Demystifying the Future of Materiality and Reporting

Speakers:

Curtis Ravenel, Global Head, Sustainable Business & Finance, Bloomberg L.P.
Hilary Irby, Managing Director Global Sustainable Finance, Morgan Stanley

Last Tuesday sustainability experts gathered for a Context Conversation in our New York office to unpack and understand the future of materiality and sustainability reporting.

The discussion featured guest speakers Curtis Ravenel of Bloomberg L.P. and Hilary Irby of Morgan Stanley.

The discussion covered our shared experience navigating the sometimes confusing waters of reporting standards, including the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the International Integrated Reporting Council (IIRC). Each spoke as reporting practitioners and industry contributors, and shared their perspectives on future reporting developments and requirements.

Participants from the financial services, healthcare, aerospace, food and beverage, and retail sectors weighed in and shared their own insights, pain points and questions.

Key takeaways

There were a few key takeaways from the discussion. First, as the landscape of materiality and sustainability evolves, companies need to understand the benefits and drawbacks of each reporting framework. Ravenel described SASB as the floor of materiality reporting, and GRI the ceiling, each one aimed at different audiences.

SASB aims to set the bar for minimum reporting in each sector based on the sustainability issues of greatest importance to investors and companies. GRI, on the other hand, aims to suit a wide range of stakeholders beyond the investment space, including employees, NGOs, communities, suppliers, media, academics, and more.

Both speakers agreed that for the foreseeable future, leading companies will likely be using a combination of both of these standards in order to satisfy the information sought by various audiences. Irby added that conducting a strategic materiality analysis looking at both standards will help companies enhance their sustainability overall and streamline reporting to focus on the issues most material to their businesses.

Second, Ravenel and Irby agreed that, on the whole, the proliferation of standards is a good thing as this means that the space is becoming more competitive, thus driving efficiency in reporting. In the long term, the speakers were optimistic that these standards will drive toward improving the consistency of reporting, and will increase awareness across audiences of which issues will drive the greatest impact. In the meantime, there remains a need for GRI and SASB, along with other emerging standards like the IIRC, to co-evolve and to develop a synergistic approach.

Finally, the discussion revealed that the audiences who are using this information are becoming increasingly sophisticated. Companies need to focus on effectively presenting sustainability internally and externally as a core strategic business driver, and not just a way to save costs or do the right thing.

Help integrate

CSR professionals should be working to help integrate sustainability into areas like product development, service enhancement, brand differentiation, and innovation. This will support materiality analyses and help the conversation evolve internally. With a stronger internal understanding of what’s most important, external audiences will begin to see sustainability as embedded in the company’s core business, making it easier to differentiate the company’s activities to a wider audience.

Future

Looking to the future, Irby and Ravenel agreed that it’s very likely we will see the integration of sustainability factors into regulated financial reporting. SASB and IIRC lay out a good baseline for companies to start preparing for this inevitable shift, but there is still much room to think about the ways companies should present sustainability storytelling to key stakeholders beyond the Form 10-K.

In addition to a high likelihood of regulated sustainability reporting, we expect to see companies increasingly communicating sustainability stories through social media, websites, and other interactive, engaging digital channels.

All in all, in a rapidly evolving materiality and reporting field. The future is bright!