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New Metrics
The Materiality Matrix Is Like Grandma’s Ham

The key lesson is to question older practices to ensure they remain fit-for-purpose. After all, practices can morph over time to the point they become ends in themselves — so ubiquitous that no one questions them.

The story goes like this: A couple is cooking together for the first time. They are cooking a large ham; and one of them trims the ends off before putting it in the oven.

“Why are you cutting the ends off the ham?”

“Because that’s what my mother did.”

“Why did she do that? It’s a waste of good ham!”

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“I don’t know — let’s call her.”

The mother says she trims the ham because her mom did it. So, they call the grandmother. Nonna is also unsure why. She asks her husband. He thinks for a moment, before remembering:

“Our house had a really small oven. I had to cut the ends off the ham for it to fit.”

The materiality matrix is like Grandma’s Ham. Today’s matrices (some examples below) try to communicate the importance of various sustainability-related topics as a function of both financial importance and stakeholder importance (double materiality).

But whether you’re looking at investor disclosure, multi-stakeholder disclosure or a double materiality approach, none of the established standards suggest the use of a matrix today.

So if you’re aligned with one or more of the above standards and using a matrix, you should be asking why.

The matrix has never had a place in double materiality

A key lesson of Grandma’s Ham is to question older practices to ensure they remain fit-for-purpose. After all, practices can morph over time to the point they become ends in themselves — so ubiquitous that no one questions them.

Proponents of today’s double materiality matrices sometime refer to GRI’s 2016 standards – which did suggest the use of a matrix:

A closer comparison will reveal that the axes on today’s double materiality matrices are different to what was proposed by GRI. Double materiality matrices feature axes of:

  • Stakeholder impact

  • Impact on the business

Yet the axes on GRI’s 2016 matrix are:

  • Influence on stakeholder assessments & decisions

  • Significance of economic, environmental & social impacts

This is a key point. GRI has never been interested in expanding its remit to incorporate the concept of double materiality (i.e. “impact on the business”). In fact, no standard has ever suggested the use of a matrix for double materiality.

Any GRI enthusiast seeking to keep the 2016 matrix alive may find the below quote instructive:

The materiality matrix is a techno-rational tool that simplifies the inherent complexity of assessing material sustainability issues, stakeholder engagement, and the societal pursuit of sustainable development.

It is instructive not only for its substance, but also because of who wrote it. The lead author on the paper is Carol Adams, now Chair of the Global Sustainability Standards Board – the authority that issues GRI Standards. If the leader of GRI questions the relevance of the materiality matrix; maybe you should, too.

The matrix is a misleading illusion of certainty

Take another look at the matrices above. In both, diversity and inclusion is deemed more important or impactful than workplace health and safety. As an LGBTQ+ person, I have faced anguish in the workplace and will always fight for the importance of diversity and inclusion.

But is it more important than my health and safety? Aren’t they intertwined? On the flip side, is an incident of discrimination really more impactful than someone dying on the workroom floor?

No one would actually say that an issue like diversity and inclusion “is about 15 percent more important” than another issue like health and safety; yet, this is what the matrix says. The prioritization in the matrix represents false choices that don’t actually reflect how these issues are prioritized strategically. Businesses will do what they need to do to achieve diversity and safety objectives together. As fellow sustainability reporting enthusiast Elaine Cohen wrote:

“I don't think we need to mess around with shades of materiality … high materiality, low materiality, average materiality ... What difference do these labels make in terms of management attention, resource allocation, due diligence? All material topics should be assigned the level of resource required to address the need, the relative priority is superfluous to requirements.”

In addition to the illusion of order, the matrix offers the illusion of stability. Even if it were true that diversity and inclusion is 15 percent more important than health and safety at the time of the materiality assessment, would it still be 15 percent more important after a series of safety-related incidents? There is also risk here, as the matrix may invite criticism that the company deprioritized health and safety and could have done more to prevent the incidents. Why open yourself up to this when you know things are always changing in reality?

With change comes uncertainty; and an unbiased appreciation of uncertainty is a cornerstone of rationality. The illusory certainty of the matrix fails this test. A more realistic representation would simply list important issues and disclose how the business managed them through the reporting period.

Start asking why

In the case of Grandma’s Ham, cutting off the ends was originally of use to fit the ham in the oven. Over time, it became a process that was unnecessary and wasteful. By asking “why,” the new couple was able to recognize that the practice was no longer fit-for-purpose.

So, if you’re using a materiality matrix today and it seems a bit forced and artificial — trust your instincts.

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