The <IR> Framework has seven guiding principles. The fourth guiding principle articulates the importance of determining materiality.
What is materiality?
Materiality is a term that is widely used, but perhaps not completely understood. The focus of this article is on materiality in integrated reporting, although definitions vary in interpretation between integrated and sustainability reports, as well as when applied in the accounting context.
Material matters highlight important information that relates to your company’s strategy, governance, performance
Why is it important?
When you highlight how your company’s material matters link with your strategy, governance, performance
What does the framework say?
“An integrated report should answer the question: How does the organisation determine what matters to include in the integrated report and how are such matters quantified or evaluated?”
How do I determine materiality?
Although there is no prescribing rule regarding the frequency of determining your company’s material matters, the framework recommends revisiting your previously identified material matters with each reporting cycle. Ideally, materiality should be embedded as a continuous process that is performed as part of everyday decision-making by senior management and those charged with governance in your
In identifying material matters, you should consider financial and non-financial information that have, or may have, the potential to impact your
Identify these relevant matters by considering value drivers, stakeholder issues, external and internal factors, and current performance. Evaluate their importance based on
Understanding magnitude of effect in integrated reporting
Not all the matters identified will be considered material. By evaluating the magnitude of effect of a specific issue, considering its known or potential impact on your organisation’s ability to create value, you can filter issues for relevance and importance.
It’s important to apply scientific rigour in determining the magnitude of effect by using both qualitative and quantitative measures.
If you require further guidance on determining your company’s material matters, contact Alchemy Creative Studios: email@example.com
This is the fourth article in a series of seven relating to the <IR> Framework guiding principles. Return to our blog to read more on these principles.