A materiality assessment is one of the key steps in any corporate sustainability journey. The results of this process form the foundation on which to build strategies, objectives, and sustainability reports that are targeted and aligned with the company’s context.
In practical terms, conducting a materiality assessment means identifying the so-called material topics — that is, the environmental, social, and governance (ESG) issues that are most relevant to the organization and to the people it interacts with. For example, for a technology company, material topics might include data privacy, information security, diversity and equal opportunities, and responsible supply chain management.
There is no single approach to identifying material topics: the method may vary depending on the company’s size, sector, and the reference standards adopted. The following guidelines outline the main steps that can help organizations navigate the process.
1. Identify relevant sustainability topics
The first step is to build a preliminary list of environmental, social, and governance topics relevant to the company. This list will later be refined and validated through stakeholder engagement and, if needed, expert input.
To identify relevant sustainability topics, it is useful to combine sector benchmarking with an internal impact assessment.
Sector benchmarking involves comparing the company with peers operating in the same industry. This helps to identify which sustainability issues are considered priorities by similar organizations. Additional sources of information may include studies and research on common environmental and social impacts within the sector.
In parallel, an internal impact assessment allows the company to examine where it generates significant actual or potential impacts — both positive and negative. This analysis helps determine which ESG aspects are most material to the organization.
2. Engage stakeholders
This phase involves engaging stakeholders and asking them to assess the relevance of the previously identified sustainability topics. Their feedback provides valuable perspectives that help the company understand which ESG issues are perceived as most significant.
The first step is to identify the key stakeholders to involve, considering both internal stakeholders (employees, management, shareholders) and external stakeholders (customers, suppliers, partners, financial institutions, local communities, public authorities, industry associations). It is not necessary to involve everyone, but rather to focus on those most affected by or influential over the company’s activities.
Once the stakeholders have been identified, the company should select the most appropriate engagement methods. Different tools can be combined depending on the type of relationship with each stakeholder and the objectives of the engagement.
For example, surveys can efficiently collect a large number of opinions, while interviews or focus groups provide deeper qualitative insights. When direct engagement is not possible, desk research — such as reviewing public reports or statements — can offer useful indications.
3. Prioritize topics and build the materiality matrix
After collecting feedback from internal and external stakeholders, the company can compare the two perspectives to determine which ESG topics are most material.
The results are typically summarized in a materiality matrix, which plots the importance of each topic from the perspective of external stakeholders (horizontal axis) and the company (vertical axis). Topics positioned in the upper section of the matrix are those considered most material by both sides and therefore warrant the highest strategic priority.
4. Integrate the results into the sustainability strategy and reporting
A materiality assessment is not a stand-alone exercise, but rather the starting point for integrating sustainability into the company’s overall strategy. The material topics identified through the matrix help define strategic priorities, guiding business decisions and investments toward what creates the greatest value for both the company and its stakeholders.
At the same time, materiality forms the foundation of sustainability reporting. For each material topic, the company should disclose its actual and potential impacts on the environment, economy, and people; explain how these impacts are managed through policies, actions, and targets; and monitor progress using specific performance indicators.
How Kyklos Carbon can support you in your materiality assessment
Conducting a materiality assessment can be a complex process, especially for small and medium-sized enterprises approaching sustainability for the first time. At Kyklos Carbon, we support your company through every step of the process — from identifying relevant topics and engaging stakeholders to developing the materiality matrix.
We go a step further by supporting you in sustainability reporting and in developing an ESG strategy and sustainability report.
Contact us to build a solid and proportionate sustainability pathway tailored to your company’s specific needs.
How to conduct a materiality assessment in your company