“The pilots’ association … seemed simply indestructible.
And yet … in the twinkling of an eye, as it were, the association
and the noble science of piloting, were things of the dead and pathetic past!“
– Mark Twain (1883)
When Simple Tools Were Enough
We’re heading to an important meeting in heavy traffic, unfamiliar terrain, a slick road, and a worrisome rattle in the motor. A glove box filled with folding maps, wrenches, and a roll of dimes for a payphone isn’t the best we can do anymore. Today, a GPS, cell phone, and live traffic data – all of which didn’t exist in the not-too-distant-past – are essential.
Materiality Hasn’t Been Up to the Task
In the same way, we can’t get where we’re going on sustainability – in the time we have – with outdated tools. We’ve just weathered a pandemic, a market crash, supply and labor instability, and socio-political unrest. Now, we’re having biblical floods and massive fires along with hurricanes and tornadoes in unprecedented places. We could really, really use some gleaming, state-of-the-art tools to assess priorities and inform strategy.
Photo by Yegor Kumachov
Sustainability is a luxury no longer but a critical strategic necessity, essential to the company’s present and future. Today’s executives, especially those championing sustainability, must be incredibly nimble and determined but, most of all, they must be informed. Materiality is a key tool we rely on for context, and insight, and we simply cannot afford materiality as staid and dusty as that map and wrench. We rebuilt it for the modern world, so it better addresses both impact on the business and impact on the world (“double materiality”).
Four Dimensions
To provide real value, materiality must illuminate four key dimensions of strategic context. Three of these give us a clearer view of the present:
- What really matters: which issues are important and to whom
- What is expected of the company and by whom
- How well the organization is doing on the above issues, and on its core purpose
The fourth focuses on the future:
4. What is coming over the horizon, and how fast it is approaching
Traditional materiality doesn’t cover all four; at best, it helps with the first. It was designed for a vanished time in which sustainability / ESG were seen as separate from the business, one where both the landscape and expectations changed slowly. In today’s fraught and frantic world, with sustainability so important and highly visible, materiality simply must address all four.
Why Does Traditional Materiality Fail Us? It’s Too Limited
Traditional materiality is too limited in terms of (a) number of stakeholders and (b) perspective.
Number of Stakeholders: Many companies query internal staff, a few customers, and their own supply chain and partners. Just this year a multinational corporation produced an analysis with input from fewer than 50 total stakeholders. Fifty! At a bare minimum, many times that number is needed.
Perspective: Traditional materiality – and even many new attempts to address “double materiality” – are too limited in perspective. Truly understanding impact on the world (half of “double materiality”) is impossible without rigorous, quantitative answers to all four questions above.
Because impact on the world is a combination of what’s most important to the world and what a company’s impact is, it’s not possible to get a good answer without:
- Being able to see what issues are most important to Tier 2 stakeholders (see below) and those stakeholders whose focus is the company’s impact on the world (#1)
- What those stakeholders’ expectations are (#2) for the company’s specific contribution to those issues
- How well the organization is performing on those issues (#3)
- What issues are becoming more important to the world (#4)
Photo by Naderaalbalawi Nader
Net Size Matters
It’s not just more input, it’s casting the net far beyond the boundaries of the business. Stakeholders with a direct connection to the business – what we call Tier 1 stakeholders – are valuable, but the very relationships that make them easier to contact also affect their perspectives. While it’s true they know more about what the company is thinking and planning, which is positive, it is important to seek out other perspectives as well.
Unfortunately, those stakeholders with no direct relationship to the business – Tier 2 stakeholders in our vernacular – are often neither sought nor queried. They necessarily have different opinions about priorities, performance, and the future than Tier 1 stakeholders, and a great deal of context, expertise, and over-the-horizon vision is lost by excluding them.
Recognition Wanted
Even when Tier 2 stakeholders are included, traditional materiality results don’t distinguish between their responses and those of Tier 1 stakeholders, so their insights are lost or garbled. This is a critical mistake for the business as well as its sustainability functions. It gives up powerful advance warning of upcoming changes, risks, and opportunities, and it leaves little time to sidestep risks and beat competitors to the punch.
Falling Flat
Flat materiality asks if stakeholders care about various issues but fails to ask their opinion about where the company stands with respect to them. Are you killing it vs projections? Hanging in? Way below expectations? Are you up but headed down? Knowing how the company is doing is essential, and this is especially true when an issue is, in the eyes of stakeholders, increasing in importance.
If Time is Money…
Let’s be clear: the old method of materiality takes too long! A Fortune 100 firm recently took six months to complete one. At the same time, a 4D Materiality engagement got input from almost twice as many stakeholders yet took just two months – 66% less time. Consider the frantic pace of change during any six-month period over the past two years and ask yourself if taking three times as long is good enough
In the same way, is it good enough to look in the rearview mirror every two years? Clearly not, yet that is the plodding cadence of traditional materiality. In contrast, our Stakeholder Science™ offering quadruples the clock speed by updating key information every six months (or more often, if desired), while adding over-the-horizon data from our E3Evolution™ and Valutus Issues Early Warning System (VIEWS™) offerings and integrating with our Customer Science™ research capabilities.
E3Evolution™ Screenshot of Issues That Are Rising & Falling in Importance
Static Cling
Finally, prior-era materiality results are static, far less flexible and informative than an interactive display that can be mined, refined, and selectively sorted in real time. A static report is just as outdated as that folding map, and less useful. This again is where those gleaming, state-of-the-art tools would come in handy – and where 4D Materiality shines, adding dynamic, compelling outputs that inform and inspire action.
4D Materiality™ Screenshot
We Fixed It!
In our true hour of need, materiality has been failing us. But materiality can be the comprehensive, multidimensional powerhouse we all need. Better input, sharper analysis, the inclusion of time and evolution, faster outcomes, and dynamic, compelling outputs: a materiality that does this – and more – is possible. In fact, it’s here. 4D Materiality has arrived and it’s built for today’s world.
A Better Materiality
We leave home every day with devices that can calculate the trajectory of a trip to Mars, while playing video games and taking our vital signs. We drive to work with an unimaginably powerful communication and navigation array at our fingertips. We relax at home with automated, AI-driven thermostats, televisions, and cameras.
How can we justify relying on flat, sluggish, outmoded materiality processes for our strategy? Our companies, and our planet, deserve better. They deserve full-spectrum, multidimensional, 4D Materiality.