Our recently released research, Sustainability Incorporated: Integrating Sustainability into Business, calls out the need for business to further embed sustainability into its core strategies. It highlights five pathways to more deeply integrate sustainability into business: employing business model thinking; putting materiality to use; applying a sustainability lens to products and services; tapping into culture; and leveraging transparency. In the second of a five-part series, which was originally published on GreenBiz, we focus on putting materiality to use.
Most large companies have identified their most critical sustainability issues, including human rights, water, customer privacy, climate change and beyond. Identifying and prioritizing those social and environmental issues, such as a materiality assessment, helps companies allocate resources, set goals and focus their strategy.
And while many companies have undertaken a materiality assessment and published a materiality matrix in their sustainability reports, few have used the assessment in strategic ways. As we have explored in past research, beyond including a matrix in a report, practitioners can use materiality to embed sustainability more deeply into the core strategy by linking key issues to the business model and engaging staff across business departments.
To use materiality strategically, businesses and practitioners must focus on a select few issues (or even just one) and then act on the issues by establishing goals and metrics that enable progress and build accountability. This targeted focus enables practitioners to drive an issue deeply into the business strategy and make progress by managing the issue. Once one issue has been embedded across the business, the company may begin embedding additional material issues.
One company that effectively has identified and prioritized a single issue and then successfully integrated it into its business by setting goals and tracking progress is Starbucks. The company long has identified sustainable and ethical sourcing as one of the most critical issues to its business and included coffee purchasing practices as its most material issue in its materiality matrix beginning in its 2007 sustainability report.
To use materiality strategically, businesses and practitioners must focus on a select few issues (or even just one) and then act on the issues by establishing goals and metrics that enable progress and build accountability.
Since then, the company has maintained a focus on ethically sourced coffee as one of its three most material issues and has worked to embed it as a priority across the business. Starbucks set an ambitious goal of ensuring that 100 percent of its coffee would be ethically sourced by 2015 and developed its own sustainable coffee standards, the Coffee and Farmer Equity (C.A.F.E.) Practices, as well as a partnership with Conservation International to work toward meeting that goal.
In 2015, after investing over $70 million on improving sourcing, Starbucks reported that 99 percent of its coffee was ethically sourced. While recognizing the 99 percent threshold may be a practical limit given that new suppliers likely will be in the process of getting certified to Starbucks’ standards, the company continues to pursue ethically sourcing 100 percent of its coffee. Starbucks since has taken on other sustainability issues and is also working to make coffee the world’s first sustainably sourced commodity and thus influencing the industry overall.
In order to zero in on one or a few material issues as Starbucks did, practitioners can use tools to identify and prioritize sustainability issues. Several tools practitioners can consider include:
- The Global Reporting Initiative’s G4 guidelines provide instruction for how to identify and report on material issues.
- Sustainability Accounting Standards Board presents companies with sector-specific lists of material issues and performance indicators.
- Convetit’s online engagement platform has embedded a materiality tool into its virtual “think tanks,” which allows stakeholders to efficiently plot issues on a matrix.
- eRevalue Datamaran offers a powerful “emerging issues radar” which allows companies to scan their sector and understand the degree of disclosure on various issues, including those deemed most material.
Once a material issue has been selected to embed into the business, the next step is to establish related goals. This enables departments and employees to better understand how the issue relates to their roles, builds wider ownership and related outcomes, and helps ensure that the issue is managed at a strategic level across the business. A number of tools can guide effective goal-setting:
- The Sustainable Development Goals present specific targets within 17 areas, which inform goal-setting for issues relevant within the company and the global context.
- The Natural Step Canada and the 3D Investment Foundation’s Future-Fit Business Benchmark offers guidance on setting goals that enable companies to be “fit for the future.”
- Authors Chris Laszlo and Nadya Zhexembayeva present useful directions for moving from incremental to breakthrough goals in their book Embedded Sustainability.
- SustainAbility’s 2013 report Changing Tack discusses goals as a key part of corporate leadership, emphasizing the importance of developing science-based, long-term goals that are ambitious and supported by stakeholder perspectives.
- Winston Eco-Strategies’ Pivot Goals site is a useful database for benchmarking corporate goals based on topic or sector.
- WRI’s Science Based Targets Initiative and similar science-based and fair share goal tools equip companies to operate within planetary boundaries.
Using materiality to focus on one or a few issues — and then setting goals related to the issues — can help embed sustainability deeply into the business. By leveraging existing prioritization and goal-setting tools, companies can focus on integrating the most important issues into their business strategies.
For example, in Sustainability Incorporated we explore how Nestlé embeds human rights across its business and how Nedbank uses its materiality to drive its overall corporate strategy. These examples can inspire practitioners to put their materiality assessments to use and further integrate sustainability into their businesses.