Companies often have reams of information about the dozens of different aspects of their water stewardship efforts. How do they decide what’s worth reporting?
The majority of companies, particularly in water-intensive sectors, publish water-related performance data. Reporting on water not only provides information and transparency, but also improves internal understanding of water issues within an organization. The question is, how does a company choose which topics are sufficiently relevant to their business? In other words, what pieces of information are material?
The concept of materiality is commonly used in accounting to set a threshold at which missing or incorrect information on a financial statement is significant enough to affect the bottom line.
This idea can also be applied to water risks and opportunities. The CEO Water Mandate’s Corporate Water Disclosure Guidelines defines materiality in the context of sustainability reporting as “a threshold at which certain sustainability topics become relevant enough for a company to report on.”
The Guidelines lay out three key steps to determining the materiality of water topics to a business.
1) Write a list of relevant water-related topics
This is the brainstorm phase. First, decide on scope. What facilities are going to be included? What river basins are they in? Next, assess to what extent water is an applicable topic within that scope – consider things like risk exposure and likelihood of negatively impacting the basin. From there, write a list of topics that may be relevant to report (examples include impacts on WASH access and opportunities for water policy engagement).
2) Prioritize the relevant water-related topics
Organize and assign relative importance to the items listed in step 1. There are two major considerations in this process. First, assess the risks, opportunities, and impacts of each topic. Second, determine if and how each topic may influence stakeholder decisions. Using this information, the list can be pared down and prioritized, resulting in the initial set of material water topics that a company will report on.
3) Validate the outcomes of the materiality assessment
This is the gut-check phase. Does the list of material topics chosen provide a reasonable and balanced representation of the company’s water-related risks, opportunities, and impacts?
Using the three-step materiality assessment process will help to select the topics that should be included in a company’s water reporting. For more information on how to determine which topics your company should be reporting on, read our detailed disclosure guidelines.
After deciding what water topics are material to your company or facility, the next step is explaining and justifying those decisions to stakeholders. Stay tuned next week to learn how to communicate the materiality assessment process.