Determining appropriate SPIs for an industry or company is done with materiality tests, which rank items according to their materiality, or importance. Materiality assessments help companies identify key risks and opportunities. Materiality tests also demonstrate that there are some common SPI’s that are important across industries such as climate change management or gender equity, but others are specific to certain industries. For example, customer privacy is a material SPI for the banking industry but much less of a concern in the automobile industry.

On the left is an example of a materiality matrix from a recent Philips Annual Report. The matrix shows how Philips, a multinational healthcare technology company, determines what environmental, social and governance issues are “material”. Notice that the axis measures an issues’ importance internally (the x-axis) and externally (the y-axis). Philips followed a rigorous process to develop this matrix involving conversations with a wide variety of stakeholders (e.g. investors, customers, partners) and analysis of company and trend data. With this information, Philips can determine precise sustainability performance indicators (SPIs).