Materiality Matrixes in Sustainability Reporting: An Empirical Examination
33 Pages Posted: 15 Feb 2018
Date Written: February 4, 2018
Purpose – The purpose of this article is to critically explore the concept of materiality in sustainability reporting. Materiality is a concept adopted from financial accounting practice, in which it is used to differentiate between financially influential activities and those that carry no financial risk. As sustainability reporting is a concept rooted in stakeholder theory, materiality has been adapted to include stakeholders' perspectives in the prioritization process. Today, this is a common practice in most sustainability reports and companies are required to report on their materiality processes as an integral part of the reporting outcome. Design/methodology/approach – In addition to its critical perspective on the current qualitative materiality approach, this article offers a quantitative methodology that was developed through the construction of an empirical model specifically for this purpose. The model consists of two major elements. The first is a preference survey, while the second is a juxtaposition exercise in which the survey results are graphically presented on a two-axis matrix. The model was validated using principal component analysis.
Findings – The findings presented in this article indicate that an empirical quantitative method for materiality is feasible. While there is still much to explore in the field of materiality in order to broaden the applications of this model, it does provide an important contribution as a scholarly starting point.
Social implications – The model proposed is this article has vast social implications mainly in the realm of sustainability reporting. As the article explains, sustainability reporting is currently in a phase of transition from a voluntary approach to a more regulated one. This transitional phase demands the exploration of alternative validated means of prioritizing the issues reported.
Originality/values – The literature review conducted for this study revealed that no published research has attempted to suggest an alternative practical method of materiality decision making. This article’s unique value is that it suggests such a method and presents the methodological reasoning for doing so.
Keywords: corporate social responsibility, sustainability reporting, materiality, accounting, non-financials, stakeholders
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