This process change consists of two parts: stakeholder involvement and the methodology used to assign the material topics. Previously, GRI proposed to engage stakeholders in the process of evaluating material topics according to their significance. In the current proposal, GRI advises stakeholders to already play a role in the process of identifying material topics, which is in a much earlier stage in the materiality process. In addition, the way to assess material topics has been changed. External stakeholders were previously asked to indicate which topic they thought was the most significant for the organization and internal stakeholders looked at the topics with which the organization made the most economic, environmental, and/or social impact. From now on, the focus will be on the negative or positive impact of a particular topic, in which the negative impact will be assessed based on severity and probability and the positive impact based on scale and scope. Besides, stakeholders will continue to play a prominent role in this.
However, what is the value of early stakeholder engagement? Since stakeholders are involved earlier in the process, greater involvement and more support of the material topics are expected. By implementing round table discussions, interactive workshops, and online questionnaires, more room for debate – and therefore mutual understanding and support – will be created. In addition, this timely – and perhaps also more frequent – involvement of stakeholders provides an interesting push for organizations to increase their attention towards material topics.
The change in the evaluation of material topics, and the distinction made between risks and opportunities, offers possibilities to further improve risk management in organizations. Because of the evaluation based on severity, probability, scale, and scope the assessment of material issues becomes more comparable to, for example, the assessment of climate risks. This is a positive side note since the Task Force on Climate-Related Financial Disclosures (TCFD) also advises the assessment of climate-related risks to be consistent with the methodology used to manage other types of risks. As a result of proposed GRI revisions, the evaluation of material topics will become more comparable with all types of risks. This results in a better streamlining of internal processes, identification of climate-related risks, and material topics.
All in all, we see a lot of added value in this revision. The adjustments ensure more intensive stakeholder engagement, more comparability for material topics and risks. Therefore, the step to sustainably integrate materiality in the internal business operations and strategy becomes smaller. Why is this such an important improvement? We’ll tell you all about this in the second part of our series ‘The potential of materiality: part 2 (the impact of COVID-19 on materiality)’, where we will discuss the strategic value of a materiality analysis.
