The ESG Materiality Revolution – Are you ready?
The business landscape is rapidly evolving today and ESG reporting has moved far beyond a checkbox exercise and a generic sustainability statement. As we move ahead, companies worldwide are realizing a fundamental truth: Successful ESG strategies are tailored to industry specific material risks & opportunities. There are no one size fits all!
Amidst this, the question posed isn’t whether your organization needs an ESG strategy but whether your organization has the right strategy, relevant to your industry.
What ESG Materiality really means for your business
ESG materiality is the specific environmental, social, and governance factor that significantly impacts a company’s financial performance, risk profile, and long-term value creation specific to industry context. It’s an ESG precision targeting rather than the scattergun approach many organizations still use. Now, this precision is advantageous and necessary – due to the recent advancements. Environmental, social, and governance (ESG) principles are becoming more and more popular around the world, influencing stakeholder expectations, legal frameworks, and business strategies. Businesses’ approaches to ESG initiatives are anticipated to change significantly, maybe focusing more on tangible risks and possibilities.
Why is a generic ESG approach failing today?
Organizations encounter more expenses with the one-size-fits-all ESG approach. If a manufacturing company focuses primarily on diversity metrics and ignores critical supply chain emissions, or if a technology firm emphasizes environmental initiatives while overlooking data privacy concerns, the priorities are misaligned, in addition to wasting resources and exposing companies to significant risks.
The European Union’s Corporate Sustainability Reporting Directive (CSRD) has introduced “double materiality,” a concept for companies to consider the following:
- Ways sustainability issues affect their business, and
- How business is affecting society and environment.
This regulatory shift has exposed the inadequacy of generic ESG approaches across all major markets.
Industry-specific Material Issues: Understanding what matters most in some key industry sectors
Different industries face distinct ESG challenges that require tailored approaches. Understanding these sector-specific priorities is essential for developing effective materiality strategies. Given below is a sample of how this is achieved in some key industry sectors.
The table below is a sample that depicts different Material issues for different industries.
| Industry Sector | Typical Core Material Issues |
| Technology | Data Privacy & Cyber Security, Responsible AI Development, Digital Inclusion, electronic waste management |
| Financial | Climate Risk Assessment, Sustainable Finance |
| Manufacturing | Energy consumption / management, Resource efficiency, worker safety, supply chain sustainability |
| Healthcare & Pharma | Product safety, accessibility & ethical considerations including drug pricing transparency, clinical trial ethics and healthcare access initiatives |
Global Regulatory Landscape & Hidden cost
Our global practice reveals varying ESG requirements across regions. Europe leads through CSRD and European Sustainability Reporting Standards, while North America follows market-driven approaches using frameworks like SASB standards. Asia-Pacific markets show increasing sophistication, with ESG issues now recognised as material to financial performance across the region. In India SEBI has been driving the regulatory needs and BRSR is the reporting format. Failure to recognize industry-specific material ESG issues exposes organizations to serious risks, including fines from the government, negative investment outcomes, operational risks, and harm to their brand.
On the other hand, through resource optimization, risk mitigation, stakeholder confidence, and competitive distinctiveness, businesses that employ industry-specific ESG materiality strategies routinely beat rivals.
Take Action – Transform your ESG Strategy today
The window for proactive ESG materiality implementation is narrowing. Organizations that act now will benefit from competitive advantages, while those who wait will face catch-up costs and missed opportunities.
Ready to transform your ESG approach from generic to strategic?
Contact bhanukumar@avtarcc.com to understand how Avtar’s expertise can blend into your organization process and help in identifying your current ESG Materiality approach
Time for Action is Now
ESG materiality is about more than just following the rules; it’s about creating a sustainable competitive advantage. Companies will thrive if they understand the unique ESG challenges in their industry and take focused, intentional action.
Businesses’ approaches to managing risk and creating profit have fundamentally changed with the move towards industry-specific ESG materiality. Businesses who adopt this shift will become industry leaders, while those that stick to traditional methods will find it difficult to stay up.
Get in touch with us right now to find out how industry-specific ESG materiality may improve the competitiveness, performance, and reputation of your company.
