For reasons unknown, the Material Girl's 'Material World' has been swirling round my head. I believe this is called an 'earworm' and sadly, there is no known cure: I just have to wait for the next song to take its place.
While the song is anchored in 1980s excess (impress/depress yourself... in which year did the song come out?), it may be due for recycling. A Millennium version of 'Material World' might carry the opposite connotation - less is more.
The concept of materiality has long been part of the legal and financial worlds, yet it is now featuring much more prominently in the ESG (environmental, social, governance) arena. For the uninitiated, materiality means identifying the crucial bits of information when a decision needs to be made from the noise of surrounding bits.
A company's environmental and social impacts are becoming material – they are becoming an important part of the decision-making process in the business lines. For most target audiences (including the CEO), investing resources in a process to identify material business risks and opportunities is compelling, whereas public relations-driven encyclopedic reporting is not.
Evidence is building that emerging market companies are catching on to this principle. This shift in corporate mentality should hearten the ESG folks. A move from 'tell us what' to 'tell us why' is a step up in sophistication and signals better alignment with core business strategy. Two resources worth reading:
- From Tomorrow's Value, SustainAbility’s fourth international benchmark of corporate sustainability reporting:
Some parts of the financial community are gearing up their use of non-financial, extra-financial and/or sustainability disclosures to better understand emerging environmental, social and governance risks…. Leadership companies — including BP, BT, GE and Philips — are shifting the focus of their sustainability strategy towards a more progressive and entrepreneurial approach that seeks to identify opportunities for strategic innovation and market building.
- From the F&C report (pdf) on biodiversity:
Investor attention to biodiversity has to date primarily focused on the extractive industries, on the assumption that these are the sectors for which biodiversity risks are most likely to be material. However, a growing number of companies, in a widening range of sectors, are considering and reporting on their biodiversity impacts and associated risks. Indeed, there is growing evidence to suggest that biodiversity risks are also relevant to companies in other sectors.
(Music trivia answer: 1984. Alas, I was already in long pants....).
Join the Conversation