Materiality in Sustainability: The Key to Focused Strategy and Credible Reporting

In this episode, Poonam Sinha, Sustainability Manager at Intertek Assuris, breaks down the concept of materiality—what it means, its role in aligning key issues with sustainability goals, and its importance in credible sustainability reporting. Whether you're new to sustainability or enhancing your strategy, materiality is essential for trustworthy progress and assurance.  

Tune in now to learn more! 

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Transcript

Refaya Priya: 0:09

Hello and welcome to our first episode of Season 8 in 2025, , where we explore the crucial elements that drive successful sustainability strategies. This is your host, Refaya Priya, the Global Social Media Manager for Business Assurance, Brett and Food Services. In today's episode, we are diving deep into a concept that is at the very heart of any meaningful sustainability journey materiality.

Refaya Priya: 0:43

You have probably heard the term used in various discussions around sustainability, but what does it really mean? How does it guide your company's mission and vision and why is it essential to your company's credibility in sustainability reporting?

Refaya Priya: 1:00

In this podcast, we have Poonam Sinha, Sustainability Manager Intertek Assuris, who explores how materiality connects your company's most important issues with your sustainability goals and how it shapes the way you report progress, and even how it feeds into the assurance process to ensure your claims are trustworthy process to ensure your claims are trustworthy. Whether you're just starting your sustainability journey or refining your existing strategy, understanding materiality is key.

Refaya Priya: 1:31

Now. let's dive in. Over to you, Poonam!

Refaya Priya: 1:33

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Poonam Sinha: 1:36

Thank you, pleasure to be here. So let's start from the beginning. The sustainability journey starts with the commitment of being sustainable, but that's only the first step. Once your organization decides to showcase its sustainability efforts to the world, the real work begins. The first action in this journey is to review your mission and vision. It might sound simple, but it's foundational. These elements are your guiding principles, so aligning them with sustainability is crucial. Next, take a moment to look backward. Your historical data can provide valuable insights into your organization's strengths and weaknesses. It's like looking in the rear view mirror, in which you can see where you have been and where you are hidden. For example, if your organization is already tracking energy use, waste management or employee satisfaction related data, then these data points offer a clear understanding of your starting points as you embark on your sustainability journey.

Poonam Sinha: 2:59

So next, the connecting link between this transition journey is materiality assessment. This is one of the most important steps to stay focused as you get to know what matters most to your company. An organization needs to gain clarity on what are the environmental, social and governance issues that are most relevant to the business. This clarity helps your organization to stay focused, relevant and aligned through the entire journey. So now let's understand the materiality. According to the Global Reporting Initiatives, or commonly known as GRI standards, materiality topics are those that represent an organization's most significant impacts on the economy, environment and people. This also includes impact on human rights. This also includes impact on human rights. These are the issues or topics that matter most because they have the greatest impact, positive or negative, on the organization's performance, its stakeholders and to the wider world. So material topics are not just theoretical. They directly affect how well the organization performs and how it is perceived.

Poonam Sinha: 4:33

The process to identify the material topic is conducting a materiality assessment. This assessment helps you understand which topics are most important to your stakeholders. So, to put it plainly, material topics are the issues that really matter, the ones that shape your business and determine its success or failure. In the context of sustainability, these topics could cover environmental factors like carbon emission, waste management and energy use, to social aspects like labor rights, community engagement or customer satisfaction. Now let's consider a couple of examples to make it more clear. So for a manufacturing company, material topics might include energy consumption, waste management and working conditions. If energy use is inefficient or waste disposal isn't handled properly, it can negatively impact both the environment and the company reputation, whereas for a tech company, material topics could be data privacy, cyber security and supply chain ethics. Negative impacts of these areas, like a data breach or unethical sourcing of materials, could significantly harm customer trust and long-term performance. So a materiality assessment is a strategic exercise that involves analyzing and prioritizing the issues that have the greatest potentials to affect your organization's success and sustainability.

Poonam Sinha: 6:24

The process is guided by several frameworks and standards. It with its own approach, but they all share one important goal to help organization understand which sustainability issue truly matter. Coming to the most popular sustainability standards those provide guideline for conducting a materiality assessment are Global Reporting Initiative, which is commonly called a GRI, the Corporate Sustainability Reporting Directives, commonly known as CSRD, and the International Sustainability Standard Boards, commonly known as ISSB, formerly known as SASB. So, as per the GRI, gri offers a well-established framework for identifying material topics. Gri is widely used and focuses on the economic, environmental and social impacts of a company. The CSRD goes a step further, with specific double materiality requirements, meaning that it asks organization to look at both how sustainability issues affects the business and how the business impacts the world the ISSB it brings even more consistency and global applicability to how organizations should disclose material topics related to its sustainability. So basically, each of these frameworks has its unique feature, but they all help organization to focus on the most impactful sustainability issues.

