Friday, September 20, 2013

Materiality – Asset Valuation for Long-Term Viability

Thanks for coming back. On Tuesday, I promised you more information on materiality; so today’s post is all about materiality, risk, and sustainability. The concept of materiality, originating from accounting, is becoming increasingly important in Corporate Responsibility. According to the Global Reporting Initiative, “Material topics for a reporting organization should include those topics that have a direct or indirect impact on an organization’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large."

Until recently, environmental and social factors were rarely thought of as “material”; only economic information was considered. However, as the effects of climate change, increased consumption, and population growth put strain on current systems and resources, these aspects are becoming key factors in accurately assessing the true value of an organization. By addressing sustainability in materiality, future risks can be identified and action can be taken to provide long-term viability.

This ties in with the video and post from Tuesday on Understanding Material Flows in Your Operation because, in order to assess the materiality of your operations, you must fully understand the inputs and outputs of your organization. After listing these variables, it is important to place ranking on the necessity of the input to your operations, as well as the risks/opportunities involved with securing these inputs in future markets. By classifying your inputs in this manner, you can begin to strategically shift areas of focus to the most critical facets of your operations.

Performing a materiality analysis of your organization benefits you, your stakeholders, and ultimately society, as you will use this information to alter business strategies and advance your practices to ensure sustained performance.

 – Tad Radzinski, PE, LEED AP, SFP

Links:

The Sustainability Accounting Standards Board’s Materiality Map

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