Business decision making | Materiality assessment vs. hotspot analysis

Implementing a sustainability programme or choosing a new, sustainable business model can be somewhat of a conundrum. Without data, it’s impossible to choose. But if you do a sustainability assessment, you get so much data that you still can’t choose. Materiality assessments and hotspot analyses can help you move forward.

Finding Out What Matters Most For Your Products

Materiality is a concept that tries to capture how important something is. The main motivator for assessing the materiality of a product is to get focus and make it easier to choose a sustainable business model. Usually, sustainability assessments cover a wide range of topics, which a company cannot tackle all at the same time. Materiality assessment is often used in sustainability to set goals, choose between new business models, and determine the most important areas of improvement. In GRI, for instance, a distinction is made between how significant something is and how important something is. You address the most significant and important things first.

Materiality Assessment Based on Stakeholder Dialogue

A materiality assessment is often conducted through stakeholder dialogue. By asking stakeholders what they value, you get an impression of what matters to them. Of course, this is quite a subjective and labor-intensive approach, but it really helps you to understand what your stakeholders consider important. When conducting a materiality assessment, it’s important to define your goal and scope. To put it simply: which stakeholders and what impacts do you involve? And which stakeholders and what impacts do you leave out? Furthermore, you have to be aware of the role your company, business model, product or brand plays for these stakeholders to provide the right context.

Hotspot Analysis Calculates Sustainable Impact

A totally different approach is identifying hotspots through life cycle assessment (LCA). Here, you model and calculate the impact of your products throughout their life cycle, from extracting raw materials to end of life. This gives you a more objective idea about your impacts. You can identify where your impact is biggest – so-called hotspots for improvement – and which stakeholders are involved in this impact. This will give you a more concrete starting point for discussions with relevant stakeholders, as you know what needs to be improved; for that reason, Hotspot Analysis can provide also solid guidance on how to choose a new business model.

Perception or Reality

A materiality assessment definitely engages your stakeholders. Since many of them will be involved in sustainability as well, a materiality assessment will help you create a platform for change. It also gives you an idea of what matters to your stakeholders, so it gives you guidance for what to act upon. However, a materiality assessment is merely based on the perception of what’s important. What it doesn’t do is establish objectively where your product or organization has a significant impact. That’s where life cycle assessment comes in, as it can pinpoint hotspots for improvement. Put simply: life cycle assessment is more reality- and science-based. Furthermore, LCA uses your product or service as a starting point, instead of focusing on the level of the organization. That makes it easier to show where the business value is, as it is directly linked to a particular stage in the product life cycle.

Busting Sustainability Myths

Sustainability is on most companies’ agendas, and it is clear that nobody can tackle all issues. Prioritization through materiality assessment is very much needed. The key issue is how to avoid groupthink and how to focus on the relevant issues, beyond perception. Science-based guidance is fundamental for real sustainable improvement or change, as is choosing the right sustainable business model for your goals. LCA has a 25-year track record of developing a consistent and science-based view. LCA has been often a myth buster, and although some people do not like that, it’s essential in a well-managed company.

Eric Mieras

Managing Director

Sustainability is all about impact. Positive impact makes you meaningful. But first you have to know where you are making an impact and where you can create shared value. That’s where PRé comes in. Pinpointing your impact is an essential starting point for taking joint action with people and organisations in your ecosystem. The combination of sustainability and social business can make a real change in the way we do business.

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