Materiality Approach in Sustainability Reporting: applications, Dilemmas, and Challenges

Abstract

Originated from financial reporting context, the concept of materiality has been applied in and contributed to sustainability reporting, by identifying, selecting, and prioritizing sustainability issues with significant impacts. This paper identifies two dilemmas that traditional stakeholder-approach confronts, and then analyzes how materiality-approach delivers advantage by addressing the dilemmas. This paper further observes two challenges for materiality-approach reporting: complexity interrelationship of sustainability issues; and subjectivity in materiality assessment. It argues that the two challenges are inherent and basic concerns for current sustainability accounting. This paper concludes that the road of materiality to sustainability reporting would be advanced with the progress of coping with the challenges. That is, extending our insight on the complex interrelationships of sustainability issues, and on subjectivity in materiality assessment, we would not only embrace a better materiality model to future effective sustainability reporting, but also open a door to view the fundamental theoretical concerns in contemporary sustainability accounting.

Materiality Analysis in Sustainability Reporting: A Tool for Directing Corporate Sustainability Towards Emerging Economic, Environmental and Social Opportunities

“…Thanks to materiality analysis, companies can improve their accountability to stakeholders and make sustainability efforts more effective. Indeed, a materiality analysis approach to sustainability reporting allows dealing with fundamental theoretical concerns such as: subjectivity in assessment and consistency of judgements; complexity and uncertainty of sustainability issues; the need to meet different stakeholders' expectations; balancing between standardized assessment procedures (that ensures comparability of reporting) and the need to take into account the specificity of different contexts (Ascough, Maier, Ravalico, & Strudley, 2008;Greenwood, 2007;Manetti, 2011;Zhou, 2011).…”

“…In fact, materiality analysis remains a highly subjective process, in which personal opinions, experiences and expectations are key to assessing the significance of sustainability aspects (Zhou, 2011). Real-world decision-making involving such subjective judgements is typically influenced by uncertainty and vagueness (Yan & Ma, 2015;Costa & Menichini, 2013).…”

Creating shared value using materiality analysis: Strategies from the mining industry

“…First of all, materiality analysis requires companies to evaluate the significance of a social issue, identifying to whom it is significant and why and to design strategies to cope with those social issues. Indeed, materiality analysis is a highly subjective process in which personal opinions, experiences, and expectations are key elements for evaluating the significance of aspects (Zhu, ).…”

PEMODELAN PETA MATERIALITAS INFORMASI PADA LAPORAN KEBERLANJUTAN PERUSAHAAN (Suatu Tinjauan Mengenai Pelaporan Keberlanjutan Industri Perbankan di Indonesia)

“…Pada konsep pelaporan perusahaan terdapat konsep materialitas (konsep materialitas informasi). Zhou (2011) berpendapat bahwa pada awalnya konsep materialitas berkembang pada konteks pelaporan keuangan perusahaan (financial reporting) dan saat ini telah diaplikasikan pada konsep pelaporan keberlanjutan perusahaan. Konsep materialitas informasi pada konsep pelaporan keberlanjutan perusahaan akan membuat manajemen perusahaan untuk mengidentifikasi, menyeleksi, dan memfokuskan isu-isu keberlanjutan yang memiliki dampak signifikan pada aktivitas bisnis perusahaan.…”