Tools

• What is the Materiality Screening Tool?

  The Materiality Screening Tool (MST) was developed by SBTN to help users carry out a first screening of what types of environmental impact are potentially materially relevant to their sector and their company’s activities, as part of Step 1a of the SBTN guidance. The tool allows users to:

  1) explore a subset of the materiality dataset by selecting specific International Standard Industrial Classification of All Economic Activities (ISIC) groups and production processes relevant to their direct operations and upstream activities;

  2) consult or copy the full materiality dataset with ratings into a separate Excel sheet to explore these further; and

  3) if necessary, translate other classifications (e.g., Statistical Classification of Economic Activities in the European Community (NACE), Global Industry Classification Standard (GICS)) into ISIC.

  MST is accessible on the resources section of SBTN’s website.

• Do I have to use the Materiality Screening Tool?

  Yes. The tool was designed to help companies quickly screen their whole business for material contributions toward the different issues covered by SBTN. It also standardizes the initial screening process across companies.

• How was the Materiality Screening Tool developed and where does the data come from?

  The MST is an interactive app that includes several key components:

  • a “ReadMe” introductory page, which gives an overview of each of the associated tabs and links to an Excel spreadsheet that includes the methodology behind the tool and the raw data for both direct operations and upstream activities;
  • a tab where a company may select or search for ISIC groups and production processes associated with its direct operations; once the categor(y)(ies) are selected, the tool will output material pressure categories for the SBTN process;
  • a tab for upstream operations similar to the direct operations tab described above;
  • a tab with summaries of ISIC groups across production processes, which may be used as a quick first pass to identify material pressure categories;
  • a tab describing ISIC categories and a “Crosswalk” tab to translate NACE and GICS categories to ISIC ones.

  The full materiality dataset can be found in the Excel spreadsheet linked in the online tool. The dataset provides the basis for the scores that companies can access and explore in the other tabs of the tool. Scores for direct operations were calculated by mapping the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) database of impact scores to different economic activity categories (ISIC groups and production processes of the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC). This dataset was developed by the ENCORE alliance, using a literature review and expert input. For direct operations, ratings were calculated by mapping the ENCORE database (see the methodology here) to a company’s ISIC classes and production processes and further analyzed by the SBTN team to inform a threshold indicating whether a company is required to continue analyzing and quantifying its impacts.

  ENCORE is managed by the ENCORE partners. More information and webinars to help you understand the background methodology are available here: https://encore.naturalcapital.finance/en.

  The interpretation of the pressure scores shown in the interactive tool and summary sheet was designed by the SBTN team based on the statistical distribution of scores. The upstream activity sheet was created using a multi-regional input output (MRIO) model (EXIOBASE), with analysis led by the Stockholm Environment Institute in York and guidance from SBTN. We used MRIO data to connect direct operations to upstream sectors based on economic flows and generate scores for upstream supply chains to the Tier 1 level.

• Materiality Screening Tool: Do I need to select the ISIC categories for my upstream and direct operations?

  You need to select the ISIC group and associated production processes for direct operations in the online tool. For upstream operations, you will need to input your associated direct operations ISIC group. The tool will then filter all associated upstream activities based on sectoral averages. You should then select any relevant upstream activities based on the ones provided. Companies will then be able to review the upstream tab to review material pressures for the upstream activities.

• Materiality Screening Tool: What do I do when the results don’t look right to me?

  We do not expect the materiality scores of the tool to match perfectly for every company, as they are based on global, sector-average data, and do not vary by geography or other relevant factors. To ensure that these scores are as accurate to the company’s operations as possible, there is a refinement step that companies can go through before moving on to the Step 1b Value Chain Assessment. This part of the method is expected to be most relevant for companies whose activities are not well-described by the categories used in the tool (e.g., when the production processes do not match the company’s actual activities). Companies will need to provide company-specific information in the validation process to explain their refinement of scores when contradicting a score that requires the further analysis of an economic activity and pressure. Please see Step 1a, Task 5 of the method for more information.

• What is the High Impact Commodity List?

  The High Impact Commodity List (HICL) was developed primarily to simplify upstream assessment for complex companies and to ensure that companies include commodities known to be most responsible for driving deforestation, nutrient pollution, and other impacts on nature in their assessments.

  The HICL can be used by companies within the V1.1 methods to:

  1) prioritize an upstream assessment in a way that is environmentally robust in Step 1; and

  2) focus upstream traceability efforts for commodities and upstream activities without location information (Step 2/3).

  HICL is accessible on the resources section of SBTN’s website.

Task 1. Define your organizational boundary

• What are the acceptable approaches for defining our company’s organizational boundary? What criteria can we use to confirm we have set a broad enough boundary?

  You may use one of three approaches to define the organizational boundary: financial, operational, or equity control.

  In the financial control approach, you account for the impacts associated with activities and operations that you can direct (e.g., you have the right to the majority of benefits or retain financial risks and rewards). In the operational control approach, you account for activities and operations where you can implement operating policies. In the equity control approach, you account for a percentage of the impacts, equal to the share of equity or economic interest you hold in the operations.

  If you have previously set climate targets with the Science Based Targets initiative (SBTi) or have defined your organizational boundary for other sustainability initiatives that align with the Greenhouse Gas Protocol (GHGP), we encourage you to use the same approach for SBTN. As a reference, you can consult the GHGP’s guidance on how to define your organizational boundary.

