Seeing the full picture with materiality analysis

Materiality is an exploration of the most vital issues facing a company and its stakeholders. By clearly understanding which issues are of highest priority through a materiality analysis and materiality matrix, a business can more accurately chart its risks and opportunities, and refine its strategy to ensure the greatest possibility of short-term wins and long-term success.

1

Define

Build a list of economic, environmental, social, and governance issues and boundaries for consideration.

Sample issues relevant to risk and opportunity:

  • Customer satisfaction
  • Corporate governance
  • Talent management
  • Innovation
  • Energy
  • Climate change
  • Customer health and safety
  • Supply chain management
2

Analyze

Determine level of stakeholder concern on issues

  • Identify stakeholder source materials and stakeholders to be engaged
  • Analyze sources and information from direct engagement
  • Prioritize issues based on level of stakeholder concern

Rank issues’ potential impact on company

Assess each issue’s business impact based on criteria such as impact on revenue, cost savings, regulatory compliance, and brand/reputation.

3

Prioritize

Chart stakeholder concern versus impact to identify the material issues with the highest priority.

4

Apply

Integrate results of materiality analysis into strategic planning and disclosure; periodically refine material issues and boundaries.

Sample applications:

  • Guide reporting and disclosures
  • Inform innovation and R&D focus
  • Reprioritize resources
  • Align executives and internal teams

 

 

While public corporations have long considered materiality through a strict financial lens—mainly in the determination of 10-K risk factors—what is considered material to a reasonable investor when making decisions has expanded to include risks and opportunities from a much broader landscape.

Framework’s materiality analysis process helps clients better identify and manage issues deemed “material” on the basis of environmental, social, governance (ESG), and economic impact. Our analysis model accounts for both internal, strategic priorities as well as the concerns of companies’ external stakeholders.

Since 2005, we have conducted analyses for clients in many industry sectors. Our decade-long investment in defining and delivering materiality analyses positions us as the leading provider of this service today.

Learn more about materiality analysis