What is Triple Materiality?
“Is your lecture going to cover triple materiality?” I was asked at an event last night. “Yikes!” I thought, “I literally have no idea what that is….”
Frantically googling on the way into Imperial College this morning, I was relieved to discover my slides did actually cover it. I just hadn’t realised it was called triple materiality. After all, we’ve had single, double, dynamic and nested materiality - what’s possibly left to know about prioritising the issues that matter when it comes to sustainable business?
Triple Materiality: What Is It?
Materiality is about measuring, managing and disclosing the issues that matter for an organisation. It’s used for strategic planning, issues management, target setting, corporate reporting and increasingly in the field of ESG and sustainable finance.
But what lens do we use to prioritise those issues? Why we are doing it, who’s asking, when we are looking at (timeframe) and now where (place) have always mattered. But triple materiality sheds a new light on the importance of this last category: where, or the context.
As a reminder:
Single (financial) materiality considers whether an issue could impact on the organisation. It’s most commonly used as a lens for determining enterprise value creation.
Double materiality involves additionally considering how the organisation impacts on people and planet. This wider stakeholder lens scoops up issues irrespective of their affect on enterprise value today. (In reality, this overlaps with financial materiality and the issues are rarely clear cut)
Triple Materiality adds the lens of context. We can’t understand the importance of a topic - whether biodiversity loss or worker welfare - unless we consider the setting: where it takes place. Crucially, we can’t judge whether performance on an issue is sufficient unless we also look at things like scientific thresholds, planetary boundaries and societal norms. Bill Baue at R3.0 has a helpful post about this here.
In short, triple materiality says that can’t decide if an issue matters unless we view impacts and dependencies in context.
Applying Triple Materiality
The challenge for any multinational is that the context varies. Triple materiality means that different issues matter more or less depending on where we are, and where impacts and dependencies are felt. Biodiversity might be critical for one product’s supply chain but freshwater use could matter much more somewhere else. Likewise, social issues like diversity or forced labour have complex geographic patterns. We need global standards, science and norms but we can’t escape the context. The scientific context is vital to judging what’s ‘good enough’ when it comes to corporate performance. Place matters.
Some companies I’ve worked with have already tried to produce ‘local’ materiality matrices. Perhaps in the future we’ll see more of the idea that who is asking and where we are determines the relative importance of the issues.
Dynamic materiality reminds us that the issues change over time. Today’s big impacts after often tomorrow’s financially material ones. Triple materiality adds the crucial insight that we need to be think about space. We can’t make sense of corporate sustainability unless we understand context.