In the race to meet climate goals and ESG disclosure standards, many businesses are rushing to publish sustainability reports, calculate carbon footprints, and adopt greener practices. While these are crucial steps, there’s one foundational tool that often gets overlooked: the materiality assessment.
A materiality assessment helps organizations identify which environmental, social, and governance (ESG) issues matter most to their business and stakeholders. It’s about asking: What really matters and to whom? The goal isn’t just to check boxes, but to focus resources on the areas where a company can make the most meaningful impact.
Why Materiality Matters
No company can tackle every sustainability issue at once. From energy use and emissions to labor rights, water usage, diversity, packaging, and supply chain ethics; the range of possible focus areas is vast. Without prioritization, sustainability strategies risk becoming diluted, performative, or misaligned with stakeholder expectations.
A materiality assessment brings clarity. It helps businesses distinguish between what is important internally and what matters externally. This includes the concerns of customers, investors, employees, regulators, and communities.
Materiality isn’t static, either. What’s considered material evolves as societal norms shift, new regulations emerge, or the company enters new markets. Conducting regular assessments ensures sustainability strategies remain relevant, strategic, and defensible.
The Double Materiality Shift
Traditionally, companies have focused on financial materiality – issues that could impact the business financially. But with new reporting frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD), double materiality is now in focus. This approach considers both the impact of sustainability issues on the business, and the business’s impact on the world.
Double materiality pushes companies to think beyond risk mitigation. It asks them to assess how their operations contribute to – or mitigate – environmental and social problems, even if those impacts don’t yet show up on a balance sheet.
It’s a transformative mindset shift, and one that brings businesses closer to authentic accountability.
How a Materiality Assessment Works
A typical materiality assessment involves several key steps:
- Identify Potential Issues: Based on industry benchmarks, ESG frameworks (like GRI or SASB), and internal priorities.
- Engage Stakeholders: Through surveys, interviews, or workshops with employees, customers, suppliers, investors, and community representatives.
- Score Relevance and Impact: Rank each issue by its importance to stakeholders and its strategic relevance or risk to the business.
- Map and Visualize: Plot issues on a matrix, typically with “importance to stakeholders” on one axis and “impact on the business” on the other.
- Prioritize Actions and Disclosures: Focus sustainability initiatives and reporting on the top-right quadrant – issues of high importance and high impact.
It’s not just about producing a neat-looking matrix. The real value lies in the conversations that happen along the way. These dialogues uncover blind spots, challenge assumptions, and build internal alignment.
Beyond Compliance: Strategic Benefits
While regulatory compliance is one motivation, materiality assessments are also a powerful strategy tool. They enable leadership teams to:
- Align sustainability with core business strategy
- Justify investment in key initiatives
- Manage stakeholder relationships more proactively
- Build trust through transparency and relevance
- Avoid greenwashing by focusing on substance over spin
For companies reporting under evolving ESG standards or seeking sustainability certifications, a robust materiality assessment provides the foundation for consistent, credible disclosures.
Getting Started
Materiality assessments don’t need to be expensive or overly complex. What matters is that they are genuine, inclusive, and regularly updated.
Some organizations manage the process internally, but many choose to bring in outside expertise. A partner like Leafr can guide stakeholder engagement, ensure alignment with leading standards, and provide insights grounded in both data and human context. This helps ensure your sustainability strategy isn’t just well-intentioned, but effective.
