The term "materiality" has its origins in the Latin word materiale. The word "material" derived from "materiality" conveys the idea of concrete, non-abstract, or even in a broader sense, relevance[1].
In legal terms, it is designated as an attribute of the legal relationship and represents a set of essential terms of this relationship, formed from a substantive right, therefore, not procedural.
Materiality and Sustainability
Bringing it into the context of sustainability, materiality represents the most significant impact issues of the organization on the economy, the environment, and people. It is exactly from this perspective that materiality is strategic for several reasons. Firstly, because it allows the organization to focus on the issues that have the greatest potential impact on its performance and reputation. This means that resources can be allocated effectively, maximizing the return on investment in sustainability initiatives.
Moreover, by involving stakeholders in the materiality process, the organization promotes transparency and builds trust, essential elements for long-term sustainable development. This collaborative approach also facilitates the identification of opportunities for innovation and continuous improvement, as the organization and its stakeholders share knowledge and perspectives.
Furthermore, materiality helps the organization align its sustainability practices with regulatory and industry standards. This not only reduces risks but also opens doors to new business opportunities and strategic partnerships focused on sustainability.
In recent times, the theme of materiality has gained considerable strength, especially from the Global Reporting Initiative (GRI), which is an international, non-profit organization and a pioneer in developing a sustainability reporting framework to assist organizations, governments, and institutions in reporting the impact of their activities on the world.
Global Reporting Initiative – GRI
Given the relevance of the GRI and considering that for such an organization materiality is a mandatory component, as it is an essential part of the process of creating a sustainability report, the section devoted to addressing the theme of "materiality" (GRI 3-3) describes the four steps to be followed for defining material topics, namely:
1) understanding the organization's context;
2) identification of real and potential impacts;
3) assessment of the importance of the impact;
4) prioritization of the most significant impacts for reporting.
Conforme se extrai da figura abaixo exposta no Guia GRI: Temas Materiais (página 5):
By using GRI standards, the organization prioritizes reporting on those issues that represent its most significant impacts on the economy, environment, and people.
The European Council recently approved the Directive on Sustainability Reporting by Organizations (CSRD[2]), which requires both European organizations and companies with branches in Europe to report sustainability information based on this Directive, as well as requiring dual materiality. This emphasizes the importance for organizations to consider both the impact of their activities on the environment and society (external materiality) and the impact that environmental, social, and governance (ESG) issues have on the financial performance of the organization (internal materiality).
In Brazil, the Brazilian Securities and Exchange Commission (CVM), which regulates the open market, established Resolution CVM No. 87, requiring organizations to disclose ESGinformation, as well as requiring materiality.
Therefore, given the international and national trend that is already a true "call" to organizations, it is important to say that materiality is an excellent ally for management, as already seen. Since its process is based on the continuous identification and assessment of impacts by the organization, through engagement with relevant stakeholders and experts, defining key points to be strategically worked on.
When in doubt, start with Materiality!
[1] Materiality - Everything You Need to Know - Russell Bedford Brazil
[2] Sustainable Finance Package - European Commission (europa.eu)
