We’re often asked about what the right amount of time is between conducting a materiality assessment. Should companies do this every 2 years? 3 years? 5 years?
While there is no set amount of time for all companies, there are a few key questions we’ve found helpful to consider when determining whether to embark on another materiality exercise.
Has your business changed?
It’s important to make sure your material issues reflect the business you are today – not the business you once were.
A significant change in the scope of your business indicates it’s time to revisit your material issues. If you’ve acquired a company, you’ve also acquired its key issues. If you’ve divested a business unit, a whole set of issues once top priority may no longer be business-critical. Even if you haven’t gone through a formal structural change, expansion into a new market or development of a new product line influence which topics are most material.
Has your operating context shifted?
Business priorities are shaped by the company’s operating context. Your materiality assessment should be as well.
Maybe you’ve noticed a change in the regulatory environment such as the new UK legislation on modern slavery and gender pay gap. Or, you’ve seen several of your competitors start to shift their production to developing economies and your company is planning to as well. Whatever the change may be, if there has been a noticeable shift in your operating context it’s time to take another look at your material issues.
Would the process itself be valuable?
Done well, the materiality assessment process itself can be invaluable. Repeating the exercise doesn’t have to mean repeating the same steps entirely. A materiality refresh can be a chance to build on the previous assessment and engage your stakeholders in new or different ways.
Perhaps the first time you did the assessment, you engaged middle managers. A refresh could provide a platform to engage senior leaders directly to gain their perspectives on the key issues and build buy-in.
If you used the last assessment to gather a broad set of external stakeholder views, this time you could dig deeper with experts on some of the key issues to learn more about how they expect you to tackle the key issues. Or vice versa.
How will I use the findings?
Above all else, consider why you are interested in conducting a materiality assessment in the first place. When you have an answer to this question, the path forward will likely become clear.