When Materiality Meets Reality

Matereality: Not a spelling mistake. A reality check.

What if we look at an old tool in a new way?

I propose a variation on a materiality assessment, as an alternate way to understand a company in relation to the future we want.

This new approach asks the question,“What if materiality was based in reality?”

Those of us working in the environmental, social and governance (ESG) space, encounter materiality assessments a fair bit. If you’re new to the topic and you’ve just happened by, this view from the Sustainability Accounting Standards Board (SASB) might help. On the other hand it might underscore the need to connect materiality with reality, as it outlines more and more appendages being hooked onto the ESG solar system, trying to prove how life can keep revolving around business, and not the other way around.

For more details including the proposed methodology and a prototyped assessment of Alphabet (Google) to test the idea further, visit my website here. This is open source content; there is no paywall or log-in required. There is also 4-minute explainer video here. More context on what I’m suggesting follows below.

Materiality assessments don’t work (at least, not very well)

Demand for materiality analyses is on the rise as companies and investors push for more comprehensive ESG reporting. This is in response to a growing awareness that the biosphere and human society are hitting some tipping points (and/or to the growing awareness that there is money to be made from various aspects of the ESG trend). I respect the effort and insights that these analyses can yield. I am not suggesting they are for naught.

But…

I have been involved in dozens of materiality analyses, both as a consultant doing the analyzing, and as a stakeholder being engaged, for large companies in numerous sectors and geographic regions. And I have been troubled by the lack of strategic impact — or really any impact at all, beyond organizing more words on more pages of more reports. And I know I am not alone in this feeling.

I suggest that the current, widely received methodology for materiality is untethered from reality. It’s due for an adjustment. And the good news is, we have…