Poonam Sinha: 8:15

So now you might be wondering how to conduct a materiality assessment, so let's explore this a little bit more. So this step basically includes four important steps as per the GRI. So the first step? It is like understanding the organization context. It means looking at everything that shapes your organization, its activities, business relationship and its stakeholders. So now, when we say stakeholders, we are talking about everyone who has an interest in your organization's performance, such as employees, customers, investors, regulators and even the local community where you operate in. The next comes, as a part of understanding your organization context, is to consider the relevant department within your organization that can contribute to the assessment, for example, teams like communication, human resources, legal marketing, procurement and product development. They all play a role in identifying material topics. These departments bring a diverse set of perspectives, ensuring a thorough and accurate assessment accurate assessment.

Poonam Sinha: 9:53

The second step is identifying the actual and potential impacts your organization has on the economy, environment and people. This includes looking at both positive and negative impacts, as well as short term and long term effects. So let me explain these impacts a little bit more with the elaboration. A positive impact for an organization could be a company's new sustainable product line that helps reduce plastic waste in the environment. A negative impact could be the pollution caused by your organization's manufacturing process. A long-term impact might be how your company's water usage affects local water resources over many years. An unintended impact could be company's new supplier causing labor rights violation without the company's knowledge. So identifying all these impacts, both the intended and unintended, helps organization understand the full picture of their sustainability footprint.

Poonam Sinha: 11:05

Now you may wonder that how we are gathering, how we will gather such diverse information. So an organization can rely on a variety of sources for these information, such as any internal assessment like environmental audit or health and safety reviews. This gives you an idea about organization's health and safety reviews. This gives you an idea about organizations health and safety practices. Another one could be external sources, such as news reports, industry publication and input from civil organization, civil society organizations. Apart from these, an organizations enterprise risk management sheet can also give a very elaborated information about organization's persisting risk. So think of it like putting together a puzzle you are looking at all different pieces of information from various departments, stakeholders and external sources, and then you start piecing them together to get a clear picture of what matter most.

Poonam Sinha: 12:14

So after this, the third step comes is assessing the significance of the impact of your organization. So once you have all the potential material issues, or the potential issues, then you have to assess the significance. This involves both qualitative and quantitative analysis. How so? A qualitative analysis means looking at measurable data like how much energy you are consuming, how much waste you are producing or how much carbon dioxide your operations are emitting. For example, a company might assess how much water is used in production or the amount of greenhouse gases it contributes. These are the numbers that give you a clear picture of your impact. Second method of analysis is qualitative analysis, which focuses on things that are harder to measure but still very important, like community perception, employee satisfaction or the ethical practices in your supply chain. It's about understanding the feeling, opinion and perception that shape your sustainability strategy. For instance, a company might analyze how its brand is perceived in terms of the environmental responsibility or the effect of its operations on local communities.

Poonam Sinha: 13:51

The significance of each impact will vary depending on the organization, sector and the business relationship, so in some cases, deciding how significant an impact is can be subjective, and that's why it is very important to consult your relevant stakeholders. So now understand it, with some of the examples, that how these issues, or how these data can be, could differ across sectors. So, for a manufacturing company, a quantitative impact might be amount of carbon emission it produces from its machinery and production process. A qualitative impact might be the working conditions in the factory, something that is harder to measure, but still extremely important. Still extremely important. For a tech company, a quantitative impact might be energy consumption of its data centers, while a qualitative impact could involve how its products or services affect privacy or cybersecurity of its customers. So both sectors would need to look at the mix of the data-driven numbers and subjective judgment to assess their material topics.

Poonam Sinha: 15:10

Once you have identified the potential impacts, the final step is to prioritize them. The idea here is to rank the impacts from most significant to least significant, and when you are prioritizing, it's key to define a cut-off point or thresholds to decide which impacts you will focus for your reporting, as you want to focus your resources and efforts on the areas that matter most to your business and your stakeholders. So, to make it easier, the companies use a materiality matrix. Now you may wonder what is materiality matrix? Consider this as a map that helps you visually understand which topics are the most important. To build a materiality map, we plot different impacts on a graph map. We plot different impacts on a graph with one axis showing the level of impacts of the topic and the other showing the level of importance of two stakeholders. Now, for example, understand it this way that imagine a manufacturing company that identifies the following material topics, company that identifies the following material topics. So for them, high impact, high importance could be air emission from factories High impact, low importance could be packaging waste from the product Low impact, high importance could be ethical sourcing practices in the supply chain. This is in the supply chain. So this matrix helps the company visualize, visually, prioritize its efforts. In other words, you won't report on everything. You will only report on those impacts that are important to you, that are your material topic. So, after you have prioritized the impact, it's essential to test your material topic list against the sectors you are in. So it helps you to make sure that you haven't overlooked any important topic. You might use industry frameworks, stakeholder feedback or even peer comparison to ensure your material topics are aligned with industry standards. Finally, the last part in the prioritization process is having your board of director review and approve the list of material topics. This is important because the board ensures that the organization is focusing on the right areas and the sustainability efforts align with long-term business strategy.

