Breakout D: Workshop on ESG and Materiality

BREAKOUT D: Workshop on ESG and Materiality

Rapporteur: Angie Hanawa

The conversation started with a discussion of GRI’s definition of materiality. The discussion quickly focused on the end-goal of materiality, and how that goal should affect the definition. Materiality has broadly been used more as a reporting need rather than a strategic need, missing the point of the end-goal of materiality, which is to gain stakeholder insight and redirect strategy accordingly.

Sometimes companies miss the point of materiality. Because there are no regular standards of materiality, companies often over-report as there is uncertainty on what to include, so in order to cover all bases, companies report on everything. This holds especially true when it comes to SDGs, as companies believe they should be reporting on them, when all SDGs might not be necessarily material to their business. What is necessary is to have a threshold of materiality. People are looking for more concise reports and better data.

Discussion then turned towards whether materiality standards should be descriptive or prescriptive. Some argued that in order to avoid the over-reporting pitfall, there should be certain standards that companies should adhere to when reporting and addressing materiality.

However, others countered that standards would in fact make things worse, as each company should decide what is “truly” material to them and their business model, and report on that.

The participants then discussed the materiality determining process in itself. Which stakeholders are included? Immediately it was pointed out that different stakeholders would have very different opinions of what is material based on their investment horizon. Furthermore, what is the incentive for companies to act on material issues if those issues are deemed material by external stakeholders? This point quickly lead to the issue of integrated reporting, and how important it is to spur integrated thinking for the future.

The discussion ended on a call for better, rather than more data, as well as the need to make data useful but at the same time comparable.