What is a materiality assessment?

A materiality assessment is a critical process that helps organizations identify and prioritize sustainability issues that are important to their stakeholders and the company’s long-term success. This process involves gathering input from various stakeholders, such as employees, customers, investors, and community members, to determine which environmental, social, and governance (ESG) factors are most relevant to the organization's operations and goals.

The assessment aims to align the organization's strategies and reporting with the sustainability topics that carry the most significant impact—whether financial, reputational, or operational—thereby ensuring that the company's resources and efforts are focused on areas that matter most to both the business and society. By understanding these priorities, companies can develop strategies that not only fulfill stakeholder expectations but also enhance their sustainability performance and reporting.

This process differentiates itself from methods like financial audits, which focus on verifying financial compliance, or resource allocation optimizations, which are more operational in scope and do not necessarily incorporate stakeholder perspectives or sustainability considerations. Similarly, while improving employee morale can be an outcome of addressing material issues, it is not the primary focus of a materiality assessment.