Guide identifies seven phases to determining materiality amid growing demands for sustainability disclosure
KPMG has launched a guide meant to help companies pinpoint ESG issues that matter most to investors in a bid to improve sustainability reporting.
The guide, ‘Sustainable insight: the essentials of materiality assessment’, breaks down assessment of materiality in sustainability into seven phases and seeks to link key issues in sustainability with processes such as enterprise risk management to allow companies to incorporate ESG data into their overall business strategies.
‘Identifying the most material sustainability issues to be addressed in company reporting is a challenge many of our clients seek our professional guidance on,’ says Wim Bartels, KPMG’s global head of sustainability reporting and assurance, in a press release announcing the guide. ‘Many companies understand the principles of materiality in theory but struggle to design and implement a robust assessment process in practice. We have produced this guide to help them with a process that is effective yet not overly complex.’
KPMG says the guide seeks to fill a growing need for materiality assessment amid a growing international focus on sustainability reporting with new reporting frameworks and accounting standards such as the Global Reporting Initiative G4 Guidelines, the International Integrated Reporting Framework and the Sustainability Accounting Standards Board.
According to the guide, around 80 percent of the world’s 250 largest companies identify material sustainability issues in their reports, although 41 percent of them do not outline how they determine materiality and only 45 percent say how they incorporate stakeholder feedback into the process.
The guide suggests a seven-phase approach to determining materiality, starting by defining the scope and purpose, then identifying potential topics and categorizing them. The fourth step entails gathering information on the impact and importance of an issue, which is followed by prioritizing, engaging management and, finally, seeking stakeholder feedback.
