Materiality assessments are at the center of many disclosure frameworks. These serve the obvious purpose of setting out the topics to be covered in company disclosures, but they may also have hidden benefits. A recent article in ESG Today discusses materiality assessments and the impact they have on shareholder engagement stating:
“Shareholder proposals submitted at companies with materiality assessment disclosures received lower levels of support. This trend suggests that these companies likely engaged with their shareholders in a more effective manner, as proposals with lower support levels generally indicate that shareholders believe the company is adequately addressing the topic at hand.”
Companies that conduct materiality assessments see a larger portion of shareholder proposals withdrawn than those that do not. Under both a double materiality and financial materiality approach, shareholder communication and engagement improves – resulting in more trust by shareholders and fewer shareholder proposals.
Viewing disclosure and materiality assessments beyond a strict compliance lens is important. While these practices are increasingly required by law, it doesn’t mean they have no value outside of legal compliance. Improved shareholder relations are only one of the numerous benefits companies receive from conducting materiality assessments. They can also result in improved risk management oversight, better understanding of key stakeholders such as a company’s consumer base, and opening paths to innovation that may not have previously been considered. When you think critically and creatively about your company’s materiality assessment, you can find hidden value and help turn a compliance cost into opportunities.
Our members can learn more about materiality assessments and ESG here.
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