• Which baseline years do we use to determine our organizational boundary? How do we deal with recent or expected changes in company scope, e.g., divestments or acquisitions? Do companies have time to add them or should they be immediately accounted for? How do we deal with variations in procurement or other upstream activities?

  Within their organizational boundary, companies should include all corporate activities that fall under their ownership or control (as defined by GHGP consolidation approaches) for the year in which they are completing the assessment, or the year prior depending on data availability. Activities in scope can include those from completed mergers or acquisitions, as well as joint ventures at that date. Planned mergers, acquisitions, or divestments should be included in the next SBTN assessment cycle (every five years).

  Consistent with current best practice, companies must include the broadest possible coverage of their corporate activities as they start using the SBTN methods. This scope is expected to narrow as companies advance through the five steps of the process for setting science-based targets and begin applying target-setting methods and taking action.

  Activities included for the materiality screening (Step 1a) and value chain assessment (Step 1b) should include all those conducted in a given year and that are recent and representative of companies’ current operations and broader social and environmental conditions. Recency and representativeness can be thought of within the span of the last five years, as companies will be required to update their assessments and targets every five years.

  For the upstream segment, only goods classified as production inputs are in scope in this version (1.1) of the SBTN methods. Companies must provide a consolidated list of all goods procured as production inputs for all their locations within each business operation during the five years preceding their submission, as well as their procurement volumes (measured in tonnage or an equivalent metric). Production inputs associated with discontinued economic activities should be excluded from this list. When procurement volumes are periodic or highly variable over time, evidence on company activities can be provided based on the average inputs over the five-year assessment cycle.

• How do we consider offices/infrastructure holdings in Step 1a and Step 1b?

  Offices and infrastructure holdings must be included in Step 1a if defined as being within the organizational boundary. They may be excluded from the pressure assessment in Step 1b if found to be immaterial based on the screening tool used and additional data provided by the company to refine those screening results.

Task 2. Identify your direct operations and upstream activities

• Can we exclude activities from Step 1a if we think they are highly likely to be excluded from Step 1b?

  If an activity falls within your company’s organizational boundary, you must screen it in Step 1a. If the activity is not in fact material after this assessment, then you will not have to assess and quantify it in Step 1b. This exclusion will then apply to all locations or sites where this is the only activity occurring.

• Can we exclude packaging from our upstream impact assessment?

  Packaging is considered a production input and should be included in the value chain assessment.

Task 3. Identify high-impact commodities in your activities

• Should we consider animal fat from waste connected to animal production, and therefore include animal fat as a high-impact commodity?

  As a general rule, companies are expected to include high-impact commodities (HICs) and their derivatives, regardless of whether these have been transformed or appear in trace amounts in a given product.

  In the case of animal fat, if it is derived from a commodity listed on the High Impact Commodity List (HICL), companies should include both the fat as the product they are actually purchasing and the animal it comes from in the materiality screening.

  Through the process of back calculation, companies would use the volume or spend purchased on fat to determine the volume or spend on the original animal (e.g., cows or pigs) to then use in further analysis.

  In Task 7, companies must identify the location of the most impactful stage in the value chain of their HICs (for each pressure category defined as material in Step 1a for that commodity). In this case it would be either the processing of the fat, or more likely the impact of the animal from which it is derived.

  Note that where the company is procuring from an aggregator across animals and locations, this will need additional traceability efforts by the company. This will be picked up in the Step 2 methods when delineating upstream target boundaries (this would go into upstream target boundary B if the company did not have subnational data traceability).

Task 4. Screen for materiality

• Can economic activities that account for a very small percentage of the total be excluded from the materiality analysis? For example, activities that account for less than 1% of total sales, or commodities that account for less than 1% of total procurement.

  If an activity falls within your company’s organizational boundary, you must screen it in Step 1a. If the activity is not in fact material after this assessment, then you will not have to assess and quantify it in Step 1b. This exclusion will then apply to all locations or sites at which this activity is occurring.

• How do we determine the right ISIC codes for using the SBTN Materiality Screening Tool?

  Companies may need to use the tabs “ISIC Detail” or “Crosswalk ISIC-NACE-GICS” to select the correct activity classification. Companies can also use the detailed description of the ISIC Rev.4 from the United Nations.

  When using the Rev.4, companies may find it helpful to use the document search function to look for keywords that describe their activities, e.g., leather, steel, transportation, mining, or manufacturing. Note that there might be more than one relevant ISIC code for a particular part of your business, e.g., for recycled paper manufacturing there are separate codes for the collection, treatment, and manufacturing of recycled waste, so you will need to check which parts of the value chain are covered by your company. For some ISIC classes, the MST gives ratings for different production processes used within the class (e.g., rain-fed vs. irrigated crops). If you are not sure which process to select, the first step may be to contact the operations personnel in that part of the business to request their input. You may also find it useful to ask your company secretariat or finance teams for guidance, as they may have come across similar business classifications before.

• Why are some pressure categories optional to include in the Step 1a screening?

  Many companies and other actors participating in the SBTN development process have emphasized that tackling 12 different environmental issue areas at once poses a substantial challenge, even for companies that have been working on sustainability for a long time. To reduce the overall effort needed to complete the V1.1 Step 1 methods, SBTN currently only requires that companies screen for the pressures for which there are methods available (land use and land use change, water use, climate change, water pollution, and soil pollution) to address these with targets in Step 3. The scope of the Step 3 methods will expand overtime. For example, the V1.1 Ocean methodology is due for release in 2025.

  Companies may include other pressures in their screening if they think these are material for their company and will need to be managed through targets in the future.