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Beyond the Matrix: Why Most Materiality Assessments Miss the Mark
The concept of materiality has long been central to how organizations decide what information truly matters. Historically, materiality originated in the world of financial reporting, where it was defined as information that could influence the economic decisions of users.
As the focus of business accountability expanded to include social and environmental issues, materiality evolved beyond finance to become a cornerstone of sustainability reporting. Today, it serves as the foundation for identifying which environmental, social, and governance (ESG) topics are most relevant to an organization and its stakeholders.
The European Union’s Corporate Sustainability Reporting Directive (CSRD) formally introduced the concept of double materiality, requiring companies to assess both how sustainability issues affect their performance and how their activities impact people and the planet. This represents a shift from a one-directional view of materiality to a two-way lens that connects business resilience with social and environmental stewardship.
However, despite this evolution, most materiality assessments still fall short of uncovering what truly matters.
The Infamous Materiality Matrix
Most sustainability reports today feature a materiality matrix, a two-dimensional visual that maps issues by their importance to stakeholders and their impact on business success. It is a convenient communication tool that offers a snapshot of priorities.
Yet, many companies still treat materiality assessments as a check-the-box exercise rather than a dynamic process that informs strategy, resource allocation, and long-term value creation. The simplicity of the matrix can be deceiving. It often hides the complexity, interdependence, and future uncertainty that define sustainability issues.
Why Most Materiality Assessments Miss the Mark
Despite being a central tool in ESG and sustainability reporting, many materiality assessments fail to identify what truly matters. The problem lies not in the concept of materiality itself, but in how it is applied.
1. Treated as a Compliance Exercise
Many organizations approach materiality as a compliance exercise, something to check off the list to meet reporting requirements rather than a dynamic tool to inform strategy. When conducted only to satisfy disclosure obligations, the process loses its ability to uncover risks or opportunities that can shape long-term value creation.
2. Based on Perceptions Rather than Evidence
Most materiality assessments rely heavily on stakeholder perceptions but fail to incorporate credible evidence of actual impacts or dependencies. As a result, the findings often reflect the popularity of certain issues rather than their genuine importance to business performance or societal impact.
3. Missing Emerging and Systemic Risks
Companies often struggle to capture the dynamic and forward-looking nature of sustainability risks. Many assessments focus on present-day concerns, overlooking emerging issues such as climate transitions, biodiversity loss, and social inequalities that could redefine business relevance in the future.
4. Disconnected from Strategy
Organizations should target the ESG issues that truly impact performance. However, in practice, materiality findings often remain isolated from strategic planning and investment decisions. Without clear links to performance and governance, they offer limited business insight.
5. Oversimplified and Opaque
Plotting issues on a two-axis matrix can create an illusion of clarity by reducing complex interconnections into overly simplistic visuals. In addition, many organizations still fail to disclose how they determine materiality, including the criteria, data sources, and thresholds used. This lack of transparency makes it difficult for stakeholders to trust or compare results.
What “Beyond the Matrix” Looks Like
To move beyond the limitations of the traditional matrix, companies need to reimagine materiality as a living process: strategic, evidence-based, and continuously evolving.
- Integrate data and evidence. Supplement stakeholder perspectives with measurable impact data, science-based targets, and scenario analysis. Robust materiality assessments can unlock strategic potential by aligning sustainability priorities with business outcomes.
- Adopt double materiality thinking. Evaluate both how sustainability affects your organization and how your organization affects sustainability. This ensures a balance between risk management and impact accountability.
- Embrace continuous assessment. Sustainability contexts shift rapidly. Regularly revisiting materiality ensures it remains relevant and forward-looking.
- Embed into governance. Materiality should inform strategy, risk oversight, and resource allocation. Aligning material issues with financial performance enhances both corporate value and stakeholder confidence.
- Be transparent. Publish the assumptions, thresholds, and criteria used in assessments. Transparency builds trust and credibility.
Accepted Frameworks and Evolving Methodologies
Several globally recognized frameworks and standards guide companies toward stronger materiality practices.
The Global Reporting Initiative (GRI) provides detailed guidelines for identifying and reporting on material topics based on stakeholder inclusiveness and sustainability context. The CSRD and European Sustainability Reporting Standards (ESRS) mandate a double materiality approach, combining financial and impact lenses. The Sustainability Accounting Standards Board (SASB) focuses on financially material ESG issues by sector.
Meanwhile, organizations and sustainability research networks increasingly advocate integrating materiality into business strategy, encouraging deeper analysis, scenario planning, and engagement with systemic risks rather than relying on one-time matrix exercises.
Call to Action
The future of materiality lies in moving beyond static matrices toward processes that actively shape business strategy and accountability. As emphasized by leading frameworks, materiality should not be a compliance task but a strategic lens that aligns sustainability priorities with long-term value creation. By integrating data, forward-looking analysis, and the principles of double materiality, companies can uncover the issues that truly drive performance and resilience.
Organizations must now treat materiality as a continuous, transparent, and evidence-based exercise that connects business success with real-world impact. This means reassessing existing approaches, grounding them in science and credible data, and embedding findings into governance and decision-making. Going beyond the matrix is no longer optional; it is essential to ensuring that materiality reflects what truly matters for both business and society.
