Common and not so common sustainability themes

How can companies and stakeholders easily identify those sustainability issues that are hot and those that are not? Fronesys offers a materiality hit parade.

The sustainability press today is filled with coverage of a wide range of non-economic issues and impacts that companies have to pay attention to.  But which of these issues do companies believe to be material to their performance, and which are not?   

To answer this question, Fronesys analysed sustainability reports from 31 different companies, as published in Materiality Futures, our coverage of where the art and science of materiality reporting has got to.  In this report, authored by Chris Tuppen, we found that the 31 companies in our study referenced nearly 140 sustainability issues between them, covering economic, governance, environmental, social and global trends. 

Before we examine the sustainability issues in question, we should lay out how we chose which companies to include in our analysis. Remember, the study was about materiality reporting, and so our goal was to identify all those companies that met the following criteria:

• they published a materiality matrix of the sort laid out AccountAbility's Materiality Report, a methodology subsequently adopted as the basis of the related Global Reporting Initiative (GRI) technical protocol on report content.
• their materiality matrix had at least three degrees of granularity per axis ( the way most companies present their materiality matrix, the vertical axis usually represents the stakeholder, and the horizontal axis the company)
• individual issues are identified and positioned on the matrix

As a result of sifting through sustainability reports via corporateregister.com, Framework:CR materiality analysis, and internet search engines, we found only 31 companies actually met our criteria. Although many companies respond to GRI indicator 3.5 and say they use a materiality determination process, relatively few disclose much detail on either the process or the determined level of materiality for individual sustainability issues. Note that this analysis covers sustainability reports published before August 1, 2011.  A full list of the 31 companies is available on the Fronesys website.

Although we could simply list the 140 or so issues that crop up via the reports of these 31 companies, we can understand their significance better if we explore some metrics:

• number of companies covering the issue
• average, minimum and maximum scores on the company axis
• average, minimum and maximum scores on the stakeholder axis

To prevent the analysis from being clouded by issues that are important to just one or two companies, we did a further sift to exclude issues that were not featured by at least five different companies, and found that 50 issues met this additional filter. 

Hit parade

So which are the top sustainability issues? 

Here's a table that lays out the top six sustainability issues, based on a sum of the average score from a company perspective and the average score from a stakeholder perspective:

Source: Fronesys Materiality Futures report, 2011

So if the top sustainability issues in company materiality reporting are sustainable products, carbon footprints, economic development / emerging markets, etc, etc, which are the ones that are bottom of the pile? Well, here's the bottom six, using exactly the same methodology as above:

• Work/life balance
• economic contributions, including tax
• volunteering
• freedom of association
• biodiversity
• senior executive remuneration

It is not that these are unimportant issues. After all, biodiversity, for example, featured on the materiality matrix in 19 separate companies, the most commonly cited issue after climate change and diversity.  Yet it is not rated highly as a material issue, either by companies or stakeholders. It is almost like they don't know what to do with the issue - but that would be the topic of another blog altogether.

 Overall, it is very useful to get a view of what issues are actually making their mark on corporate managers - one has to assume that the more public the statements about materiality get, the more companies need to act (and be seen to be acting) to manage these impacts.

Maintaining such a Top 50 list could be a useful service to the players in the market: companies can compare their own analyses with those of their peers, while stakeholders get a list of which issues are cooking and which need more attention. 

Here's to more material number-crunching. 

Materiality: what does everybody else think?

The publication of the Fronesys report Materiality Futures has created a fair amount of coverage and interest in the press and blogging community. Here's a flavour of some of the things we heard:

Guardian Sustainable Business Blog

Seeing the wood for the trees: how materiality helps companies focus on their key issues

2 degrees webinar

Webinar on Integrated Reporting and Materiality featuring Chris Tuppen and Jessica Fries

Accountancy Age

Make finance less opaque to your business

Elaine Cohen's csr-reporting blog

31 ways of looking at materiality

Financial Times

Environmental analytics: Numbers game is hard to play

So is materiality getting more material? Let us know what you think. 

Leading companies need to disclose more about their materiality determination processes

Fronesys launches Materiality Futures: joining sustainability to strategy.

As the marketplace applies an increasing focus on sustainability factors, a number of the world’s leading companies are seeking to establish which of their sustainability impacts are material to their business.

The thirty-one companies covered in Materiality Futures, the latest sustainability report from Fronesys, are some of the most transparent, but even with them there is often a real lack of transparency regarding how the materiality process actually works. In particular, the report finds that companies are much more likely to be open about their stakeholders’ understanding of sustainability impacts than their own.

The Materiality Futures report, released today by Fronesys, is authored by Chris Tuppen, partner, corporate services, and is the most comprehensive and detailed evaluation of the materiality determination  process to date. It investigates how materiality is currently used in the sustainability reporting of thirty one leading global companies (A full list of companies evaluated in the study is included in the press release). From the public disclosures of these companies, a total of 50 different sustainability issues are evaluated in the report in terms of importance to stakeholders and the 31 companies.  These cover a diverse range of issues, such as corporate governance, water use, human rights, executive remuneration, carbon and privacy.

