Want to increase the effectiveness of your corporate citizenship? One of your first steps should be to determine what is most important to the company. However, deciding upon the specific matters which most closely align with the company’s vision can be daunting. Fortunately, a process exists to aid in making this determination: materiality.
The concept of materiality originates from financial accounting practices, which strive to include the most essential information that if otherwise omitted would result in a significant misrepresentation of a company. This understanding of materiality has since been adapted to apply to the development of a company’s corporate social responsibility strategy.
The significance of materiality in corporate citizenship has greatly increased in the past years. Many organizations calling for sustainability and corporate citizenship reporting have included the materiality determination process within their guidelines. For example, the GRI’s new G4 instructions place a special emphasis upon the use of materiality to determine the relevance and importance of different issues to companies and their stakeholders. As GRI states in their report, this focus is meant to “…make reports more relevant, more credible and more user-friendly. This will, in turn, enable organizations to better inform markets and society on sustainability matters.”
According to AccountAbility’s Materiality Report, “material information provides the basis for stakeholders and management to make sound judgments about the things that matter to them, and take actions that influence the organization’s performance.” By soliciting input from internal and external stakeholders, a materiality exercise can assist a company not only in finding the basis from which to develop their corporate citizenship program, but also to ensure they will receive the support of those individuals who matter most to the company. The key component of the materiality process in regards to corporate citizenship as compared to the original accounting usage is the inclusion and analysis of stakeholder opinions.
More and more companies are undertaking materiality assessments in order to minimize risk by understanding and addressing key sustainability issues for their stakeholders. For more on this topic, the Center offers these learning opportunities:
- COURSE: September 16, Minneapolis
This one-day program will enable those involved with the development, execution, and/or reporting of their company's materiality process to become familiar with and begin to apply concepts and frameworks that can help identify material issues. It is taught by Lynnette McIntire, former director of global reputation management at UPS. Learn more and register.
In this webinar Lynette McIntire provided an introduction to the concept of materiality, how the materiality process can be applied by companies, the development of materiality matrices, and the current frameworks for reporting materiality results. Jennifer Leitsch, director of corporate citizenship at Prologis, expanded upon these points by discussing her experience and the lessons she learned firsthand from implementing the materiality process. Members can view the archived webinar here.