A materiality assessment is a process used to identify and prioritize the sustainability issues that are most significant (or ‘material’) to a company's operations and stakeholders. The aim is to determine the environmental, social, and governance (ESG) risks and opportunities that are most relevant for the company to address first, and to help them establish a framework for managing their ESG initiatives moving forward.
The assessment involves identifying and evaluating the potential impacts of a company's operations, products, and services on the environment and society, as well as the potential impacts of external factors on the company's operations. It involves engagement with the company’s stakeholders to understand their concerns and priorities related to sustainability issues.
The output of a materiality assessment is a materiality matrix that visually depicts the most significant sustainability issues that have been identified through the process. This matrix is used to inform a company's sustainability strategy, decision-making, and reporting. By focusing on the issues that are most material, a company can allocate its resources and efforts more effectively to create positive impacts and manage risks related to sustainability.