Tragedy or Statistic? This week I’ve been enjoying learning about how organisations report on sustainability. I’ve also been getting into the topic of ‘materiality’ – how you decide if something is sufficiently ‘relevant and significant’ to be measured (and audited).

I’ve enjoyed it so much that I woke up at 6am (on my day off) and felt compelled to write stuff down. Rambling scribbles in the note book I keep by my bed for such occasions.

First amongst my thought’s was the Joseph Stalin quote (alleged), “a single death is a tragedy, a million deaths are a statistic”. What a bleeding awful thought to wake up to. But the day has got better…

How I understand Materiality (apologies if I cross the boredom threshold). Materiality is a decision made about how relevant or significant an issue is, and could it affect the performance of a company. Things that are ‘material’ would typically get measured and reported in the annual report.

Things that are material also typically get looked at by auditors to understand if they are a ‘true and fair’ reflection of reality. One of the drivers behind all of this is to give stakeholders confidence in the decisions they make about their investments.

Traditionally materiality judgements have been about financial matters. Lots of lovely ‘hard’ numbers where things like ‘percentage of turnover’ can be used to decide if something is material.

This can however, lead to different levels of scrutiny, for example in a billion pound organisation ‘materiality’ might be in the range on millions of pounds. Things below this level might not get the same level of measurement, analysis and reporting as they do in a smaller say 10 million pound organisation.

In a 10 million pound organisation something considered material might be reported on (and audited) while in the billion pound organisation potentially the same thing is ‘lost’ below the materiality threshold.

I’ve heard some people describe a variation of this as ‘hiding things in the rounding errors…’

Two bites of the Materiality Cherry. For sustainability reporting the concept of Double Materiality has been introduced. So, in addition to the financial materiality that has been happening for years, companies will be required to report on a second layer of materiality. This will focus upon the wider impact the organisation has on society and the environment.

Two bites of the materiality cherry… this is where the wider costs and impacts upon wider society might actually become visible – to everyone.

There’s a lot of debate and information about what is developing in this area, so I’m not going to talk about that. What I’m interested in is bias and how the judgements of ‘what is material’ will be made.

One person’s Tragedy is another person’s Statistic. The second thing I scribbled down at 6am on my day off was about the Newsworthiness of Death. Specifically that reporting is ‘biased towards the; simple, immediate and spectacular, which I wrote about a while back.

The post was based upon some research into over 30 years of disasters and the medial coverage they generated. Some of the numbers I drew from it was that a single death on a European Volcano generated the equivalent media coverage as 38,000 deaths from famine / food shortages (typically in the Global South).

There seemed to be a distinct bias towards the;

• simple to understand (a volcano erupting)
• immediate (happing now, in a place I know about) and
• spectacular (see volcano).

The things reported less were;

• difficult to understand (food shortages are likely to be complex),
• developed over time in far way places, and
• definitely not spectacular (from a newsworthiness perspective).

Professional Judgement and Scepticism. The journalists who reported on those disasters over 30 years will have all been professionals. All having a healthy dose of scepticism around what they consider to be ‘newsworthy’.

However, the 1 death on a volcano is equivalent to 38,000 deaths from famine figure does suggest an element of bias. I’d suggest that journalists and other ‘reporters’ are no worse than any other group of professionals, even auditors.

It all leaves me thinking that the world of double materiality and sustainability reporting is going to be a hotly contested space. When is a tragedy a statistic? What makes something ‘material’ especially when lots of it will be in the space of (messy) human impacts?

So, What’s the PONT?

1. Deciding on what is relevant and significant (material) and should be reported on as part sustainability reporting is going to be an interesting space. My statistic might be your tragedy.
2. The reality of reporting on ‘impacts’ may well focus on very contextual information. Things that probably won’t work well when aggregated and averaged out.
3. Expect some turbulence as everyone works out what ‘materiality’ actually looks like for sustainability reporting.