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Materiality Matrix Essentials

The concept of materiality raises the very relevant question of how the company justifies its choices on issues deemed important and relevant for the proper conduct of its activities or for its stakeholders; even if the initial objective is reporting, a materiality matrix has a strategic scope, because it commits the company - all the more so if it must be communicated externally!

The reason why materiality analysis is so widely used in strategy definition is that it enriches the "classic" risk analysis by highlighting social or environmental issues that were poorly identified or assessed beforehand. This is the whole point of "double materiality". Quantification is necessary but not always possible for all issues: an issue that cannot be quantified can also be material. For this reason, it is helpful that the materiality analysis is supported by sector standards (SASB - TCFD)

In practice, the static representation of materiality on two axes is restrictive: as is often the case with sustainable development issues, the integration of the temporal dimension is lacking. The relative importance of issues is not static but dynamic, and an issue that was not considered a priority yesterday in any other way than in the long term can become a potential crisis in the short term in the event of a competitive attack, a media scandal or a regulatory change. It is therefore important to keep forward thinking: What could be the possible "worst" positions of Critical Topics in 6 months, in 1 or in 2 years? (Any time milestones in between the existing and the next planned materiality matrix).

If the materiality matrix is used internally to guide action, it will be useful to break it down to the level of the divisions/activities or countries/regions in which the company operates, as the relative importance of an issue varies with the activities and naturally the local context (e.g. water stress, corruption, recent scandal involving a competitor or media controversy in the sector, etc.).We recommend to cluster the topics into E-S and G themes and map them into 3 categories (Acceleration, Group, Local)

Finally, to guarantee the relevance and public recognition of the exercise, the methodology used must always be understandable, opposable, reproducible and transparent: the simple communication of a matrix, without explanation of how it was obtained, the choices made and the dilemmas encountered, is not necessarily a factor of credibility. It will also be necessary to put in place a revision or updating procedure that will allow the dynamic nature of the evolution of the issues to be understood.

These essentials, and more, are part of our Analysis module: www.stratesgy.com/analysis