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What is Material in GRI?
In the context of sustainability reporting, “materiality” refers to the topics that are most relevant and important to an organization’s operations and stakeholders. Materiality is a principle in the Global Reporting Initiative (GRI) Standards, which provide a framework for organizations to disclose information about their environmental, social, and governance performance. The GRI 3 2021 represent the organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights.
According to GRI 2021, materiality principle in GRI Standards is defined as:
“Materiality is the principle that organizations should report on topics that are most relevant and material to their operations and stakeholders. Material topics are those that could reasonably be expected to have a significant impact on an organization’s ability to create value in the short, medium or long-term. Materiality is determined through a process of assessing the potential impact of topics on an organization and its stakeholders, taking into account the perspectives and priorities of the latter. Materiality assessments should be conducted periodically to ensure that reporting remains relevant and responsive to changes in the organization’s operations and external context.”
The GRI Standards provide a list of material topics that organizations can report on, such as economic performance, environmental performance, labour practices and decent work, human rights, society, product responsibility, anti-corruption, and governance. However, it’s important to note that not all material topics are relevant for all organizations, as organizations should report on the material topics that are most relevant and material to their operations and stakeholders.
GRI 3 Contains disclosures for organizations to report information about their process of determining material topics, their list of material topics, and how they manage each of their material topics.
It is divided in to 2 broad category :
- Section 1 provides step-by-step guidance on how to determine each material topics.
- Section 2 contains 3 disclosures, which provide information about the organization’s process of determining material topics, its list of material topics, and how it manages each topic.
GRI 3 also includes a new feature, called ‘Sustainability Context’ which enables organizations to provide context and perspective on their sustainability performance in a more comprehensive and consistent way.
Organizations have the flexibility to choose the level of assurance they want to apply to their sustainability reporting. The GRI 3 Standards offer four options: self-declared, self-assessed, independent assurance, and third-party assurance.
In summary, GRI 3 provides a comprehensive framework for sustainability reporting that covers a wide range of material topics, including economic, environmental, social and governance performance, with guidelines on how to report on these topics in a transparent and verifiable way.
Steps involved to determine Material topics.
- Identify the GRI standards that are most relevant to your organization’s operations and stakeholders.
- Review the list of material topics in each relevant GRI standard and compare them to your organization’s specific sustainability performance.
- Determine which topics are most material to your organization and its stakeholders, and prioritize those for reporting.
- Compare the GRI material topics to the topic standard you are using to ensure alignment and completeness.
- Adjust your reporting as necessary to ensure that it is fully aligned with the topic standard and the most material topics for your organization and stakeholders.
Material topics from GRI 2021
The Global Reporting Initiative (GRI) has several Standards for sustainability reporting, each with a different focus. The latest version of GRI Standards is GRI 2021. The material topics that organizations can report on using the GRI Standards include:
- Economic performance
- Environmental performance
- Labor practices and decent work
- Human rights
- Product responsibility
These material topics are further broken down into specific disclosure items that organizations can report on, such as:
- Environmental impacts of products and services
- Energy use and emissions
- Water and effluents
- Land use
- Emissions, effluents and waste
- Raw material extraction
- Environmental compliance
- Occupational health and safety
- Diversity and equal opportunity
- Training and education
- Labor/management relations
- Forced or compulsory labor
- Child labor
- Human rights assessment
- Community engagement and development
- Land acquisition and involuntary resettlement
- Indigenous rights
- Access to information
- Business integrity
- Anti-corruption programs
- Compliance with laws and regulations
- Board of Directors
- Auditing and assurance
It is important to note that, not all material topics are relevant for all organizations, as organizations should report on the material topics that are most relevant and material to their operations and stakeholders.
How to successfully conduct materiality exercise
Conducting a materiality exercise is an important step in the sustainability reporting process, as it helps organizations to identify and prioritize the material topics that are most relevant and important to their operations and stakeholders. Here are some steps organizations can take to successfully conduct a materiality exercise:
To make the most use out of a materiality exercise, companies should pay attention to how they are conducting the entire process.
Define the scope of the materiality exercise: Clearly define the scope of the materiality exercise, including the time period and the topics that will be covered.
Engage with stakeholders: Engage with a variety of stakeholders, including investors, customers, employees, suppliers, and the community, to understand their perspectives and priorities.
Identify and assess material topics: Identify and assess potential material topics, taking into account the perspectives and priorities of stakeholders, as well as the organization’s operations and impacts.
Prioritize material topics: Prioritize the material topics based on their level of importance and level of impact on the organization and its stakeholders.
Communicate and disclose: Communicate the results of the materiality exercise to stakeholders and disclose the material topics that will be reported on.
Continual improvement: Continually review and update the materiality assessment to ensure that the most important issues are being addressed and reported on.
It’s important to note that Materiality assessment is not a one-time exercise, but rather a continuous process that should be reviewed and updated regularly to ensure that the most important issues are being addressed and reported on.
To ensure the success of materiality exercise, organizations are encouraged to consult with external expert or use tools like GRI Materiality Matrix which can be found in GRI Standards.
By the way materiality assessment should not be performed just for the sake of reporting for completion, the way that your company is approaching materiality will be a crucial step in ensuring the plan of actions you are taking are properly aligned with your strategy, regardless of whether you plan to report through the “with reference” or “in accordance“ route.
When done correctly, this process will be a powerful instrument in understanding where the impacts are, how stakeholders relate to these impacts, and how a strategy can be formulated to deliver long-term value to these stakeholders.