As a startup, what is the best way to conduct a materiality analysis?

What is a materiality analysis?

A materiality analysis is an approach whereby a company identifies the issues that are most critical to it and its stakeholders.
The widely used Global Reporting Initiative (GRI) provides a helpful, detailed definition of this important concept:

“Those topics that have a direct or indirect impact on an organization’s ability to create, preserve or erode economic (e.g., company financial metrics), environmental and social value for itself, its stakeholders and society at large”
While there are many issues companies could focus on, they should prioritize those issues that both they and their stakeholders have identified as most important (or most “material”); this is why “materialities” are often referred to as simply “priorities.”

As a startup, what is the best way to conduct a materiality analysis?

STEP 1

First, identify from a broad range of both internal and external stakeholders those whose points of view are most important to include in the materiality analysis.

Internal

Employees
Management team
Founders
Board of directors

External

Investors
Partners
Customers
Suppliers
Local communities
Government

STEP 2

Build a list of ESG topics to assess.

Companies can start with the “essential ESG factors” and add others they believe will be most important for their business and stakeholders. This should be a prioritized, manageable list that includes no more than 10–12 issues.
Keep in mind that it is ultimately up to the companies to determine how broadly or narrowly they define the issues they’d like to consider. Below is a select set of issues we believe are most relevant to startups. To develop this short list, we’ve drawn from various ESG, sustainability, and ethical design frameworks such as GRI, SASB, and Ethical OS as well as best practice examples we’ve seen from startups themselves (later in this guide we explore these frameworks and others in more detail).

Environmental	Social	Governance
・Biodiversity impact
・Climate change mitigation
・Environmental product innovation
・Greenhouse gas emissions
・Materials use and waste
・Responsible supply chains
・Water management	・DEI
・Community engagement
・Economic inequality
・Employee well-being and safety
・Employee training and development
・Ethical AI design
・Financial inclusion
・Human rights	・Board composition
・Code of conduct / governance rules
・Data security and privacy
・Ownership share structure

For a longer list of issues to explore, see page 19 of this KfW Capital / BCG report.