Navigating the Materiality Maze: A Survey of the Full Spectrum of Materiality Definitions and Approaches

1. Navigating the Materiality Maze: A Survey of the Full
Spectrum of Materiality Definitions and Approaches
Bill Baue, Sustainability Context Group @bbaue
Cornis van der Lugt, Stellenbosch University & BSD Consulting
Louis Coppola, Governance & Accountability Institute @gainstitute
Jackie Cook, Fund Votes
Rachel Guthrie, TD Bank Group
Ralph Thurm, A Leader’s Guide to ThriveAbility @aheadahead1

2. Materiality: The Importance
of Being Earnest
Cornis van der Lugt, Senior Associate, BSD Consulting and Senior Fellow,
Stellenbosch University Business School, South Africa
New Metrics Conference
Boston, USA, 6 October 2015

4. 4
Authoritative definitions of “materiality”
From the sustainability, accounting and legal professions
 Securities and Exchange Commission (SEC), USA
 International Accounting Standards Board (IASB)
 Financial Accounting Standards Board (FASB)
 International Federation of Accountants (IFAC)
 AccountAbility AA1000 series of standards
 ISAE 3000 standard for assurance engagement
 Global Reporting Initiative (GRI)
 International Integrated Reporting Council (IIRC)
www.materialitytracker.net

5. 5
What do they all have in common?

6. 6
Global / regional context
Internal & external thresholds at different levels
> 2°C change in
global ave surface
temperature
Sector > 10%
contribution to
national GHG
emissions
Energy savings /
losses > 5% of
earnings
Error > 5% of entity
GHG budget
Losses due to labour
unrest > 5% of
earnings
> 1,5% increase /
decline in labour
productivity growth
> 20% jobs created
by entity in the local
economy
> 5 - 30%
unemployment rate in
regional economy
National / local
context
Entity
CLIMATE | LABOUR
Source: www.materialitytracker.net

7. 7
DJSI 24 Industry Group Leaders 2013-2014
Cross-sectoral analysis by Materialitytracker
35 topics identified based on top quadrant topics in Materiality Matrix or
listing, of which top 10 most indicated:
1. Human Resources
2. Product Excellence
3. Climate Change
4. Environmental Stewardship
5. Community Impact
6. Supply Chains
7. Labour EHS
8. Resource Efficiency
9. Ethics
10. Improved Access
 Of the 24 leaders: 23 reference GRI use, and 4 Annual Reviews or Integrated
Reports reference IIRC. Five reference using AA1000 in process. Twenty
reference UN Global Compact membership.
Source: www.materialitytracker.net

8. 8
Materiality findings for financial sector
G&A Institute “Sustainability -
What Matters?” (2014):
Financial Services:
1. Customer Privacy
2. Materials (e.g. recycling)
3. Marketing &
Communications
4. Equal Remuneration
Women Men
5. Training & Education
6. Public Policy
7. Investment &
Procurement Practices
8. Diversity & Equal
Opportunity
9. Corruption
10. Indirect Economic
Impacts
GRI & ROBECO-SAM “Defining
Materiality” (2015): Banks &
Diverse Financials:
1. Community (local
communities)
2. Training & Education
3. Product & Service
Labeling
4. Product Portfolio
5. Economic Performance
6. Employment
7. Emissions, Effluents and
Waste
8. Diversity & Equal
Opportunity
9. Compliance
10. Customer Privacy
SASB Commercial &
Investment Banking & Asset
Management Accounting
Standards (2014):
1. Financial Inclusion &
Capacity Building
2. Customer Privacy & Data
Security
3. Transparent Information &
Fair Advice for Customers
4. Management of Legal &
Regulatory Environment
5. Systemic Risk Management
6. Integration of ESG Risk
Factors in Credit Risk
Analysis, in Investment
Management, Advisory,
Underwriting and Brokerage
Activities
7. Employee Incentives & Risk
Taking
8. Employee Inclusion (gender,
race, ethnicity)

9. Dr. CT van der Lugt
Senior Associate
T: +41 79 2575281
c.vanderlugt@bsdconsulting.com
Thank You
BSD Consulting Switzerland
Hufgasse 17
P.O. Box 826
8024 Zürich