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WMSBF - Using Materiality Assessments 12-May-2014
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The world’s leading sustainability consultancy
Using Materiality AssessmentsMay 12, 2014
Elsie Rivera PalabricaERM, Senior Consultantelsie.palabrica@erm.com(317) 697-4606
The world’s leading sustainability consultancy
ERM Sustainability Services
ERM – 20 years of sustainability services
■ Sustainability disclosures
■ Public reports, including GRI reports
■ DJSI questionnaires
■ CDP and CDW
■ Customer and NGO other surveys
■ Equator Principles reviews and risk assessments
■ Project impact assessments
■ Materiality assessments
■ Strategy and stakeholder engagement
■ Metrics and goals
■ Data management systems
■ Report assurance and reviews
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Elsie.Palabrica@erm.com
+1 317-697-4606
Elsie Rivera PalabricaSenior ConsultantIndianapolis, IN
WMSBF - Using Materiality Assessments 12-May-2014
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The world’s leading sustainability consultancy
Materiality Assessments
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Materiality Process and ExamplesMateriality Process and Examples
Q&AQ&A
Materiality Background
The world’s leading sustainability consultancy
Why conduct a materiality assessment?
■ Inform or validate sustainability strategy, programs, and initiatives
■ Provide foundation for public sustainability reporting
■ Engage with stakeholders
■ Identify new opportunitiesand unknown exposures
■ Comply with GRI G4
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BASF Materiality Analysis- 300+ stakeholders
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The world’s leading sustainability consultancy
What is a material issue?
International Accounting Standards Board – An issue is material if its omission or misstatement in financial statements could influence the decisions of users.
SASB – An issue is material if the omission of related disclosures would be viewed by the investor as changing their perception based on the “total mix” of disclosures made.
GRI – Issues related to a company’s significant economic, environmental, and social impacts; or that could influence the decisions of its stakeholders.
AccountAbility – Issues that will influence the decisions, actions, and performance of a company or its stakeholders.5
An issue is material if information on that issue could be used by stakeholders to make decisions that may impact the company – in other words, it can generate
risk or opportunity.
The world’s leading sustainability consultancy
GRI G4 Raises the Bar on Assessing Materiality
■ Increased emphasis on materiality as a foundational GRI process
■ Need to identify what is material and where the issue is material across a company’s value chain
■ Must disclose list of material issues and process used to identify and prioritize them
■ Specific aspects and disclosures on management approach (DMA) will depend on results of the materiality assessment
– At least one indicator for “core”
– All relevant indicators for “comprehensive”
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WMSBF - Using Materiality Assessments 12-May-2014
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The world’s leading sustainability consultancy
GRI G4 Recommended Process
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The world’s leading sustainability consultancy
GRI G4 – Key Changes from G3
1. Overarching structure
2. “In Accordance” model
3. Materiality process and disclosures
4. Supply chain/value chain
5. Disclosure on management approach (DMA)
6. New governance and ethics and integrity disclosures
7. Other new indicators
8. GRI index
9. Reasons for omission
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WMSBF - Using Materiality Assessments 12-May-2014
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The world’s leading sustainability consultancy
GRI Recommended Process
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The world’s leading sustainability consultancy
Materiality Assessments
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Materiality Process and Examples
Q&AQ&A
Materiality BackgroundMateriality Background
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The world’s leading sustainability consultancy
Developing a Materiality Assessment
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1. Review Business Strategy
2. Identify Stakeholders
3. Identify and Map Material Aspects
4. Prioritize Issues
5. Plot Results
6. Define Strategy and Next Steps
The world’s leading sustainability consultancy
1 Review business strategy
■ What is your business model?
■ What are your goals and objectives?
■ By region
■ By business unit & product
■ By function
■ Where are your key operations and what regions are you targeting for expansion?
■ What are your supply chain management priorities and key challenges right now and in the near future?
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The world’s leading sustainability consultancy
2 Identify stakeholders
■ Who are your primary stakeholders – up and down your value chain?
■ Who matters to you and how do you go about understanding what matters to them?
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Customers
Consumers
Employees Suppliers
NGOs/Activists
Investors
Community Members Regulators
The world’s leading sustainability consultancy
3 Identify and map issues
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Materiality Filter
Material Aspects
■ Considerations for identification of issues
– Key industry resources(e.g., GRI, SASB)
– Categories
– Level of detail
– Governance and systems issues
– Product issues
– Issues related to megatrends
– Issues unique to the organization
– Issues unique to the specific communities or urban areas
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The world’s leading sustainability consultancy
Example: GRI G4 – Across the value chain
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The world’s leading sustainability consultancy
Example
Governance
■ Board oversight
■ Ethics
■ Stakeholder engagement
■ Supply chain environmental & social impact management
Product Stewardship
■ Innovation
■ Design for sustainability
■ Product compliance
■ Conflict minerals
Environmental
■ Air emissions
■ Water use and discharges
■ Ozone depleting substances
■ Waste management
■ Hazardous materials
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Energy Efficiency & Climate Change
■ Climate leadership
■ Vehicle efficiency
■ Building efficiency
■ Resilience to climate disruptions
■ Greenhouse gas (GHG) emissions
■ Fleet/transport management & composition
■ GHG emission regulation
Social
■ Community involvement & investment
■ Political involvement
■ Human rights
■ Occupation health & safety
■ Talent management/training
■ Diversity/gender participation
■ Labor/management relations
■ Supplier diversity
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The world’s leading sustainability consultancy
4 Prioritize issues
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via interviews
The world’s leading sustainability consultancy
Example
Stakeholder Groups■ Suppliers
■ Customers
■ Investors
■ NGOs
■ Industry groups
■ Labor group
■ Trade press
■ Academia
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Stakeholders were grouped into categories, and category averages were used to determine the “importance to stakeholders” scores. This provided a balanced approach to scoring.
