Materiality – a material mystery?

With the highly anticipated release of the next version of GRI (G4) in May, there is likely to be an increased emphasis on determining materiality with respect to issues relevant to stakeholders.

With the release of G4, I thought it a good time to outline what materiality actually is as we find it can often cause confusion particularly with first time reporters.

The AA1000 Assurance Standard that is used to guide reporting organisations already includes guidance on the principle of materiality. It defines a material issue as one that will ‘influence the decisions, actions and performance of an organisation or its stakeholders’. The process of identifying these issues involves ‘determining the relevance and significance of an issue to an organisation and its stakeholders’.

Taking the environment as an example, there is a clear parallel with determining ‘significance’ in ISO 14001. In essence this is a risk assessment process to determine prioritised risks for a business. However, for the wider context of reporting and Corporate Responsibility, a business will have other considerations such as governance and human rights. So, rather than have a number of different processes for each topic, what should an organisation be considering in its materiality process?

Well, identifying stakeholders is a key consideration. The process also needs to consider the strategy and policies of the organisation, and relevant issues and related information. Issues can be wide ranging and involve Corporate Governance, environment; health & safety, human rights, labour practices, financial, etc. This list is not exhaustive and will vary between organisations. All this information needs to be captured in a framework that allows identification and prioritisation.

In practice, material issues need to be monitored and reviewed on a regular basis as business and stakeholder concerns change.

For more information and advice on materiality, download The Materiality Report produced by AccountAbility in association with LRQA and BT.

Ged Farmer

Senior Management Systems Assessor