THE CURRENT STATE OF MATERIALITY MATRICES

To better understand how companies currently construct and use materiality matrices, we examined those of 91 companies (see Appendix 6B for our methodology and the list of companies reviewed). We define a materiality matrix as a diagram having two axes, populated with named issues, where their location on the matrix (or scoring) is evident.19 Based on this analysis, we examined current practice in terms of five aspects of materiality matrix construction and use: stakeholder identification and engagement, dimension definition and label, issue identification and description, issue scoring, and interactivity.

Stakeholder Identification and Engagement

We observed substantial variation in how stakeholder identification and engagement is done and the degree to which each is explained. Only 12% of our sample explains the identification process to any extent, yet 8 7% do so for the stakeholder engagement process (albeit with substantially varying degrees of detail).20 In cases where it was possible to ascertain the number of stakeholder groups (63%), the average was 7.9. The most common stakeholder groups named were customers, communities, employees, suppliers, investors, media, government, and nongovernmental organizations (NGOs). Most companies name the high-level stakeholder groups, but few identify the specific stakeholders that comprise them. An exception, Volkswagen, provides an additional "Stakeholder dialogues" report as part of its 2012 sustainability report, which names the individual stakeholder, the stakeholder cluster, and the geographical context.21 University of St. Gallen is part of the "Science" stakeholder group and the European Union geography, whereas the Federation of German Industries, a domestic geographical group, is part of the "Politics and Government Agencies" stakeholder group.

Stakeholder identification methods are limited and, across our sample, no consistent method was used. Dow established a Sustainable External Advisory Council, which "provides for open dialogue between Dow's business leaders and independent external thought leaders" and whose purpose is to help identify stakeholders who "can drive, block or shape the discourse around sustainability."22 Carlsberg Group, on the other hand, uses GRI G3 guidelines to identify a prioritized list of eight external and internal stakeholder groups.23 While stakeholder engagement methods primarily include interviews, surveys, discussion groups, and media scanning, the depth with which companies pursue such engagement is uneven. Some merely conduct informal discussions or surveys. Others create thorough processes or consult with outside groups to devise methods for engagement. Staples Australia, for example, sent out a questionnaire that was "completed by over 400 stakeholders including associates, customers, suppliers, sustainability professionals and community stakeholders," asking them "which sustainability issues were the most important for us to address."24 Daiwa House, Japan's largest homebuilder, disaggregated its six stakeholder groups and ordered the priority of the top five issues for each group.25 Although Daiwa House did not explain the process of aggregating the stakeholder priorities in creating the matrix, its disaggregation allows the viewer to compare the level of issue importance across groups—a level of transparency rarely seen. Kepco, the largest electric utility in South Korea, provides a chart showing its different stakeholder groups, its responsibility to these groups, and the channels it uses to engage with them (Figure 6.1).26