Naturally, organizations define strategies to deliver on their objectives and goals. Materiality assessments determine which topics are important for the primary stakeholder-groups of the organization. The material topics are topics that have an impact on the organization or are impacted by the organization. After completion of the materiality assessment, some organizations only use this as input for the annual report. Luckily, most organizations step in by defining action plans to address their contribution to the material topics. Execution of those action plans is frequently monitored by a CSR or Sustainability Manager. So, what do strategy and materiality have in common?
They both identify what is truly important for the organization and aim to monitor the progress in the degree of realization. However, strategy and materiality are two managerial tools on different frequencies. Synchronizing the frequencies of strategy (development) and the outcome of the materiality assessment enables the organization to make an intelligent combination of both strategic pillars & objectives and the material topics.
Let us take an example: in a world in which strategy and materiality are not synchronized yet, an organization can have a strategy that’s completely focused on financial gains and growth. Meanwhile, a materiality assessment is conducted and material topics like ‘Societal Impact’ and ‘Employee Wellbeing & Engagement’, are handled independently of the strategy. However, the way the organization approaches ‘Societal Impact’ and ‘Employee Wellbeing & Engagement’, is integrated into the strategy leading to financial gains and growth when both management tools are synchronized. Integration stimulates organizations to actively think about their role in relation to the material topics and how they can contribute to areas in which they have a major impact. Plus, what stakeholders find important.
A welcome side-effect is solving ’the governance issue’, regarding handling the material topics as independent topics, which is often not seen as a high priority when those are not directly related to strategy. Integrating the material topics into strategy enables the organization to use the existing governance structure for strategic targets for material topics as well, reducing the risk of not taking responsibility by (senior) leadership.
And yes, we know that the example above is overly exaggerated and simplified, yet it illustrates the potential of materiality. Nowadays, organizations can benefit from further integrating material topics into their business strategies. First, there is a reputational gain since society and the organization’s stakeholders have indicated these topics as important. Therefore, they will reward the organization for their effort when acting upon them. Second, these non-financial indicators will become more important to assess the success of organizations in the long run, as these indicators illustrate the sustainability of the business model much better than only the yearly financial gains do. Last, if you can develop a business model in which you serve society, positively impact the environment, and can earn some money, you are a winner!