Interviewees selected and rated their top sustainability topics and discussed others at length. Gaps (in gray) were filled using publicly available information on the organization’s activities, initiatives, and stated topics of interest.
* Illustrative, not comprehensive scoring sheet
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The world’s leading sustainability consultancy
Internal Engagement
■ For materiality assessments …the importance of issues to businesssuccess or achieving business objectives
■ Growth
■ Profit
■ Efficiency
■ Risk
■ Beyond the bullets
■ Nature & extent of current engagements on sustainability issues
■ Identification of operations or areas where issues represent unknown risk
■ Discovery of unidentified and unexploited trends across stakeholder categories
■ Opportunities for cross-functional collaboration
■ Experience with collaborative efforts on shared goals/outcomes19
The world’s leading sustainability consultancy
External Engagement
■ Determining issue importance to stakeholders
■ What issues impact their opinions,actions, decision making…
■ What their performance expectations are
■ How they perceive existing action (inaction)and performance
■ Beyond the bullets
■ Their predictions for issues and issues management
■ Who they respect and why
■ What irks them most
■ What approaches work or are not working with them
■ What are they working on that they are most proud of(and with whom!)
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The world’s leading sustainability consultancy
5 Plot and analyze
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Importance to Business
Imp
ort
ance
to
Sta
keh
old
ers
Stakeholder Engagement
Product Life Cycle Impacts
Energy and Climate ChangeInnovation
Recycled ContentManagement
Systems
Recyclability
x
Recycling Capacity
The world’s leading sustainability consultancy
Regional and Value Chain Considerations
■ GRI G4 wants organizations to understand and speak to issues across the value chain and by region if relevant
■ Research and engagement strategies should reflect that
■ Engage regional and business unit leaders as well as functional leaders
■ Consult local leaders (e.g., plant managers) at key locations
■ Graphical presentation of related information may suffice for your sustainability report but feed strategic planning with insight
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The world’s leading sustainability consultancy
6 Define strategy and next steps
■ Identify ways to mitigate risks and capitalize on opportunities for highest priority issues
■ Say “no” to lower priority issues
■ Create and implement an enhanced stakeholder engagement plan
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The world’s leading sustainability consultancy
Sustainability Approaches
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A megatrends approach…. A values, ethics, and systems focus….
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The world’s leading sustainability consultancy
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Strategically targeting societal issues with core company capacities….
Sustainability Approaches
The world’s leading sustainability consultancy
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Strategically targeting societal issues with core company capacities….
Sustainability Approaches
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The world’s leading sustainability consultancy
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Strategically targeting societal issues with core company capacities….
Sustainability Approaches
The world’s leading sustainability consultancy
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Sustainability Approaches
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The world’s leading sustainability consultancy
Key Questions
■ What are your objectives for conducting the assessment?
■ What existing analyses have been done that can be leveraged?
■ What level of stakeholder engagement is desired (for internal and external stakeholders)?
■ What level of desktop review is appropriate?
■ What is the best method for prioritizing issues?
■ Are there other ways in which the assessment could bring value?
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The world’s leading sustainability consultancy
Case Study
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ERM created clear definitions for a comprehensive list of 40 economic, environmental and social issues and rated those issues on two central elements: importance to key stakeholders and potential impact on the company’s North American business objectives.
The project was informed by dialogues with key external stakeholders and internal decision makers as well as a thorough media scan, reviews of peer company activity and the frameworks and methodologies of respected sustainability raters and rankers (e.g., DJSI, CDP).
ERM’s recommendations to the client justified the need and established the foundation for a U.S.-focused sustainability strategy.
Client: Fortune 100 Pharmaceuticals
Location: Global
Sector/Practice: P&A - Sustainability
A global company in a highly scrutinized industry is provided with a solid foundation for well informed strategic planning and enhanced, more effective stakeholder engagement.
Impact to the Business
Inte
rest
to
Sta
keh
old
ers
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The world’s leading sustainability consultancy
Materiality Assessments
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Materiality Process and ExamplesMateriality Process and Examples
Q&A
Materiality BackgroundMateriality Background
The world’s leading sustainability consultancy
Other Trends in Disclosure
■ Mandates from governments and stock exchanges
■ Materiality assessments as astakeholder engagement tool
■ Materiality assessments in strategic planning
■ Board interest and engagement
■ Use of digital and social media
■ Alignment among reporting frameworks
■ Focus on governance andand supply chains
■ Integrated reporting
■ Assurance32
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