An ESG materiality analysis determines whether an ESG factor is important and relevant to your company. These factors become the basis for your ESG reporting. How do you decide which factors are important and relevant enough to report on?
Your decision could be based on these four key areas:
What is considered important:
- Only financial factors
- Only societal (greater good) factors
- Or double materiality (i.e., both financial and societal factors).
The characteristics of your company:
- Your location and culture
- Your sector, industry, and product line
- Your size and structure
- Who is within your Circle of Responsibility
- Or company specific features (e.g., is your company publicly traded? Do you have insurance risks?)
The intended audience:
This could be employees, customers, investors, vendors, or government regulators. Each party may require a different reporting framework.
These are the areas that could “make or break” your company. These include:
- Capital expenditures
- Product development
- Compliance with industry regulations
Read the next post in our 11 part ESG Series:
Who in the Company Should be in Charge of ESG?
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This article just scratches the surface of ESG.
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