Chris Tuppen, partner, corporate services, Fronesys, says: “The report is particularly timely as companies around the world prepare to tie together their financial and sustainability reporting processes into the draft integrated reporting model recently released by the IIRC. In our view, the key link between sustainability and business strategy is materiality, and it is surprising how opaque the processes are by which materiality is determined.”

Read the full press release on the launch of the Materiality Futures report

Check out more information on the Materiality Futures report.

2degrees webinar on Integrated Reporting: Identifying material sustainability issues

Chris Tuppen will be discussing his new report Materiality Futures in a webinar with Jessica Fries of the International Integrated Reporting Committee (IIRC) on October 11. The new Fronesys report, which will launch on October 10, features an analysis of sustainability data from 31 leading companies, covering 50 different sustainability issues.

For more information, check out http://www.2degreesnetwork.com/all-activities/event/integrated-reporting-identifying-material-sustainability-issues-2011-10-11/.

Fronesys - all of three months young! Check the highlights.

Greetings from London.

 It was just three months ago that we set up Fronesys, a brand new sustainability advisory service, featuring Paul Druckman, Chris Tuppen  and Jyoti Banerjee.  And you might be wondering what we have been up to.

 Well, glad you asked because here is a quick snapshot of some of the highlights of Fronesys's first three months: 

• Six reasons why sustainability matters to business

Chris and Jyoti wrote this paper summarising the business impacts of sustainability. If you are still wondering whether sustainability is a business issue, or just something to do with greenwashing, then check out this paper. Our friends at HfS Research are offering it to their subscriber base but anybody can download it for free.  

• HfS Research has new Research Fellow on sustainability - from Fronesys

Talking of our friends at HfS, we can tell you that their new Research Fellow on sustainability is Fronesys partner, Jyoti Banerjee. HfS Research is a Boston-based firm helping enterprises make complex decisions about their business processes and sourcing. Check out what Phil Fersht, ceo of HfS had to say about sustainability and the invitation to Jyoti. As a result of this arrangement, selected Fronesys content on sustainability will be available to the 55,000 or so subscribers to content from HfS Research. 

• Partnership on environmental metrics with Trucost

We are pleased that Trucost, provider of the world's largest store of corporate environmental impact data, and Fronesys have become partners. As a result of our joint work, companies can embed ESG metrics into the heart of their strategic decision-making. Which is exactly what we are offering to joint customers.  Find out what Richard Mattison, ceo at Trucost, had to say about the partnership.  check this link on their website. 

• We're in the FT

Yes, Rod Newing's article on tracking corporate social impacts (Financial Times, 24th June) features an interview with Jyoti Banerjee. 

• Speaking at conferences globally

Fronesys partners have been logging the miles, getting to conferences all over the world to speak on issues relating to sustainability metrics, materiality determination, integrated reporting, and business strategy. Paul, in particular, needs to consider his carbon footprint with speaking slots at the Ceres conference in California, and other events in New York, London, Paris, Brussels and Frankfurt. Jyoti has been in Seoul and also spoke at the DVFA conference in Frankfurt on Integrated Reporting.

• Content plans

We have so many fresh and new pieces of research and advice that we are publishing over the next few months that we decided to put up a summary of some of the main ideas you can expect. We will be publishing a summary of Chris's work on materiality determination processes, analysing how 31 different companies assess their exposure and vulnerability to 50 different material sustainability measures.  Plus, we are putting together a multi-client research study exploring the state of the art when it comes to the impacts of materiality determination processes on business strategy. And a review of the leading tools and services that improve corporate sustainability. This, and so much more. 

 We are also planning a new website (actually our first one!) after three months of using the wonderful social media tools. And we would love to talk to you about what we are doing. Or if you think you know someone who we can help on sustainability and business, then please connect us.

 As before,  please socialise us across your network. Like us on Facebook. Follow us on Twitter. And come along and join the conversation at www.fronesys.com.

Six reasons why sustainability matters to business

If a CEO’s pronouncements were all the evidence we needed that a business was doing something, then sustainability would be top of the strategy charts.

Over half of the McKinsey Global Survey 2010 participants consider sustainability – the management of environmental, social and governance issues  “important” or “extremely important” to their businesses. An even more optimistic Accenture study of 766 CEOs found 81% claiming that sustainability is part of the strategy and operations of their businesses.

In practice, for most companies, word and deed diverge.

The same McKinsey study reports that most companies are not actively managing sustainability, or seeking opportunities for investment or making it part of their business practice. Yet, the best sustainability performers comfortably beat their competitors on sheer economic grounds.

So how do companies get their deeds to match their words? And why should they bother?  Here are six reasons why companies have to get their sustainability actions to speak at least as loudly as their words:

• The best sustainability performers are the best performers. Period.
• Operating efficiency is a sustainability virtue
•  Keeping out of regulatory trouble is a sustainability driver
• Reputation? What reputation? The drive to corporate respectability
• Employees care about sustainability too
• Business opportunities are rife in the New World

Still not convinced?

Well, Fronesys has written a paper that is exactly right for you - six reasons why the business case for sustainability is no longer a debate but a fact.

Check out the new paper authored by Fronesys partners Jyoti Banerjee and Chris Tuppen: Six reasons why sustainability matters to business.