An important decision for company managers is through what medium results should be disclosed….


Considering traditional financial reporting instruments, should material information for example be disclosed through the Management’s Discussion & Analysis (MD&A), annual financial statements, quarterly filings, press releases, investor presentations, website information? One factor is whether the information involved is quantitative or not, if it involves financial data, and whether it is strategic requiring broader qualitative discussion. Having reliable metrics and KPIs to facilitate informed judgment requires the reporting enterprise to have effective information systems, monitoring and controls in place.


pile-of-booksSince the advent of guidance from AA1000 and the GRI Guidelines, many sustainability reporters have presented the results of their materiality determination process in the form of a “Materiality Matrix”. This implies an empirical approach in doing interviews, surveys and analyses to prioritize issues. The results presentation shows ‘stakeholder views’ (usually the vertical Y-axis) and ‘company views’ (horizontal X-axis), a two-dimensional matrix in tabular form. The most material issues appear at the top right-hand corner, issues that provide the content of the report.

Analysis done for the book The Integrated Reporting Movement (Wiley 2015) showed wide-ranging differences in how reporting companies develop and present the matrix in their reporting. Description of how it was developed and the methodology employed for scoring purposes are often missing. Furthermore, the labels given to issues plotted on the matrix can take the form of numerical labels, word labels or simply shapes such as circle dots that may vary in size to reflect a third dimension (such as level of company control over the issue). The method and composition of the Materiality Matrix may lend itself to standardization by ISO, considering related standards such as the ISO 31000 series on risk management.

Irrespective of shortcomings in its current use, the potential value of the Materiality Matrix as tool to present materiality findings is rooted in the process behind it. The advantages of its use, in whatever medium of disclosure, are that (i) it challenges management to be more scientific in conducting a systematic stakeholder engagement and quantified materiality determination process, (ii) it brings transparency and insight in illustrating trade-offs and differences in perspective between management and stakeholders (including providers of financial capital), and (iii) it illustrates – when disclosed annually over a series of years – the evolution of issues from an emerging (e.g. upper left-hand quadrant) stage to a mature and eventually established phase (bottom right-hand quadrant).

Today some reporters include a Materiality Matrix or similar presentation not only in their sustainability reporting but also in their annual reviews or integrated reports. Various section headings are used for this, such as “Sustainability Statements” or “Stakeholder Overview”. Some would argue that only issues in the top right-hand quadrant, ones that are also (financially) material from the reporting enterprise point of view, should be addressed in an integrated report. This implies that those issues or topics only highly significant from a societal or stakeholder point of view, appearing in the top left-hand quadrant, can best be addressed through sustainability reporting.

Based on analysis of what businesses from diverse sectors present in their annual sustainability and integrated reports, this section provides examples of:

  1. what conclusions leading corporates have come to from their annual materiality determination processes, signaling headline topics across sectors for the last year,
  2. leading practices in the presentation of their results, often in the form of Materiality Matrices, and
  3. leading practices in the materiality determination process, as summarised in the annual reports.

We start with a summary overview of the DJSI Industry Leaders 2013-2015, an analysis this platform will provide annually. Additional examples, including some historical good practices, are also collected and presented on these pages. The selection is based on reporting examples sighted in international publications on the theme over the last decade.

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