Real estate organisations seeking to develop a sustainability strategy need to consider the materiality of various factors in their business.

Following on from Prospect’s review of stakeholder engagement, the next step in deciding what to report on is materiality, and this is a key output of stakeholder engagement. Every real estate business has a plethora of topics on which it could report, but not all are necessarily material.

Materiality is the threshold at which topics become important enough to be reported on. That is to say, the economic, environmental or social impact is significant, or they may be issues which substantively shape decisions of stakeholders or influence assessments.

This is set out by the Global Reporting Initiative (GRI), a non-profit organisation that pioneered sustainability reporting, under GRI 101 reporting principles.

According to Sam Crispin, Head of Regional Sustainability and ESG at Savills Asia Pacific, a GRI Certified Sustainability Professional: “Businesses increasingly face mandatory ESG reporting, typically under stock exchange listing rules. However, there is generally limited guidance on what to include in the report. This is where the GRI materiality matrix comes in to help. Determining what is important enough to include and what can be left out is a critical step.”

Furthermore, not all material topics are of equal importance; the emphasis given is determined by their relative priority. Materiality importance is determined by plotting stakeholder interest against significance.

For a commercial building owner, energy use is obviously material. Energy is a significant cost to both the owner and the tenants. However, indoor air quality, for example, may be a higher priority for the tenant than the landlord. Nonetheless this is still important to the landlord because it is a priority for a key stakeholder i.e. the tenant.

In an industrial setting, worker safety may be paramount while in an agricultural setting biodiversity is more important. While biodiversity is critical to life itself, asset owners are more likely to see it as material if their key stakeholders, such as residential tenants, prioritise it.

As well as informing reporting, materiality can also be used to support decision making, including reviewing corporate strategy and goals as well as guiding investment decision making. For example, a materiality assessment can help determine which of the UN’s 17 sustainable development goals are material to an individual business. This enables a business to focus on the most relevant sustainability topics on which to take action.

“Developing an action plan is the means by which sustainability can be embedded into a corporate strategy” adds Crispin.

Further reading:
Savills APAC sustainability services

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Simon Smith