Two-Dimensional Materiality Framework

Question 1

What’s Two-Dimensional Materiality Framework?

Answer 1

A tool used to assess and prioritize material ESG issues based on their importance to both stakeholders (external) and the company’s financial performance (internal). It helps companies identify the most significant sustainability issues they should focus on, depending on their relevance to business success and stakeholder concerns.

Question 2

Two Dimension : Financial Impact (Inside-out)

Answer 2

This dimension evaluates how ESG issues affect the company’s financial performance, such as its profitability, risk management and long term value creation.

Example : Climate change might pose financial risks to a company due to regulatory changes, supply chain disruptions or reputational damage.

Question 3

Two Dimension : Stakeholder Impact (Outside-in)

Answer 3

This dimension looks at how ESG issues are viewed by external stakeholders, such as investors, customers, regulators or communities

Example : Labor practices or data privacy might be highly important to stakeholders but may not have an immediate financial impact on the company

Question 4

Context Dependent

Answer 4

The framework is context dependent because the relative importance of ESG issues and how they are assessed across the two dimensions varies based on factors such as the industry, geography, stakeholder priorities and the company’s specific business model