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A. Comparing the Ford and Daimler Materiality Matrices

WHILETHE3X3 matrix displayed on Ford's website on December 30, 2013 (Figure 6A.1), is similar in structure to its first public effort in 2005, changes are evident. The number of issues in the matrix increased from 34 to 61, issue definitions have become more detailed and elaborate, issue trends from previous materiality analyses are noted, and the matrix has increased interactivity.1 The High Impact, High Concern issues in the top right-hand corner of the matrix are included in the company's printed summary report, the issues in the three adjacent boxes are reported on the web, and those in the remaining five boxes are not covered in detail through any type of reporting. The website has an "interactive" feature whereby the user can click on a box to see which issues it contains.2 The High Impact, High Concern box shows 14 issues in seven categories (Figure 6A.1) and for each issue, the user can scroll down to see a definition/description, comments, trend analysis, and hyperlinks to other pages on Ford's website that provide a more detailed discussion and information on Ford's strategy in relation to the issue.3

Without going into great detail, Ford provides a reasonably clear view of how it developed its 2012/2013 matrix. The company defines "material information" as "that which is of greatest interest to, and which has the

Ford's Materiality Matrix

FIGURE 6A.1 Ford's Materiality Matrix

Source: Ford. Sustainability 2011/12, Our Blueprint for Sustainability, Overview of the Analysis Process, corporate.ford.com/microsites/sustainability-report-2012-13/ blueprint-materiality-analysis, accessed December 2013.

potential to affect the perception of, those stakeholders who wish to make informed decisions and judgments about the Company's commitment to environmental, social and economic progress."4 It also emphasizes, "materiality as used in this Sustainability Report does not share the meaning of the concept for the purposes of financial reporting."5

Ford provides a general description of how issues are identified and ranked for both the company and stakeholder axes with no supporting analytical detail. For the company axis, Ford notes the frequency with which issues are raised in its policies, business strategy, and performance tracking tools, and the Annual Report or Form 10-K. Ford does not explicitly say how it defines "current or potential impact" on the X-axis, but it does note that it considers "possible impacts and importance out to 10 years."6 For the stakeholder dimension, Ford analyzes summaries of stakeholder engagement sessions as well as documents representing broader stakeholder views.7 The company does not explain how this analysis was aggregated into a single stakeholder dimension, but it does note that extra weight was assigned to "investors and multi-stakeholder inputs, as they are the key audiences of our reporting."8

A Ceres Stakeholder Committee that included representatives of nongovernmental organization (NGOs), socially responsible investment organizations, and a supplier company reviewed Ford's analysis. On Ford's website, the

TABLE 6A.1 Ford's High Impact, High Concern Issues

Ford's High Impact, High Concern Issues

company reported the Committee's detailed recommendations and noted what type of data assurance, if any, had been done on each issue.9

Ford's competitor, Daimler, also produced a materiality matrix (Figure 6A.2) for its 2012 "Sustainability Report."10 Like Ford, Daimler updates the matrix every two years and indicates the degree of assurance provided on various issues. Compared to Ford, Daimler reversed the X-axis (determined through stakeholder engagement) and Y-axis (determined through the company's Sustainability Office and Board Sustainability

Daimler's Materiality Matrix

FIGURE 6A.2 Daimler's Materiality Matrix

Source: Daimler. Sustainability Report 2012.

Committee). Rather than using boxes to separate issues, the Daimler matrix only presents issues that score between "High" and "Very high" along each axis.11 Daimler's matrix also contains no interactive features. Both companies are similar in that they use documents and stakeholder engagement to identify and weight issues, although Daimler provides more detail on the process—as on the stakeholder axis, starting with an annual "Daimler Stakeholder Dialogue" held in Stuttgart, Germany, and organized into different working groups by topic (e.g., environmental protection and human rights).12

In its 2011 Sustainability Report, Daimler includes a materiality analysis process chart (Figure 6A.3) showing the process by which their matrix is constructed. Daimler also conducted its first online survey, which "was open

Daimler Materiality Matrix Construction Process

FIGURE 6A.3 Daimler Materiality Matrix Construction Process

Source: Daimler. Sustainability Report 2011.

for all interested stakeholders to participate in online at daimler.com during a four-week period between November 15 and December 14, 2012."13 Some 700 responses were received. Like Ford, Daimler attaches greater weight to some stakeholder groups (e.g., shareholders, customers, suppliers, employees, and NGOs) than others (which are not named).14 However, also like Ford, no analytical detail is provided about how these weightings resulted in issue placement on the Y-axis.

NOTES

1. A review was conducted of Ford's materiality matrices from 2004/2005 to 2012/2013, excluding the 2009/2010 matrix, which was unavailable.

2. Ford updates this analysis every two years.

3. Ford. Sustainability 2011/12, Our Blueprint for Sustainability, Overview of the Analysis Process, corporate.ford.com/microsites/sustainability-report-2012-13/blueprint-materiality-analysis, accessed December 2013.

