The history of the concept dates back to 1867**, when the English Court introduced the term “material”, by referring to “relevant, not negligible fact” that emerged in the judgement of the false accounting case concerning the Central Railways of Venezuela. The English Common Law could indeed be considered as the cradle of the concept of materiality!
The concept of materiality has been brought into the public spotlight in the sustainability context by the Global Reporting Initiative (GRI) in their G3 Guidelines in 2006 – the cornerstone of the GRI Sustainability Reporting Framework.
It has quickly become essential for stakeholder engagement exercises and topic mapping while appearing as a keyword in consultant pitches. Sustainability professionals around the world clambered to understand the term and the process, outlined by standard setters like the GRI and the International Integrated Reporting Council (IIRC).
As a concept borrowed from the accounting and auditing domain, materiality represented the perfect idea to foster the integration of non-financial issues in the mainstream business thinking and decision making. It sounds professional, financially relevant, familiar to investors and auditors.
* For the purpose of this analysis the terms Environmental, Social, and Governance (ESG), Sustainability or Non-Financial are used interchangeably.
** Holmes, W. (1972). Materiality--Through the looking glass. Journal of Accountancy (pre-1986), 133(000002), 44.
