Does the concept of Dynamic Materiality affect your organization? What steps you have to take as an entrepreneur to achieve and represent the correct parameters in your ESG Report. Let us discuss:
Environmental, Social and Governance (ESG) standards require organizations to achieve growth in a sustainable way. Even companies have to report about the same on yearly basis. The issue of Dynamic Materiality is not new. Businesses have been taking care of the same since the beginning but this term was not recognized back then. It was first introduced by the World Economic Forum (WEF) in early 2020.
Following are some major elements of this theory;
- The material affects of factors affecting profitability as well as sustainability of the organization may change from time to time. For example- in pre pandemic era, companies need not take insurance of employees for pandemic related diseases but now it has become need of the hour.
- The factors themselves also change. For example- carbon footprint was not as big issue a decade back as it is now.
- The scale of affect also changes with time. For example- non-payment of CSR expenditure as per law did not attract that much penalty previously as it attracts today.
As dynamism is the key to success and growth so the same affect ESG compliances as well. Now, ESG benchmarks focus more on Committee and Board Structure, Customer Satisfaction, Data Privacy etc.
