling sugary beverages, while donating money to youth sports and building athletic fields in disenfranchised communities. Even worse, Coca-Cola’s donations to the American Heart Association, American Diabetes Association, and National Institutes of Health, to name a few, deter these organizations’ advocacy for sugary beverage taxes, undermining their public health efforts.
Transitioning to for-profit, I see my corporate clients challenge traditional philanthropy and increasingly seek innovative solutions that shift their philanthropic efforts from a cost center to a value center. This is an actual mutually beneficial relationship that turns feel-good projects (philanthropy and corporate social responsibility) into sustainable solutions embedded into the company’s values, business model, and operations (ESG).
Conducting materiality assessments for organizations in different sectors has cemented my belief that business can be a force good. Materiality assessments are the first step in transitioning from shareholder value to stakeholder capitalism, “a system in which corporations are oriented to serve the interests of all their stakeholders.” This means creating value for employees, board members, community organizations, customers, investors, and others involved in the company’s value chain, and seeking to understand how the company can create long-term value, rather than solely maximize profits.
If you’re wondering what a transition to ESG could look like for your company, here are a few tangible benefits I’ve seen with clients conducting materiality assessments:
#1 peer benchmarking to assess baselines
Interview after interview, I’ve heard, “We’re just tech - we’re not manufacturing actual products, so our emissions must be low.” One of my clients was shocked by how far their competitors were going to offset their emissions. Many of these peers, most of whom are smaller companies, were already offsetting all energy usage from time users spent on their apps, on their personal mobile devices. Some were offsetting their usage twofold! Whether a company is playing catch-up or wanting to stay ahead of the curve, peer benchmarking sets the stage for baseline standards.
disclaimer: just because your peers are doing something doesn’t mean it’s exactly what you should be doing. however, it is a good gut check to make sure you’re considering all of the areas where you could focus resources, depending on your company’s business model, mission, and goals.
#2 identifying strategic impact efforts that matter to stakeholders
Companies with philanthropic or corporate social responsibility (CSR) departments often allow these efforts to be siloed from the rest of the company. Some house these projects in non-profit arms, others in human resources as employee engagement efforts. This governance structure can result in under-resourced, overworked teams (or individuals); business-related priorities have to come first. I’ve seen tech talent build homes, entertainment professionals paint schools, and gaming employees fundraise for students with special needs. These are, of course, important issues, but they are also easy to cut when a revenue-driver becomes more pressing. Focusing on ESG strategically weaves impact into the fabric of a company’s identity, day-to-day operations, and business value. Having the input and buy-in of all stakeholders is crucial to making this possible. It makes sense for a data company to advocate for data literacy and it makes sense for a gaming company to increase access to design education. That is what stakeholders can get behind.
#3 realizing employee engagement is not enough
Employee engagement seems like an easy win - employees feel like they work for a company that cares, companies donate staff time, and organizations receive free time and money. One of my clients, with a staff of about 700, allocated $12,000 to their employee engagement program, which often went unused because employees did not know about it or did not have time to take advantage of it. One-off or event-based giving can be great for morale, but the impact of these experiences is fleeting, at best. This budget was going towards every issue under the sun, none of which were tied to the mission or vision of the company. My team spoke extensively with their human resources team to figure out what was and wasn’t working, demonstrated examples of programs by their peers, ideated potential company-wide strategies that could more successfully accomplish their goals, and presented to their decision-makers. After seeing what a comprehensive, values-aligned program could look like, the increase in budget came easily.
#4 transforming the intention & narrative of existing projects
One client wanted to understand what was feasible in the near-term, as they strategized for the long-term. As a software company, they had incredibly high turnover for the computer and mobile devices in the office because all of the software they created had to work on the newest hardware. One of their material issues was waste and although they were already recycling these devices by offering them to their employees and donating the rest to electronic waste vendors, they wanted to go further. Once we identified access to coding and design education for students as a top priority for their giving, they decided to transform their usual operations into a philanthropic program, donating technology to schools, non-profit organizations, coding programs, and design programs.
#5 transitioning from shareholder value to stakeholder capitalism
Materiality assessments provide a well-rounded view of what all stakeholders want to see a company prioritize. Employee input, from employees of all levels of the company, tends to be very highly valued, which is a contrast to the traditional model of disproportionately prioritizing shareholder voices. In the interest of gathering all perspectives, I have conducted internal interviews with everyone from on-site vendors, to new hires (really, I interviewed someone who was two weeks into the job), to employees of a wide age range. I mention the age range factor because this company’s fairly young employee base meant that the work culture was not very family-friendly, for example, with Slack messages sent at all hours of the evening.
#6 getting the conversation started
For those less familiar, both internal and external stakeholders automatically thought about environmental sustainability when hearing the term “ESG.” Although interviews are meant to collect stakeholders’ thoughts, ideas, and feedback, they simultaneously served as informational conversations that allowed everyone’s wheels to start spinning. It’s easy to get caught up in the day-to-day of a business, but these are unique opportunities to challenge stakeholders to think about exactly who they envision this company being and what mark they see this company making in the community or the world at large. The extent to which companies prioritize ESG has the potential to determine their capacity for long-term success and commitment to shaping the future.
If you’re interested in learning about how a materiality assessment might benefit your company, let’s chat.
by Tiffany Huey
Consultant
