What matters most?: How boards can use materiality to prioritise sustainability
"Our primary focus as an ESG & Ethics Committee is to translate the evolving ESG agenda into practical, actionable transition plans that are measurable, benchmarked, and aligned with clear milestones. Achieving this requires a disciplined scan of the ESG universe and the application of materiality to identify the areas that matter most, thereby enabling effective resource allocation, planning, and programme implementation. In our case, the most material issue is Scope 3, specifically the financed carbon emissions of our lending portfolio. We have assessed our total contributed emissions, identified the industries with the greatest contribution, and put forward a targeted programme to drive emissions reductions through green lending initiatives and client awareness-building."
Eran Klein, NED and Chair of the ESG & Ethics Committee, TBC Group
For many years, organisations have increasingly used the concept of materiality to understand what sustainability matters are most relevant to their investors and broader stakeholders, and subsequently use this understanding to drive strategic decisions.
An organisation’s ability to generate value over time is linked to its interactions with stakeholders, society, the economy and the natural environment. However, an organisation is likely to also impact the environment and people in a range of ways, including through its value chain. Understanding these impacts is essential for organisations to determine material drivers of value and risk.
If undertaken strategically, a comprehensive materialityassessment1 will explore how all these sustainability issues are likely to affect the future resilience and success of
the business. Materiality assessments should not be viewed as an ‘add-on’, and in most cases are already integrated within organisations’ existing systems, processes and resources, including risk management processes, stakeholder engagement activities and sustainability reporting frameworks. These mechanisms can be leveraged and expanded upon to help assess the materiality of sustainability matters and realise strategic advantages. If your organisation is yet to undertake a materiality assessment, or the last time it did so was several years ago, there are some key points that are important to discuss at board-level to ensure that the exercise is driven by a strategic mindset, rather than purely a compliance one.
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