Materiality assessments are a powerful tool for identifying the Environmental, Social, and Governance (ESG) topics that truly matter, offering a clear roadmap for focused action and impactful reporting. At Baumann Consulting, we work with clients to help them reach sustainability goals, and internally, we are currently developing our second annual ESG report. Reflecting on our own journey and client experiences, we’ve fine-tuned an approach to materiality assessments that balances stakeholder insights with globally recognized standards and evolving market expectations. In this blog, we will outline the proven steps to carry out a successful ESG materiality assessment and share insights gained from the experience.
The Evolving Nature of ESG Materiality
Materiality assessments are dynamic by nature. What is considered material today may shift as market demands, client requirements, regulatory landscapes, and stakeholder expectations evolve. Material topics can be informed by organizational stakeholders, global standards like the United Nations Sustainable Development Goals (UN SDGs) or the Global Reporting Initiative (GRI), or even requirements tied to industry-specific frameworks such as EcoVadis or GRESB. This wide range of options is admittedly challenging and can be overwhelming. But it also provides the opportunity to identify the approach that aligns best with your firm’s goals. The process is most efficient with an experienced consultant, whether that is a collaborative brainstorming session, a framework gap assessment, or a combination of different strategies.
Steps to Conduct a Robust ESG Materiality Assessment
The following recommended key steps, which have been successfully implemented, will help facilitate an effective ESG materiality assessment.
1. Onboard Your ESG Core Team
The first step is to assemble a cross-functional team to champion the materiality process. ESG efforts often span multiple departments, so it’s crucial to include representatives from areas like sustainability, operations, finance, human resources, and legal. It is crucial to establish the expectations ahead of this onboarding; for example, informing staff and their supervisors of the regular time commitment, the end date of the project, and what responsibilities may be assigned to them. It is much easier in the very beginning to identify and replace team members who do not have the bandwidth to accommodate the project. This team should have a shared understanding of ESG goals and the materiality process, which can be achieved through training sessions or an initial briefing. At our firm, we’ve asked for volunteers and were able to create a diverse team that not only spans across our firm’s geographic footprint but also across technical and corporate disciplines and all levels of the organization. The diverse makeup of the team ensures a broader perspective on ESG priorities and buy-in from the whole firm.
2. Map the ESG Journey
Before diving into the materiality assessment, establish a clear roadmap:
- Define your objectives, timeline, responsibilities, and deliverables
- Identify the standards or frameworks that will guide the assessment, whether it’s the GRI, EcoVadis, UN SDGs, or a combination of these
A well-mapped plan keeps the process organized and ensures all stakeholders are aligned from the outset.
3. ESG Kickoff, Brainstorm, and Materiality Workshop
Kick off the assessment with a collaborative workshop that brings together your core team and key stakeholders. This session serves as a platform to:
- Introduce the materiality process.
- Brainstorm potential ESG topics relevant to your organization.
- Discuss trends, risks, and opportunities impacting your industry.
Workshops are invaluable for fostering dialogue and capturing diverse perspectives. For our second ESG report, we integrated breakout sessions and interactive tools to encourage robust participation, which led to a comprehensive list of potential material topics.
4. Rank and Categorize ESG Topics
Once potential topics are identified, the next step is to rank and categorize them based on their significance to both the organization and its stakeholders. Common methods include:
- Surveys or scoring matrices: Evaluate topics against criteria like impact, urgency, and stakeholder relevance.
- Materiality matrices: Visualize the results to identify high-priority issues.
At our firm, we’ve used a dual-axis materiality matrix to plot topics based on importance to stakeholders and impact on business success. This approach highlights areas that require immediate attention versus those that are less critical.
5. Meet with Stakeholders
Stakeholder engagement is a pivotal part of the process. Stakeholders can include employees, investors, customers, suppliers, community members, and regulatory bodies. Engage them through surveys, interviews, or focus groups to validate the material topics identified in earlier steps.
For our ESG efforts, stakeholder feedback provided essential insights into emerging issues and ensured our priorities aligned with external expectations. We convened our company leadership at specific touchpoints to get their feedback on material issues and provided ESG updates during All Staff Meetings to allow dialogue from the entire firm. This method provides transparency and reinforces trust, both vital components of an effective ESG strategy. This is especially important to get the buy-in for unfamiliar topics.
6. Finalize ESG Topics
With input from stakeholders and internal teams, it’s time to finalize your list of topics. Document your findings and rationale, ensuring they are clear and justifiable. Organize topics into categories such as environmental, social, and governance issues, or align them with relevant frameworks like the UN SDGs.
In our experience, finalizing material topics is not the end but a stepping stone. These priorities inform the structure of our ESG report, guide decision-making, and shape initiatives that drive measurable impact.
Lessons Learned from Our ESG Journey
Developing our second ESG report has reinforced the importance of a thoughtful materiality process. Here are some lessons we’ve learned:
- Start simple: For organizations new to ESG reporting, focus on a manageable set of material topics and build from there. Rome wasn’t built in a day!
- Flexibility is key: Be prepared to adapt as market conditions and stakeholder priorities evolve.
- Communication is critical: Keep stakeholders informed and engaged throughout the process.
Conclusion
An ESG materiality assessment is more than a box-checking exercise; it’s a strategic process that shapes the future of an organization’s ESG efforts. By onboarding your team, mapping the journey, facilitating workshops, engaging stakeholders, and setting priorities, you can create a targeted road map for meaningful ESG action and reporting.
As ESG consultants, we’ve seen firsthand how a well-executed materiality assessment drives both organizational success and stakeholder value and provides valuable guidance for decision making. Whether you’re embarking on your first ESG report or refining your strategy, these steps can help you navigate the process with confidence and clarity.
For organizations ready to take the next step, our team is here to help guide the way with proven expertise and practical insights. We work with clients every day to help them achieve sustainability goals, including green building certifications, building performance, decarbonization, or an overarching playbook that encompasses ESG priorities.
Reach out to us to discover how our team can assist you.
