A fuzzy analytic hierarchy process method to support materiality assessment in sustainability reporting

The purpose of materiality assessment in sustainability reporting is to identify, select and prioritize the issues that have the most significance to companies and their stakeholders. Reporting on the material aspects of sustainability provides greater transparency for the stakeholders and achieves greater accountability for the company. To date, few studies have inquired into quantitative methods to support materiality assessment in sustainability reporting, and these have not addressed the issues of subjectivity or of completeness in the reporting. To respond to this gap in the literature we propose a ‘fuzzy analytic hierarchy process’ method. This method facilitates sustainability reporting by means of a structured materiality analysis based on the Global Reporting Initiative Guidelines. The outcome of the proposed method is a prioritization of sustainability aspects and indicators, which offers a guide to companies in identifying the appropriate content for preparation of their reports. Each GRI aspect and indicator can be reported with a level of accuracy corresponding to its level of importance (materiality). In addition, the method allows the company managers to identify a threshold of completeness below which sustainability aspects and indicators can be reported in only summary form, as not being substantially material. The ex-ante choice of a level of completeness is particularly important for companies with limited resources to dedicate to reporting activities, as is typical for small and medium enterprises. As they address the reporting task, companies can use the proposed method to assess materiality, thus enhancing the credibility and accountability of the sustainability reports while containing costs in time and resources. The paper illustrates the method through a step-by-step application to a medium-sized Italian company active in the water technology sector.