4. Ibid.

5. This clarification of materiality in the sustainability context was not added until Ford's second materiality matrix was constructed for its 2006/2007 sustainability report. In its 2011/12 Sustainability Report, Ford significantly updated its materiality analysis using the three steps recommended by AccountAbility: (1) identify the material business issues, (2) prioritize these issues, and (3) review the analysis. In the first step, Ford reviewed a variety of company documents (e.g., on policies, business strategy, and performance tracking tools, and the Annual Report and Form 10K); got comments from external stakeholders (customers, communities, investors, and NGOs); reviewed summaries of stakeholder engagement sessions held by the company; and reviewed documents that represented stakeholder views more broadly (e.g., GRI's G3 Guidelines, the Ceres Roadmap to Sustainability, and reports from socially responsible and mainstream investors). Ibid.

6. Ibid.

7. These documents included the Ceres Roadmap for Sustainability (www . ceres. org /resources / reports / ceres - roadmap - to - sustainability -2010/ view, accessed May 2014), reports on consumer trends and attitudes, and reports from socially responsible and mainstream investors. Ibid.

8. Ibid.

9. Ford. Sustainability 2012/13, Our Blueprint for Sustainability, Assurance, corporate .ford, com/microsites/sustainability-report-2 012 -13/review-assurance#fh01, accessed December 2013.

10. Daimler. Sustainability Report 2012, About this report, Materiality matrix, http: / / sustainability. daimler. com/reports/daimler / annual/2013/ nb/English/ 7520/materiality-matrix.html, accessed December 2013.

11. Daimler's first materiality matrix that appeared in its 2011 Sustainability Report had more clearly defined "high," "very high," and "extremely high" categories. Daimler 360, Facts on Sustainability 2011, sustainability .daimler.com/daimler/annual/2013/ nb/English/ pdf/D AI_2 01 l_sustainability_ en.pdf, p 11, accessed December 2013.

12. Daimler. Sustainability Report 2012.

13. Ibid.

14. The Daimler materiality analysis was further advanced and has significantly changed since 2011-12. In order to be even more transparent and precise, the Sustainability Report 2013 illustrates the results of materiality analysis using a table instead of a matrix. At the core of the analysis was an open stakeholder survey with over 800 responses received. In addition, sustainability dialogues to discuss issues from a qualitative perspective were organized in Germany and international markets. In 2013, Daimler's analysis of sustainability topics from the company's point of view reflects the evaluation by Daimler's Board of Management, Sustainability Board and Sustainability Office. For more information see, Daimler. Sustainability Report 2013, sustainability.daimler. com / reports / daimler / annual / 2014 /nb/ English /7520/ materiality - analysis .html, accessed June 2014.

B. Methodology for the Materiality Matrices Review

WE STUDIED THE MATERIALITY matrices of 91 companies as published on their websites, restricting our search for matrices to those that had been published or updated since 2010 in order to provide the most accurate review of current practice. An initial group of 16 companies was identified from an Internet search, which we supplemented with companies identified through four other sources. Framework LLC's 2011 report "The Materiality Bridge" was the source of 10 companies. The 2011 Fronesys report "Materiality Futures" was the source of 14 companies. RobecoSAM provided proprietary data from its Corporate Sustainability Assessment of 2000 firms.1 This is a representative sample of the Standard & Poor's (S&P) Global Broad Market Index since the sample is based on a geographical and sector mix that closely mirrors the S&P broader universe of approximately 10,000 companies. RobecoSAM evaluated these companies for evidence of a materiality process description, a materiality matrix, or a discussion of materiality issues. We identified 42 companies from their study as having materiality matrices and included them in our review. Finally, from the analysis of integrated reports in Chapter 7, we were able to identify an additional nine companies to include in our review.

The materiality matrix was located either separately on the company's website or in one of its reports (annual, sustainability, or integrated). We evaluated both the materiality matrix itself and the surrounding text or links. Our analysis followed three broad categories: stakeholders, matrix construction, and purpose and use.

Stakeholders

- Does the company explain how it identified its stakeholder groups?

- Does the company explain the stakeholder engagement process?

- How many stakeholder groups did the company engage with?

Matrix Construction

- How is the X-axis labeled?

- How is the Y-axis labeled?

- Does either label have a time element (e.g. current/increasing/future)?

- How many issues are included in the materiality matrix?

- Are the issues defined or explained?

- Are the issues themed by color or symbol?

- Does the company alter the size of the issue dot?

- Are arrows used to show the movement of issues over time on the materiality matrix?

- Is the matrix interactive?

- Is the scoring method for issues explained?

- What is the scale used on the axis? (numerical/categorical/none)

Purpose and Use

- Does the company use the matrix for reporting purposes or management purposes? (The text surrounding the materiality matrix was examined for any reference to the matrix as a tool for reporting or as a tool for management purposes. Management purposes could include either stakeholder engagement or resource allocation.)

The list of companies, the source used to identify the company, the year the matrix was published, and a link to the matrix are provided in Table 6B.1.

TABLE 6B.1 Company Materiality Matrices Reviewed

Company Materiality Matrices Reviewed

NOTE

1. Special thanks to Cecile Churet and RobecoSAM for providing these data.

 
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