Understanding and prioritizing the corporate social responsibility (CSR) issues that matter to our business and our stakeholders (materiality assessment) enables us to address the right issues and report on them effectively. It also allows us to focus our resources, evolve our strategy and tailor our reporting to align with the interests and needs of our business and our stakeholders.
We recognize there are varying definitions of materiality—such as those from the Global Reporting Initiative or Sustainability Accounting Standards Board (SASB), and many ways to conduct a materiality assessment. In 2016, we revisited our prior materiality assessment process to evolve our strategy and stakeholder engagement. We sought to find a hybrid between the varying definitions that exist and created a broad and non-traditional definition and methodology. Our methodology focused on social and environmental issues and our definition considered the impact to our business and the degree of impact/influence we can have on the issue. This assessment leveraged an internal process, which consisted of three key actions:
action 1: identification
Target conducted a robust review of existing issues analysis, previous stakeholder engagement results and research into new trends, competitor practices and global standards to generate a list of more than 400 potentially material environmental, economic and social issues. Sources included:
Rating/Ranking Reports (six total), including the Dow Jones Sustainability Index and CDP information request
ESG Guidance Documents and Research Reports (six total), authored by organizations such as Ceres and SASB
Materiality assessments completed by competitor or CSR leadership companies (11 total)
We then removed duplicate issues and combined any issues that, while slightly different in wording or definition, were similar at the core, to arrive at a list of 61 potentially material issues.
action 2: assessment
We classified these 61 issues into 16 topics and ultimately four focus areas: Products, Team, Communities and Planet. This allowed us to have a more manageable list of topics to discuss, without losing the granularity of key issues.
Better services and experiences
Diverse workforce and inclusive workplace
Skills for a lifetime
Resilient and vibrant communities
Climate and energy
We then assessed each of the 61 issues on two dimensions: 1), importance to Target’s business, and 2), Target’s ability to impact/influence the issue in question. While the “importance to the business” dimension is standard in most materiality assessments, the “ability to impact/influence” dimension is less common. To determine “importance to business,” we have traditionally relied on qualitative inputs such as interviews with subject matter experts. This year, we paired that qualitative information with internal quantitative data, such as financials and sourcing volumes by country, to elevate issues that could have the most significant impacts on Target’s business.
To determine “ability to impact/influence,” we relied on qualitative inputs such as interviews with internal subject matter experts and external research to understand environmental and social issues by country around the world. We paired this information against three dimensions of our supply chain—raw materials, manufacturing and retail operations—to understand the level of impact we could potentially have on an issue.
We organized the resulting issues according to the axes shown below in fig. 1. This helped us to prioritize our resources and focus on the issues that matter most to our business (categorized in the top right quadrant), but we may also take action on the issues in the other quadrants.
AXES WITH FOUR QUADRANTS
ACROSS THE TOP: ability to impact/influence
ALONG THE SIDE: importance to the business
TOP LEFT QUADRANT: low business impact, high degree of control
BOTTOM LEFT QUADRANT: low business impact, low degree of control
TOP RIGHT QUADRANT: high business impact, high degree of control
BOTTOM RIGHT QUADRANT: high business impact, low degree of control
action 3: validation
To validate our process and test our internal methodology, we engaged BSR (Business for Social Responsibility), a global nonprofit organization that works with its network of more than 250 member companies and other partners to build a just and sustainable world. BSR conducted interviews on Target’s behalf with a variety of external stakeholders and corporate social responsibility experts. The purpose was to determine what concerns exist with our process or methodology.
This process highlighted three primary concerns:
Limited stakeholder engagement early in the process compared to previous approaches to materiality assessment
Need for more granularity in issue definitions and a clear translation from materiality to strategy
Need for further discussion around the context and motivation for Target’s decision to pilot a new approach to materiality that better facilitates stakeholder engagement and the evolution of the materiality practice
We take our commitment to continuous improvement seriously. We plan to take action on this feedback as part of our ongoing effort to ensure the materiality assessment remains relevant in light of changes in our business and socioeconomic and environmental trends. We will keep the materiality assessment under regular review, and aim to be as responsive as possible to stakeholder needs as critical issues arise.
In 2017, we will engage internal stakeholders to define and translate priority issues into our CSR approach. In addition, we plan to evolve our external stakeholder engagement approach to ensure materiality is part of the conversation throughout the year.