Poonam Sinha: 17:57

So now, what are the type of materiality? Or, as we have previously discussed, the single materiality and double materiality. So let's just understand it in a bit. So a single materiality assessment focuses on the issues like labor rights affect the company's financial performance or operations, whereas double materiality assessment takes a step further. Double materiality considers the impact of a company's activity on society and environment, as well as how sustainability issues affect the company's financial position. So, in nutshell, how do issues like climate change, biodiversity loss or pollution affect your organization financially? This is the outside-in perspective. Financially, this is the outside-in perspective. But it also asks how does your company's impact on the environment or society influence the planet and people? So this is the inside-out perspective.

Poonam Sinha: 19:24

Additionally, materiality is key, connecting with your organization's vision and mission. It helps you to understand your company's mission. How, if your organization is focused on reducing its environmental impact or improving social equity, a materiality assessment will pinpoint the issues that matter most in achieving these goals. Similarly, materiality also charts the course of realizing your vision. Whether your long-term goal is to lead in sustainable innovation, then materiality provides key issues that will deliver your success. Actually, a materiality assessment does more than identify key sustainability topics. It also provides a valuable insight and tools for taking actions. The result of the assessment provides a clear roadmap to guide your organization's sustainability efforts.

Poonam Sinha: 20:34

Once you have the result from your materiality assessment, it's time to take action. So what are the next actions? First, one in the list is to integrate sustainability into business strategy and governance. Next, develop action plan to address material issues. Now the organization has their material issues, so they should have a clear plan to address it. Make sure to assign ownership of specific teams or individuals within the company so everyone knows who is responsible for driving the change.

Poonam Sinha: 21:16

As a next step, set measurable ESG goals and track performances. And, while setting the goal, make sure to set goals that are smart in nature. The smart word means here specific, measurable, achievable, relevant and time bound. One may consider the SMART goal as reducing carbon emission by 10% in the next 3 years from the baseline 2022. I am just giving one example over here. That how your goal should meet the attribute of being specific, measurable, achievable, relevant and time bound. So you make sure that, once your goals and targets are finalized, so you keep tracking the progress of your goals. For that you should use KPIs, so these key performance indicators will help you to understand that how well you are doing.

Poonam Sinha: 22:24

Now the next step comes is reporting on your sustainability. Here the transparency is key. So you regularly report on your sustainability efforts and progresses, where it's through annual report or sustainability disclosures. But whenever you are reporting, be open with the stakeholders about what's are working and where improvements are needed. So it should declare the both the areas where you are actually heading or you are leading, and also the lagging indicators where you think your organization has to do extra to reach the goals. So that's till now. It is all about the materiality, how we do the materiality and what we do after having the material topics. So now let's discuss a little bit more about ESG reporting.

Poonam Sinha: 23:41

Assurance also plays a critical role in verifying the accuracy and credibility of a company's sustainability claims. The assurance is similar to a financial audit, where companies have their financial statements reviewed to ensure the accuracy. In a same way, sustainability disclosures are also subject to review to ensure they are accurate and reliable. This verification helps maintain the trust of stakeholders and ensures that sustainability efforts you have outlined are genuinely in line with your company's goal. And materiality is a fundamental concept in the assurance process. So how it helps?

Poonam Sinha: 24:28

So, basically, materiality helps determine which issues matter most to the company and its stakeholders, meaning the assurance process focuses on verifying the most critical issues.

Poonam Sinha: 24:43

For example, if carbon emission or supply chain labor practices are identified as material topics, these will be prioritized for verification too.

Poonam Sinha: 24:54

Secondly, the materiality assessment determines what data needs to be verified, how deeply the data should be reviewed and what level of risk exists if there is a misstatement. This ensures that the assurance process addresses the right topics and offers stakeholders confidence that the information they are receiving is accurate and reliable. So, by integrating materiality into assurance, organization not only strengthens the credibility of sustainability disclosures, but also ensures that the reports focus on the issues most relevant to the business and stakeholders. This approach prevents the flood of irrelevant data and instead deliver insights that truly matter to your audience. To wrap up, a well-conducted materiality assessment is the foundation for a successful sustainability strategy, a successful sustainability strategy. It helps you identify and prioritize the issues that are truly important to your business and stakeholders, providing a clarity and direction for your efforts. By integrating materiality into both your sustainability journey and assurance process both your sustainability journey and assurance process you ensure that your reports are accurate, trustworthy and relevant. This approach not only enhances the credibility of your claims, but also drives meaningful progress towards your sustainability goals. Thank you.

Refaya Priya: 26:37

Thanks, Poonam, for elaborating and providing such valuable insights into the materiality assessment process, from its initial stages to final assurance. It's clear that this process is one of the most fundamental and impactful steps a company can take on its sustainability journey. By aligning your organization's priorities with the issues that matter most, you set a strong foundation for meaningful progress and transparency To our listeners. If you have any further questions or need more guidance on how to implement materiality within your own company, please feel free to reach out to us at businessassurance@ intertek. com. We are here to help you shape a sustainable future for your organization. Thanks for tuning in and until next time.