Top Tip – Master the Materiality Matrix: Making CSR look Easy (Part 4 of 4)

In order to succeed in CSR, you need to update the Materiality Matrix regularly and also to understand the business context for CSR.

This is the final part of a 4 part series: Top Tip – Master Materiality

Other Parts: 1  2  3  4

Mastering Materiality – It’s active, not static

CSR is still a relatively fast-changing discipline, and the materiality matrix changes as quickly as the business environment and also stakeholder concerns. The Bangladesh factory collapse of March this year, for example, has probably irrevocably changed the approach that clothing companies need to take to supply chain issues.

VODAFONE 2008-2009 MATERIALITY MATRIX

Vodafone’s Materiality Matrix 2009

Vodafone was one of the first to publish its materiality matrix in 2009. Its subsequent versions (see below – 2010 and 2011) show just how quickly, and in some cases radically, their matrix changed. For example, in 2009 “Energy Use and Climate Change” appears as one of the big issues, although it isn’t the biggest.

Vodafone-materiality-matrix-2010

Vodafone’s Materiality Matrix 2010

By 2010, the issue itself has changed (now called “Climate Change, Energy Use and Renewables”) if only subtly, and other issues have fallen off the radar altogether. That was no doubt partly due to some of the issues being fixed, but partly due to changing conversations with stakeholders. In Vodafone’s case, between 2009 and 2010, they had expanded their stakeholder dialogue and had a better picture of what their stakeholders cared about and which of their stakeholders were most important.

VODAFONE 2011 MATERIALITY MATRIX (online)

Vodafone’s Materiality Matrix 2011

By 2011, the original issue of Energy Use and Climate Change had morphed into at least three different issues: Low Carbon Solutions, Our Carbon Footprint and Environmental Impacts of Products. Renewable energy doesn’t appear on the register at all. Of course I’m not saying that renewable energy should have fallen right of the radar of Vodafone, but the changes from 2009 to 2011 highlight the importance of refreshing the materiality matrix periodically. The climate related changes were probably as a result of a changing understanding of the company of the issues. Another example, Tax, highlights how quickly an issue can change. In the 2010 edition, Tax appears as very important to the company (as it does in 2009 and 2011) and not very important to stakeholders. By 2011, it is one of the most important issues to stakeholders, mostly due to some highly public taxation controversies for individuals and companies alike. TOP TIPS:

  • Use the materiality matrix and refresh it periodically – it should be a living document
  • Track social media to see how relevant issues on your company’s matrix are

TRAPS:

  • Sliding the materiality matrix into the back of the drawer and forgetting about it can only undermine any value CSR can bring to your company

Directors, Lawyers and Materiality

In a legal context, materiality is a term of art. It is used to refer to the Director’s defensive shield in relation to disclosing relevant events, either in relation to public disclosure for listed companies or merger/acquisition activity. It is usually tagged to a threshold of revenue or costs, like 10% of total revenue. So if an event isn’t likely to result in a decrease of revenue of 10%, then it need not be disclosed in those contexts. I mention that because you might need to stand ready to lucidly expound the virtues of the materiality process you are proposing, and explain why the issues are important and relevant to the business. There are probably many more risks on a corporate risk register than appear in your Annual Report, or meet the legal meaning of Materiality, and that will give you some leverage in relation to CSR issues. You should be clear that you aren’t necessarily saying that the CSR issues need to be disclosed in the annual report, but that they have an ability to impact on the business in a way that the business needs to know about. If you’ve really done your homework on the CSR issues (for example, by running them through a risk analysis), you will even have an idea of how big an impact the issues can have on the business. If you can narrow it down to a number, then you are very likely to get their attention. All that to say, that you probably need to understand how others may be using the term materiality, and you may choose to go with an alternative phrase, like ‘CSR impacts’. TOP TIPS:

  • Talk to your Risk Managers about CSR issues
  • Be ready to clearly explain the difference between the traditional lawyer’s definition and a CSR professional’s definition

TRAPS:

  • Insisting that CSR issues ARE material isn’t likely to win you any friends or get respect from some of your colleagues.

Materiality Matrix Top Tips

In summary, my top tips are:

    • Pick CSR lenses that help your business see issues that it might otherwise miss
    • Identify as many CSR issues as you can sensibly get to (and take the views of stakeholders in doing so)
  • Find the ‘third’ dimension
  • Talk directly and openly to your stakeholders
  • Get in at least one stakeholder that will challenge the way your company thinks
  • Understand the different views that stakeholders have and areas of commonality
  • Incorporate CSR into the usual risk processes (and extend them where needed)
  • Use the CSR risk framework to identify opportunities and be entrepreneurial
  • Use the understanding of risks and opportunities to build the business case for CSR
  • The Materiality Matrix is likely to identify the biggest business wins from CSR
  • Connect business benefit to CSR and talk about it with investors and also with staff
  • Use the materiality matrix to frame the CSR communications strategy and the overall communications strategy
  • Use insights from stakeholders to change business behaviours
  • Honesty breeds credibility – tell people why you aren’t dealing with issues and when you might get to them
  • Use the materiality matrix and refresh it periodically – it should be a living document
  • Track social Media to see how relevant issues on your company’s matrix are
  • Talk to your Risk Managers about CSR issues
  • Be ready to clearly explain the CSR professional’s definition of materiality

Other Resources

I am indebted to Radley Yeldar for its publication, How Does it Stack Up 2013, which identifies how well companies are reporting from a CSR performance perspective as well as a communications perspective. Several examples used in this series are also identified in the above report. Elaine Cohen’s CSR Reporting blog has provided, and will continue to provide, excellent examples of reporting and connecting reporting to the materiality matrix.

This is the final part of a 4 part series: Top Tip – Master MaterialityOther Parts: 1  2  3  4.

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