Abstract
The materiality of a sustainability topic should be the deciding factor in determining to what extent a company concerns itself with that issue. A materiality assessment is the standard tool used to evaluate this. During such an assessment, companies not only ascertain the relevance of a specific sustainability topic from a stakeholder perspective but also assess the company’s own impacts with respect to the topic. The international financial market increasingly demands impact measurements from companies, and through the EU non-financial reporting directive (EU NFR Directive) the term impacts was explicitly embedded in the German Commercial Code (HGB).
The results of a materiality assessment aid companies in aligning their sustainability strategy and sustainability management. They also provide the foundation for focusing content when reporting on non-financial performance. The major challenge many companies are currently facing is preparing a valid impact measurement as no practicable methods have at present been standardised in this regard. Moreover, the potential such analyses offer as a basis for focusing and consolidating resources is often not fully leveraged.
This paper gives an overview of the various definitions and usual interpretations of the term materiality. We will show how most applications take an outside-in approach, which conflicts with the requirements of the GRI Standards in particular. In addition, possible approaches to impact measurement will be presented. We will conclude with a summary of how companies can employ an impact-oriented materiality assessment as the basis for sharpening the focus of their sustainability management.
Similar content being viewed by others
References
Ausschuss für Recht und Verbraucherschutz (6. Ausschuss) (2017) Beschlussempfehlung und Bericht des Ausschusses für Recht und Verbraucherschutz. BT-Drucksache 18/11450 v. 08.03.2017
Bellantuono N, Pontrandolfo P, Scozzi B (2016) Capturing the stakeholders’ view in sustainability reporting: a novel approach. Sustainability. https://doi.org/10.3390/su8040379
BMW Group (2017) Sustainable value report 2016 (https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/ir/downloads/en/2016/BMW-Group-SustainableValueReport-2016--EN.pdf)
Business Call to Action, Global Reporting Initiative (2016) Measuring impact: how business accelerates the sustainable development goals (https://www.globalreporting.org/resourcelibrary/Meassuring%20Impact_BCtA_GRI.pdf)
Calabrese A, Costa R, Levialdi N, Menichini T (2016) A fuzzy analytic hierarchy process method to support materiality assessment in sustainability reporting. J Clean Prod 121:248–264
Cohen E (2014) Why the materiality matrix is useless. http://csr-reporting.blogspot.de/2014/12/why-materiality-matrix-is-useless.html. Accessed 7 May 2017
Europäische Kommission (2017) Communication from the Commission—guidelines on non-financial reporting. Methodology for reporting non-financial information, C/2017/4234 (https://ec.europa.eu/transparency/regdoc/rep/3/2017/EN/C-2017-4234-F1-EN-MAIN-PART-1.PDF)
Global Initiative for Sustainability Ratings (2015) GISR’S 12 principles of the CORE framework (http://ratesustainability.org/wp-content/uploads/2015/07/GISR_CORE_Framework12Principles.pdf)
Global Reporting Initiative (2011) Sustainability reporting guidelines, version 3.1 (https://www.globalreporting.org/resourcelibrary/G3.1-Guidelines-Incl-Technical-Protocol.pdf)
Global Reporting Initiative (2015) Sustainability reporting guidelines, implementation manual (https://www.globalreporting.org/resourcelibrary/GRIG4-Part2-Implementation-Manual.pdf)
Global Reporting Initiative (2016a) Consolidated set of GRI sustainability reporting standards 2016. https://www.globalreporting.org/standards/gri-standards-download-center/. Accessed 5 May 2017
Global Reporting Initiative (2016b) GRI 101: foundation 2016 (https://www.globalreporting.org/standards/media/1036/gri-101-foundation-2016.pdf)
Global Reporting Initiative (2017a) Sustainability disclosure database. http://database.globalreporting.org. Accessed 24 July 2017
Global Reporting Initiative (2017b) Questions and feedback: questions about materiality and topic boundary. https://www.globalreporting.org/standards/questions-and-feedback/materiality-and-topic-boundary. Accessed 27 July 2017
Global Reporting Initiative (2017c) Insights from the GRI corporate leadership group on reporting 2025, future trends in sustainability reporting (http://10458-presscdn-0-33.pagely.netdna-cdn.com/wp-content/uploads/2017/01/GRI-CLG_Report-FutureTrends2025-v12.pdf)
Impact Valuation Roundtable (2017) Operationalizing impact valuation. Experiences and recommendations by participants of the impact valuation roundtable (http://docs.wbcsd.org/2017/05/IVR_Impact_Valuation_White_Paper.pdf)
