Intro 1: Introduction to materiality topics
Materiality, in the context of sustainability refers to all the factors or items that will potentially impact on investors decision and business development. Therefore, it should be recorded in companies financial statements using various standards.
Essentially, materiality has to do with the importance of the data included in financial accounts of a corporation. A transaction or business decision is priority "material" to the business if it necessitates reporting to stakeholders of the financial statements and cannot be excluded.
As per SASB Standards, which is a guide for sustainable investing contains multiple parameters that are industry specific and are further subdivided into various categories. The standards vary by industry depending on the many sustainability risks and possibilities within a given industry, with an emphasis on how sustainability influences enterprise value development.
Hence, companies tend to use similar value creation methods within the same industry, just as they do within different industries.
The five dimensions as per SASB standard for sustainable business are:
Environment
It is defined as the sum total of all the living and non- living elements who are interdependent and interconnected for their survival.Thus, there are few environmental elements which needs urgent attention and is listed in SASB standards are:
- GHG Emissions
- Air Quality
- Energy Management
- Water and Wastewater Management
- Waste and Hazardous Material Management
- Ecological Impacts
Social Capital
Social capital is a collection of shared values or resources that enables people to collaborate in a group to successfully accomplish a goal. These resources and values on which companies have started focusing on as given by SASB standards are as follows:
- Human Rights and Community Relations
- Customer Privacy
- Data Security
- Access and Affordability
- Product Quality and Safety
- Customer Welfare
- Selling Practices and Product Labeling
Human Capital
Human capital is broadly defined as economic value of workers experience.Its a non monetary value, which might not be included in companies balance sheet but plays a key role in increasing profits , productivity and growth of the company. Human capital includes, education, training, employee engagement, diversity and inclusion, employee health and safety, labor practices etc.
Business Model and Innovation
A business model is a strategy or document that describes how a company or organization provides value to its clients. In its most basic form, a business model offers details about the target market of an organization, the needs of that market, and the part that the company's goods or services will play in satisfying those needs. SASB Standards includes, product design and lifecycle management,business model resilience, supply chain management, material sourcing and efficiency, physical impact of climate change as business model and innovation.
Leadership and Governance
Business ethics, competitive behavior, management of the legal and regulatory environment, critical incident and risk management, systemic risk management etc. are few of the parameters provided by SASB standard for various industries to refer for creating a sustainable business model. Though these parameters are essential for everyone to take care of, however certain industries have greater sustainability risks and opportunities that can have an impact on corporate value than others. Thus, materiality mapping is an important step towards creating and sustaining a sustainable organization.