This report highlights the legal concept of materiality as foundational to corporate disclosure in the US, providing the basis for disclosing information used by investors for voting and investment decisions. The report also explores varying definitions of materiality used by different sustainability disclosure frameworks and standard-setters.

The report underscores that the use of the term ‘materiality’ in sustainability disclosure has resulted in significant uncertainty, leading to communication problems among informed participants in the market. A range of proprietary definitions of materiality focused on diverse users, subject matters, and objectives has been adopted by disclosure frameworks and standards.

The report recommends clearly describing the different materiality approaches utilised by sustainability standard-setters and disclosure frameworks and developing a common language and structure to achieve market coherence. The report also indicates that apparent market confusion regarding time horizon and the use of the term ‘enterprise value’ resulted in proposed revisions to the SASB Conceptual Framework.

The report acknowledges that rigorous, transparent, and market-informed standard-setting tools are invaluable in developing a common language regarding the relationship between sustainability factors and enterprise value. It also recognises the need for greater clarity regarding sustainability disclosure standards, their use by companies, and their interpretation by investors.