Institute of Public Auditors in Germany (2017) Zukunft der Berichterstattung, Nachhaltigkeit. IDW Positionspapier: Pflichten und Zweifelsfragen zur nichtfinanziellen Erklärung als Bestandteil der Unternehmensführung (https://www.idw.de/blob/101498/30d545 b52d2fcc5d71a 71035b8336a70/down-positionspapier-csr-data.pdf)
International Accounting Standards Board (1989) Framework for the preparation and presentation of financial statements. International Accounting Standards Board, London
International Federation of Accountants (2015) Materiality in integrated reporting, guidance for the preparation of integrated reports. https://www.ifac.org/publications-resources/materiality-integrated-reporting. Accessed 7 May 2017
International Organization for Standardization (2015) ISO 14008. Monetary valuation of environmental impacts and related environmental aspects. https://committee.iso.org/sites/tc207sc1/home/projects/ongoing/iso-14008.html. Accessed 6 May 2017
International Organization for Standardization (2016) ISO 14007. Environmental management: determining environmental costs and benefits, guidance. https://committee.iso.org/sites/tc207sc1/home/projects/ongoing/iso-14007.html. Accessed 6 May 2017
Jones P, Comfort D, Hillier D (2015) Managing materiality: a preliminary examination of the adoption of the new GRI G4 guidelines on materiality within the business community. J Public Aff 16(3):222–230
Kering Group (2015) Environmental profit & loss. 2014 group results (http://www.kering.com/sites/default/files/document/kering_group_2014_environmentalpl.pdf)
Kering Group (2017) EP&L methodology. http://www.kering.com/en/sustainability/methodology. Accessed 24 July 2017
KPMG International (2014) A new vision of value: connecting corporate and societal value creation (https://assets.kpmg.com/content/dam/kpmg/pdf/2014/10/a-new-vision-of-value-v1.pdf)
McElroy MW (2011) Are materiality matrices really material? http://www.sustainablebrands.com/news_and_views/articles/are-materiality-matrices-really-material. Accessed 6 May 2017
Otto Group (2015) The way ahead: report on the sustainability of our value creation 2015 (https://www.ottogroup.com/media/docs/en/Nachhaltigkeitsbericht/0_Otto_Group_Sustainability_Report_2015.pdf)
Pape-Hamich S (2013) ESG-Faktoren als Risikoindikatoren fuer Investoren von Unternehmensanleihen. http://www.portfolio-international.de/newsdetails/article/esg-faktoren-als-risikoindikatoren-fuer-investoren-von-unternehmensanleihen.html. Accessed 13 July 2017
Rangan K, Chase L, Karim S (2015) The truth about CSR. Harv Bus Rev 93(1/2):40–49
RobecoSAM AG (2016) 2016 RobecoSAM corporate sustainability assessment—annual scoring (http://www.robecosam.com/images/CSA_2016_Annual_Scoring_Methodology_Review.pdf)
RobecoSAM AG (2017) DJSI 2017 review results (http://www.robecosam.com/images/review-presentation-2017.pdf)
Springer Gabler Verlag (2017) Gabler Wirtschaftslexikon, keyword: „Materiality“. http://wirtschaftslexikon.gabler.de/Archiv/127630/materiality-v12.html. Accessed 20 July 2017
Sustainability Accounting Standards Board (2017) Materiality: Why is it important? https://www.sasb.org/materiality/important. Accessed 24 July 2017
SustainAbility Inc. (2014) See change: how transparency drives performance (http://10458-presscdn-0-33.pagely.netdna-cdn.com/wp-content/uploads/2016/07/see_change_how_transparency_drives_performance.pdf)
True Price (2017) Homepage. http://trueprice.org. Accessed 13 July 2017
U.S. Securities and Exchange Commission (1999) SEC staff accounting bulletin: no. 99—materiality. https://www.sec.gov/interps/account/sab99.htm. Accessed 7 May 2017
Unilever (2017) Defining our material issues. https://www.unilever.com/sustainable-living/our-approach-to-reporting/defining-our-material-issues/. Accessed 19 July 2017
Wikipedia (2016) Sozialrendite. https://de.wikipedia.org/wiki/Sozialrendite. Accessed 23 July 2017
World Business Council for Sustainable Development (2013) Measuring socio-economic impact, a guide for business (https://www.enterprise-development.org/wp-content/uploads/WBCSDGuidetoMeasuringImpact.pdf)
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
N. Taubken and T.Y. Feld declare that they have no competing interests.
Additional information
This paper is based on the white paper “Impact-Bewertungen und Materialität – neue Anforderungen und Ansätze für Wesentlichkeitsanalysen”, which was published in November 2017 by Scholz & Friends Reputation (http://www.csr-berichte.de). For this publication, it has been re-edited and supplemented with a practical example from NORMA Group.
Rights and permissions
About this article
Cite this article
Taubken, N., Feld, T.Y. Impact measurement and the concept of materiality—new requirements and approaches for materiality assessments. NachhaltigkeitsManagementForum 26, 87–100 (2018). https://doi.org/10.1007/s00550-018-0483-x
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00550-018-0483-x