Interpreting your Materiality Matrix

ESG experts Andrea Spencer-Cooke and Dr Anna Young-Ferris deep-dive into the Materiality Matrix, understanding each segment, and how to interpret your results.

Engaging stakeholders is a core part of managing ESG issues effectively, and one of the best tools for doing this is through an ESG Materiality Assessment. This process centres on consulting key internal and external stakeholders to better understand their concerns and priorities around ESG impacts arising from the organisation’s activities, as well as understanding the significance and impact of ESG issues on the organisation itself. The results are then commonly represented in a matrix to capture the environmental, social and governance issues that matter most— the organisation’s so-called ‘material’ issues.

As set out in the GRI (Global Reporting Initiative) reporting standard GRI 101: Foundation 2016, the Materiality Matrix has commonly been used by organisations as a simple way to highlight the relative significance of environmental, social and governance issues for it and its stakeholders. Although GRI 1: Foundation 2021 revised Universal Standards does not stipulate including a matrix per se, the standard encourages an organisation to provide a visual representation of the prioritisation of its material topics—and for an SME starting out on its ESG journey, a matrix remains a helpful starting point.

The Drova Materiality Assessment tool automatically generates a Materiality Matrix from an organisation’s stakeholder inputs to help it visualise its priority ESG issues.

How to interpret the Materiality Matrix

The Materiality Matrix is divided into segments as follows:

Segment 1: Act now

Issues that fall within the top right-hand band of the matrix are an organisation’s most critical material issues. These were rated highest either in terms of their significance for the organisation and/or their importance to stakeholders. Given their material importance, the benefits of taking immediate, credible, and effective action on these issues are compelling, while failing to act could pose major reputational, financial, and regulatory risks.

Segment 2: Manage and monitor 

Issues that fall within the middle band of the matrix are those that have been rated moderately or highly in terms of their importance for stakeholders and/or the impact and influence the organisation has upon the issue. These are areas that an organisation should proactively manage and monitor to mitigate ongoing risks and boost performance.

Segment 3: Learn and prepare 

Issues that fall within the bottom left-hand band of the matrix are the least material issues for an organisation at the point in time of conducting the materiality assessment. These are issues that were rated lower both in terms of their importance to stakeholders and the organisation’s impact upon them. However, given that they ranked high enough to be included in the matrix, these issues should be watched, understood and an organisation should initiate, or be ready to take, action.

Segment 4: Consider and review

The Materiality Assessment process also identifies a fourth, least material, cluster of issues that are not included in the Materiality Matrix. Segment 4 contains issues rated lowest by both the organisation and its stakeholders. These are included in the Appendix of the Materiality Assessment results report for reference. As ESG issues, associated impacts, regulations and priorities are dynamic and continually evolving, the organisation should consider and review these issues periodically and take action when opportunities arise or circumstances change. 

What else is included in the Materiality Assessment results report?

The report provides a comprehensive overview of your materiality process, including: 

• Engagement statistics: View how many surveys were sent and completed across each stakeholder group

• Number of issues: Understand the number of material issues assessed according to ESG category

• Materiality explainer: Receive an overview of materiality, the Materiality Assessment, and why it matters to help educate any external readers

• Top issues and recommended actions:  Build a comprehensive list of top issues and recommended actions moving forward, based on the priority segments of the matrix

• Stakeholder alignment:  Compare the top 5 material issues ranked, for both internal and external stakeholder groups

• Assessment commentary: Generate an appendix containing all stakeholder comments on the assessment

• Stakeholder suggested material issues: Reflect on additional material issues identified by stakeholders for consideration by the organisation

As well as helping you prioritise relevant ESG issues, the Drova Materiality Assessment equips you with recommended next steps so you can take meaningful action to improve your ESG performance.

Your ESG journey starts with a Materiality Assessment

Undertaking a traditional Materiality Assessment can be a complex and challenging process for organisations. Due to the wide range of potential issues and the number and variety of stakeholders involved, materiality can be time-consuming and costly. Without robust and user-friendly digitised tools to guide and streamline a very manual process, it can take up to 6 months and cost anywhere between $30k to $100k. 

In partnership with ESG experts One Stone Advisors, Drova has released a state-of-the-art digital Materiality Assessment, so organisations can start their ESG journey at a fraction of that time and cost outlay. Designed with leading practice structure and processes built in, the Materiality Assessment builds on recognised ESG frameworks. The output is a comprehensive, Board-ready report, with clear next steps to take and a blueprint for an integrated ESG strategy moving forward.

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