The outcomes of the discussion will help the Lab understand how companies develop, assess and use materiality, and consider how enhancements to disclosure about materiality processes might assist investors.
Key discussion points included the following:
- What does best practice look like for companies who have already completed a materiality assessment?
- How can companies take the theoretical concept of materiality and use the insights to inform reporting?
- What is the role of auditors in a materiality assessment?
- What material information is a primary focus for investors, and how does this inform ESG-driven investors?
- How can companies consider materiality from a qualitative and quantitative point of view?
Our key takeaway: Sustainability and finance teams are two sides of the same coin
Sustainability teams need to work closely with finance and risk teams in order to have a more robust view on what’s really material for a company.
It’s important for finance directors to have sustainability literacy and for sustainability teams to understand the financial side of things. When the two functions come together, that’s when companies get the best results for their materiality assessments for reporting and disclosure.
What’s next?
Bringing CFOs or financial representation to ESG Steering Committees or TCFD Working Groups means that both financial and non-financial metrics can help to inform sustainability strategy and operations.
For a deep dive on how this issue affects climate change, one of the most common material issues, have a listen to our podcast: From TCFD to Net Zero, Connecting the dots. I’m joined by my colleague Stephen to share our advice on how different departments can do a better job of speaking to each other’s language and helping the business move in the right direction on climate issues.
All details on the FRC’s materiality project can be found here: https://www.frc.org.uk/investors/frc-lab/materiality-in-practice
If you are interested in hearing how we can help with your materiality requirements, please contact Rachel.Madan@luminous.co.uk.
Further reading:
Double materiality: a necessary frontier
