Materiality

Materiality in ESG (Environmental, Social, and Governance) refers to the prioritisation of issues that are most significant to a company’s performance and to the environment and society it operates in.

It answers two core questions:

1. What ESG issues could affect this business financially, reputationally, or operationally?

2. What ESG issues is this business significantly impacting in the world around it?

This isn’t just a reporting concept, it's a strategic compass. It separates what’s important from what’s just interesting.

Materiality brings focus.

• It helps companies prioritise resources and align ESG with business strategy.

• It helps investors and regulators understand risks and opportunities.

• It empowers citizens, consumers, and civil society to hold businesses accountable for what actually matters — not just what looks good in a report.

For Africa, materiality is essential to avoid misaligned priorities or imported agendas. It helps businesses and governments stay locally grounded and globally competitive.

Three Dimensions of Materiality

1. Financial Materiality

Focuses on ESG risks that could materially affect the business's revenue, costs, valuation, or operations.

Example: A company heavily reliant on agriculture is financially exposed to climate risks like droughts or flooding. That makes climate resilience a material issue.

2. Impact Materiality

Focuses on the company’s external impacts on people, planet, and systems, regardless of whether it hits the financials (yet).

Example: A manufacturing firm that pollutes a water source may not feel the financial effects immediately, but the social and ecological damage is very real.

3. Double Materiality

Combines both financial and impact perspectives, recognizing that ESG isn’t one-sided.

It asks:

“What affects us?” and “What do we affect?”

The European Union is actively integrating this into law. In Africa, this approach can be especially powerful for long-term inclusive development.

How is Materiality Determined?

Most credible ESG strategies start with a Materiality Assessment, this is a structured process to identify, rank, and visualize material issues.

Steps typically include:

• Stakeholder engagement: surveys, interviews, town halls

• Risk analysis: emerging ESG risks across regions, sectors, and supply chains

• Industry benchmarking: comparing with peers and global standards

• Internal prioritization: leadership alignment and cross-functional discussions

The result is often a Materiality Matrix; a visual that plots ESG issues by importance to stakeholders vs. impact on the business.

Common Material ESG Issues by Sector (Africa Focus)

The following table reinforces the idea that materiality is sector-specific, context-sensitive, and never one-size-fits-all.

The thing, is without materiality, ESG becomes a box-ticking exercise. With it, ESG becomes a strategic driver of resilience, trust, and transformation.

At Green Quotient, we advocate for African-led ESG thinking and materiality is where that begins.
We’ll continue helping organizations ask the right questions, prioritize real impact, and reject performative sustainability.