Materiality Assessment: Is Your Company Truly Sustainable?

Every time I ask my customers if their company is sustainable, many emphatically reply: “Of course! We have solar panels!” This phrase has become increasingly common, without any real understanding of what sustainability actually means.

First, we must consider that in Spanish we have two key words: “Sustentabilidad” and “Sostenibilidad,” both derived from “sustentable” and “sostenible,” respectively. However, in English, we only have one word: “sustainable.” Therefore, although our article is in English, I will provide some clarifications by including the Spanish word for the reader's better understanding.

The dictionary of the Spanish language (RAE) defines sustainability (sustentabilidad) as “that which can be supported or defended with reasons,” and the word “to support” comes from “to conserve something in its being or state.” This means that sustainable processes preserve, protect, and conserve current and future natural resources. In this sense, the term “sustainability” (sustentabilidad) has undergone different transformations over time, leading to the modern concept based on the development of socio-ecological systems to achieve a new configuration in the three central dimensions of sustainable development: economic, social, and environmental.

On the other hand, sustainability (sostenibilidad) is linked to the balance between human activities and the natural resources of an organization's environment. In 1987, the World Commission on Environment and Development (WCED) published a report entitled “Our Common Future.” The document became known as the “Brundtland Report” in honor of the Commission's chair, Gro Harlem Brundtland. It was there that the idea was first proposed that humanity has the capacity to achieve “sustainable development” (desarrollo sostenible), which it defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Today, we find these terms used almost synonymously, which is something we might also do in Spanish. However, we must go deeper than just the words.

When we are conducting a Sustainability Assessment in organizations, the first step is a “Materiality Assessment,” also known as a “Sustainability matrix.” This initial step allows us to identify and prioritize the Sustainable Development Goals (SDGs) most relevant to the company and its stakeholders. To that end, there are 17 SDGs with over 100 targets in total.

So, if we have installed photovoltaic panels at my company, does that mean that I haven't done anything? The answer is complex. Your company has made a positive contribution to SDG 7: “Ensure access to affordable, reliable, sustainable, and modern energy,” specifically target 7.2: “By 2030, substantially increase the share of renewable energy in the global energy mix.” Despite that, you still might not be a completely sustainable company.

Let's look at an example: Imagine a company in the manufacturing sector, whether automotive, electronic, foods, textile, chemical, pharma, and so on. It will impact many different SDGs, such as “6: water and sanitation,” “8: Decent work and economic growth,” “9: Industry, innovation and infrastructure,” “12: Responsible production and consumption,” among others.

When we conduct a Materiality Assessment, we follow a series of key elements: identifying the issues, consulting stakeholders, evaluation and prioritization, creating the materiality matrix, and finally, integrating it into the strategy.

In the first stage, “Identifying Issues,” information is gathered on a wide range of potentially relevant topics. An initial screening is developed, where we conduct an analysis based on the regulations and compliance requirements with which the sector must comply. For example, a manufacturing plant has not submitted its wastewater treatment report to the authorities. Many of our readers know that these reports must be submitted to the authorities monthly and annually, depending on where the company is located. Therefore, this matrix will show us that it is a priority to address water quality issues before installing photovoltaic panels at the manufacturing plant. So, am I being sustainable if I first address the responsibility for treated water? Not exactly. You are prioritizing the actions your organization should take, and this will help you become a truly sustainable company in the future.

In the same example, the same plant hasn't verified if its contractors comply with the social security (IMSS) requirements for their subcontractors working on-site. This could become a serious legal problem, so this issue should be prioritized over the photovoltaic panels as a result of the Materiality assessment.

As we can appreciate, sustainability is more complex that simply having a PV system on the roof of the manufacturing plant. As a suggestion, before declaring whether my company is sustainable or not, the first thing I should do is take a look at the SDGs and targets with which I am currently compliant.

Sustainability isn´t greenwashing, and we are not opposed to your company´s objective on solar energy with this green initiative. If you have already implemented this one, I congratulate you because you are fulfilling a particular objective with a specific goal, but I invite you to review all the additional SDGs and do a materiality assessment to understand if your company is or is not “a real sustainable company.”