Responsible Business strategy: Double materiality assessments
What is a double materiality assessment and why should a retail business do one?
In the world of ESG, double materiality assessment is a concept used when reporting on sustainability of an organisation. It is an extension of the traditional financial materiality concept and takes into account both the financial and non-financial impacts of a business’s activities. In a double materiality assessment, a business evaluates its impact on the environment, society, and the economy, as well as the significance of these impacts on the business itself.
Irwin Mitchell, the legal and financial advisory business, has recently published its Responsible Business strategy and as part of the development process undertook a double materiality assessment.
Here Kate Fergusson, Irwin Mitchell’s Head of Responsible Business, offers her insights…
When we evolved the firm’s Responsible Business strategy last year, one thing was very clear – the need to focus in and consider what issues were material to Irwin Mitchell and its stakeholders, what would help us grow our business in a sustainable, responsible, and inclusive way.
For a firm with a proud heritage of supporting its communities and those most in need, there is an instinctive urge to try to do as much as we can, to address as many environmental and societal issues as possible. Whilst we knew we were not alone in that ambition; we also understood that we needed to be more strategic if we wanted to make a meaningful difference.
The decision to undertake a double materiality assessment was a logical next step in our aspiration to become a leading responsible business. It enabled us to pause and reflect upon our areas of focus – both in terms of the most material environmental, social and governance risks and opportunities we face as a business, but also which environmental and societal issues could be most positively impacted by our skills and resources.
After several months of working closely with a brilliant team of consultants at Corporate Citizenship, part of SLR Consulting, and engaging over 100 stakeholders, including our clients, colleagues, senior leadership, future recruits, and community partners in the consultation, we have a set of results which make us far better placed to address the challenges ahead.
If you are thinking of going down this route, here are some insights you might find useful:
- At the start of the process, we worked with consultants to identify 16 key material issues which we would ask stakeholders to rank according to their importance to Irwin Mitchell. What became clear was that all 16 issues were hugely important. The process was then very much about prioritising and identifying where we could make the greatest impact – it was not about discounting any of the issues as being immaterial or irrelevant.
- Our stakeholder groups have different perspectives on what is most material to Irwin Mitchell. Breaking the results down in this way is enabling us to identify any potential tensions and address them through education and awareness. It also highlights where there is an overwhelming consensus. Given that we work in a sector which is very much focussed on people, it was unsurprising that our stakeholders identified talent attraction and retention and diversity and inclusion as two of our most material issues.
- We couldn’t have done this alone. Working with consultants added a layer of objectivity and credibility but is also meant that they could challenge and encourage us to think more ambitiously about what being a leading responsible business means.
- Some of the issues we felt were critical didn’t rank as highly as we thought they would: supply chain management and climate change were two of the surprises. We took some time to understand why that might be and concluded that these were likely to be emerging issues – ones to watch which would increase in materiality in the coming months and years. We also realised that visibility of the issues was vitally important: their lower placing in the matrix didn’t absolve us of the responsibility to address them.
- Environmental, social and governance issues don’t fit neatly into separate boxes. For example, the concept of a just transition evidences the important overlay between diversity, equity and inclusion, and climate change. There is intersectionality between the 16 material issues we identified and a need to consider the impact of each from a multi-stakeholder perspective.
This process has been invaluable for our business, specifically, it has enabled us to engage our stakeholders in our responsible business journey, generating new ideas and opportunities for collaboration. This is of course only the start: the hard work of refining our strategy to reflect the outcomes of the materiality assessment begins now and we are optimistic about where that will take us.
For more information about Irwin Mitchell’s Responsible Business journey, please take a look at our 2023 Responsible Business Report.