Sustainability Strategy: Is The Materiality Analysis Suitable as a Prescribed Basis?

The topic of sustainability has become increasingly relevant in recent decades. Guidelines, laws, and demands influence corporate actions and reshape the term sustainability. To survive in today’s market and gain a competitive advantage, more and more companies are investing in sustainability and want to transfer this to their company accordingly.

Definition: What is a sustainability strategy?

The sustainability strategy defines the company’s long-term contribution to sustainable development. It communicates the sustainability positioning internally and externally and formulates the company’s strategic goals and measures. The content of a company’s sustainability strategy is based on the vision, goals, and desired contribution to the company’s sustainable development. The context of the company plays a major role in communicating sustainability positioning. These are:

• The internal strengths and limitations
• External factors, such as climate change and legal frameworks
• The market development
• The corporate environment

The strategy process includes the conception of the sustainability strategy, defining the goals and measures, and anchoring the strategy within the company.

What does a sustainability strategy process look like?

The strategy process must be initiated as the basis of a sustainability strategy. This means that the understanding of sustainability within the company must be clarified. Central questions can be asked, such as “What importance does the topic of sustainability currently have in the corporate strategy and should it have in the future?” and “What responsibility does the company have for people and nature?”

After these questions have been answered and a common understanding of sustainability has been developed, the topics of sustainability and strategy must be anchored in the minds of employees and managers. Workshops and further training help with qualification and prepare the company for strategy development.

The strategic analysis, i.e., an inventory of the company’s current state, must be carried out, representing the second step in the strategy development process. The list includes the stakeholder analysis, in which important stakeholder groups are defined, and the materiality analysis, through which the company’s focus topics are determined and the associated activities are decided.

Building on the inventory, the third step is initiated: strategy formulation. This includes the formulation and agreement within the company on a uniform understanding of sustainability, the definition of a standard, the formulation of the vision and mission, and the definition of the measures and goals. It is important to note that the company’s strategy is based on its vision and mission. The invention addresses the question of what the company should look like in the future, and the task then answers how the image can be achieved.

The fourth and final step of the strategy process includes implementing and anchoring the strategy within the company. The performance of the sustainability strategy process includes:

• The structure of the sustainability organization
• The assignment of responsibilities
• The structural integration of sustainability issues in the organization
• The training and sensitization of managers
• Involving employees
• Deriving the area goals and measures from the strategy

Regular exchange should be ensured in a committee, such as a sustainability working group, to anchor the strategy within the company. Furthermore, the sustainability goals must be anchored in management, employees must be trained, and there must be regular sustainability communication to constantly develop and update the strategy.

What exactly is a materiality analysis?

Materiality is a fundamental principle of economic and financial auditing concerned with presenting all decision-relevant facts by mandatory standards. Everything that can influence the company’s decision-making process is relevant to the decision. The principle of materiality, therefore, describes a concentration on significant and relevant information and thus excludes insignificant information. During a materiality analysis, also known as a materiality analysis, the company discloses the key business activities that impact aspects of sustainability. It analyzes the significant influence that aspects of sustainability have on business activities and highlights the positive and negative effects and how these findings are incorporated into one’s processes. The result defines the framework for action for sustainability management and reporting.

How is a materiality analysis carried out?

Four steps are required to carry out a materiality analysis. The first step determines the topics that are relevant to the company environment. These include, for example, economic, social, environmental, and governance issues from the 17 Sustainable Development Goals (SDGs). The second step determines the importance for the stakeholders. This is done by evaluating and classifying the topics and their significance for the company’s stakeholders. Workshops, online surveys, and expert interviews can be data collection methods. The third step defines the importance of the company’s success. For this purpose, the topics are evaluated and classified in connection with their relevance to the company’s success. To assess issues from the company’s perspective, an opportunity and risk analysis or a comparison with the company strategy can be carried out. In the last step, the materiality matrix is ​​created. The axes can compare external and internal stakeholders or represent inside and outside data. The prioritized topics can then be used for communication purposes.

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