A Guide to ESG Materiality Assessments for Procurement & Supply Chain Pros

Environmental, social and governance (ESG) considerations have moved from optional initiatives to strategic imperatives for enterprises. With pressure from stakeholders to demonstrate responsible business practices and sustainability bona fides, procurement and supply chain have emerged as key drivers of ESG performance. 

And conducting an ESG materiality assessment – a crucial tool for identifying the most significant sustainability impacts and opportunities across your value chain – is a necessary first step. 

Understanding ESG Materiality Assessments 

An ESG materiality assessment is a systematic process that helps organizations prioritize the sustainability issues that matter most to their business and stakeholders. This strategic exercise goes beyond simple risk assessment, serving as a foundation for ESG strategy, reporting and performance improvement. 

Think of materiality as the threshold at which ESG issues become sufficiently important that they should be reported and actively managed. For procurement and supply chain organizations, this means identifying which ESG factors could hinder the company in creating value in the short, medium and long term. 

Conducting an ESG Materiality Assessment 

A successful ESG materiality assessment follows a structured, seven-step approach: 

1. Design Project Plan 

Create a comprehensive project plan outlining scope, key activities and governance framework to ensure clear roles and responsibilities throughout the assessment process. 

2. Benchmark Performance 

Analyze current ESG performance against industry peers, best practices and relevant standards to establish a baseline and identify potential areas for improvement. 

3. Identify Stakeholders 

Partner with key decision-makers to identify and categorize survey participants into two main groups: internal stakeholders (employees, management) and external stakeholders (suppliers, customers, investors).

4. Identify Topics 

Leverage maturity assessment results and stakeholder interviews to determine high-priority ESG topics with significant potential for strategic influence on the business. 

5. Develop & Launch Survey 

Create and distribute tailored surveys for both stakeholder groups, offering flexible participation options ranging from in-depth interviews to simplified scoring systems based on organizational priorities.

6. Report Results 

Compile and analyze survey data to produce a comprehensive materiality report that highlights high-relevance, high-impact issues requiring strategic attention. 

7. Embed Sustainability 

Develop a strategic implementation plan that incorporates both process improvements and technology solutions to drive progress across identified material issues in each ESG category. 

Next Steps: Taking Action on ESG Issues 

Once an organization identifies the material ESG issues with the highest impact, it should evaluate those issues at the supplier, category and organizational level to drive strategy development. 

At the supplier level, strategies should focus on how key suppliers are performing against material sustainability topics, determine which suppliers will be most impacted by the sustainability transformation and develop supplier-specific strategies for jointly working toward sustainability goals. 

Example: 

Developing KPIs that tie financial incentives to supplier’s renewable energy usage in facilities, databases, etc.

Having a clear strategy for identifying the categories that support organizational goals, based on which categories are most impacted by materiality issues, is essential in defining and achieving sustainable procurement goals. 

Example: 

Prioritizing travel partners with renewable energy goals and that prioritizes staff diversity. 

At the organizational level, companies should examine and transform their processes to embed sustainability into sourcing decisions and track progress across categories and suppliers. 

Example: 

In the strategic sourcing process, including questions on material issues in RFPs and evaluating bids based on ESG factors. 

ESG Materiality Assessments Are Not Just Compliance Exercises 

For procurement and supply chain professionals, understanding how to conduct an effective materiality assessment – and what to do with the results – is crucial for driving meaningful ESG improvements across the value chain. 

These assessments are strategic tools that help enterprises focus sustainability efforts where they matter most.

Success in this area requires a combination of robust processes, advanced technology solutions, and deep expertise in sustainability and supply chain management. As sustainability continues to grow more important, enterprises that master ESG materiality assessments will be better positioned to create value, manage risks and meet stakeholder expectations. 

Looking to enhance your organization's ESG performance? Click here to learn how GEP can help you develop and implement effective materiality assessments and sustainability strategies.