the 4 materiality questions we get asked the most

Feb 17

published 2.17.22

Raise your hand if you’re not conducting a materiality assessment this year.
From rapidly evolving SEC guidance to increasingly stringent EU customer requests and the Great Resignation, a baseline understanding of stakeholder concerns is requisite.

While materiality assessments are an increasingly common practice, there is still a bit of confusion. So Sam, qb. strategy & governance services lead and cofounder, and I surveyed our team to see what the most frequently asked questions were. Below are our answers in hopes of making your job just a little easier:

1. “What exactly is a materiality assessment? And how do I make this relevant to my cross-functional team?”

A materiality assessment is an exercise to identify which environmental (e.g. energy use, water management, natural resource conservation), social (e.g. accessibility, responsible use of technology, labor relations, equity, inclusion) and governance (e.g. ethics, privacy, cybersecurity, board composition) topics are most relevant to your company and its stakeholders (e.g. talent, investors, Board, customers, business partners).

The results of a materiality assessment will help sales quickly navigate requests at the RFP stage, legal increase transaction velocity, and product development design products and services in tune with customers needs - just to name a few.

Curious about the specific ins and outs of conducting a materiality assessment? Check out this recorded materiality assessment info session.

2. “How relevant is human capital management to ESG?”

The ‘S’ in ESG is critical. Social topics cover everything from employee wellbeing, health and safety, compensation, and talent development to human rights, freedom of expression and association, and dignified work.

In fact, the World Economic Forum's (WEF) latest global risks report cites mental health, livelihood crises, and social cohesion erosion (a.k.a. crumbling of civil society) as three of the top five emerging threats to our world. The power balance in businesses has shifted to employees, and employee activism is now a force to be reckoned with.

Suffice to say, if the perspectives of your talent (full-time, part-time and contract), the culture of your company, and the concerns of society are not considered, you risk hindering the progress of your company.

3. “Is ESG strategy different from business strategy?”

If done right - no. ESG isn’t another arm or siloed team of a company. ESG is a reflection of topics - both financial and non financial - that are material to near- and long-term business success. ESG is here to make a business strategy more resilient and innovative.

The “ ESG strategy” of it all is deciphering how to turn material topics into action - by answering what policies need to be created or upleveled and what systems, processes or data are missing. These answers will ensure you can adequately and accurately respond to varying stakeholder demands and manage material topics.

4. “How do I leverage the findings of a materiality assessment???”

It depends on your results and what’s identified as the “most critical” topics. It could mean expanding benefits to include transgender-inclusive health isurance; evaluating supply chain standards to ensure safety, escalation processes, and nondiscrimination are prioritized; or incorporating climate-related risks into your enterprise risk management.

A good starting point for most companies, especially those just now formalizing their ESG journey, involves (1) instituting board oversight, (2) allocating headcount to this work, (3) establishing a baseline for your environmental footprint, (4) collecting and disclosing framework-aligned data, and (4) reviewing your code of conduct (+typically creating and publishing a supplier CoC).

If you need support with any of the above, please don’t hesitate to reach out! You can contact us here.