Many of our clients hear about environmental, social and governance (ESG) topics in the news or from investors and board members. As ESG covers a wide range of topics, it’s provoking them to ask questions, primarily around an approach to where to start.
Knowing you’re ready to invest resources in ESG might mean that your organization is thinking about one or more opportunities. This includes its path towards an eventual initial public offering, attractiveness to investors, further commitments to impact across the organization, and the complexity of navigating global operations and expectations around ethics and sustainability.
Earlier integration of ESG in an organization allows for scalable strategies and alignment. In a survey by the World Economic Forum, 68 percent of startups said that they integrate ESG from day one. Regardless of where your organization is in addressing ESG, conducting a materiality assessment is always a crucial first step in approaching ESG strategically. A materiality assessment includes the following components:
Benchmarking — Understanding your industry and its ESG trends. What is the baseline amongst your peers? What does leadership look like? What do reporting frameworks, such as the Sustainability Accounting Standards Board (SASB) or the Global Reporting Initiative (GRI), determine material for your industry? What data do they recommend disclosing? What types of commitments, programs, and policies do you see across peers?
Stakeholder Engagement — Interviewing and surveying key stakeholders. Who are the key decision-makers at your organization? Whose buy-in will you need to move ESG work forward? What is the level of understanding among those at your organization? Whose conversations about ESG can plant seeds for organization-wide commitments? Whose input should be reflected in your organization’s ESG priorities?
Materiality Framework — Determining business priorities. What are your organization’s business goals in pursuing ESG strategies? Brand reputation? Customer acquisition? Talent attraction and retention? Access to investment opportunities? Regulatory risk mitigation? Systemic risk mitigation? Whose voices should be the loudest in informing your organization’s ESG priorities?
Materiality Matrix — Deciding key impact areas. Once you have narrowed down your list of potential ESG priorities, what do your organization’s leaders, decision-makers and implementers think are most urgent? Which areas need more resourcing? Which ESG topics need owners? Which ESG issues are business-critical?
Organizations will increasingly see ESG at the forefront of stakeholder expectations and regulatory requirements. If you have questions about ESG materiality assessments or are ready to start building your organization’s ESG strategy, get in touch with us today.