Materiality in times of crisis: Teva Pharmaceuticals on why you need a dynamic approach
Itamar Schwartz - Director, ESG Reporting & Disclosures
Teva Pharmaceuticals was just beginning to revamp their materiality and ESG risk processes using Datamaran when the COVID-19 crisis began. The lessons that Itamar Schwartz, Teva’s Director of ESG Reporting and Disclosure, and his team learned about materiality in times of crisis got right at the heart of why a dynamic approach to materiality is crucial.
During this workshop, Schwartz showcased how they used Datamaran to ensure a dynamic approach that won executive buy-in. He presented how they captured and presented decision-useful insights with Datamaran, and how they will continue to monitor external risks and opportunities using its data-driven approach.
Materiality: is it the right time?
Materiality assessments traditionally are subject to many of the same disruptions as any other business process. When something like COVID-19 begins to make its presence felt, there is often an instinct among businesses to cut losses and focus on the internal environment. In the case of Teva, Schwartz and his team found themselves in the middle of their materiality process - and responded by looking outward.
“When Teva started our materiality process, COVID-19 was just a blip on the radar. We had decided to undertake a materiality assessment for all the reasons we normally would: to get a better understanding of our stakeholders, to inform our reporting practices, and to guide our ESG strategy. But now, we had a new one: to meet the challenges of this crisis.”
Of course, the emergence of a crisis might encourage just the opposite when it comes to materiality - to hunker down and wait for the crisis to pass. Schwartz’s thought on this is that this “makes sense given what people think they know about materiality assessments. For example, people are having a hard time doing things such as reaching out to stakeholders, since the stakeholders themselves are so disrupted.”
Nevertheless, “undertaking this sort of process during a crisis is hard - but very important to success. As your external environment shifts, your materiality needs to do so as well.”
The results of a poll taken by Donato Calace, Datamaran VP of Accounts and Innovation and Schwartz’s interlocutor, confirmed this. When asked whether or not they intended to perform a materiality assessment this year (i.e. during the crisis), the majority responded in the affirmative.
“We are now in a stage where management is inviting - and expecting - key strategic information from ESG and risk teams. More data means a greater impact on this process and a greater contribution to stakeholders across the value chain.
We have the ability to help with prioritization and impact in a way like never before - and that rests on getting the C-Suite involved and engaged with ESG processes.”
Itamar Schwartz - Director, ESG Reporting & Disclosures
Is my data biased?
“The challenges we faced were two-fold. The first had to do with data. Before the crisis escalated, we had already finalized our stakeholder feedback - which was now already outdated. We needed a more forward-looking approach.”
“We knew what the emerging topics were because we put an emphasis on engaging our investors.” Even given this, there are still key questions that need answers. What is the quality of that data in a crisis? What is its lifespan? Does it actually reflect what’s going on?
In order to answer these questions, Teva adopted a more dynamic approach, which is better able to adjust to changing circumstances and identify biases. “Our newly dynamic approach allowed us to constantly monitor, discover the known unknowns, and gain access to the latest insights.”
This proved to be a far superior option to just putting things on hold once the crisis got into full swing. “With Datamaran we are able to refresh our analysis at the click of a button - enabling us to keep our strategy relevant.”
“The second challenge is that we need to engage management, especially in times of crisis. But in a crisis, we can’t engage them with outdated data and analysis.”
This is where a dynamic approach to materiality becomes even more critical. Instead of relying on the static once a year data that goes in an external report, there is a constant stream of meaningful and up-to-date information.
“This information is incredibly important to shaping a response to a given crisis, and in getting buy-in at the executive and board levels. They need to know what is going on and what is informing our recommendations. Doing so allows them to fulfill their oversight role in the most comprehensive and efficient way possible - improving performance in a structural way.”
Adopting a dynamic materiality process ensures accuracy in the insights, transparency in the process, and a greater level of customization needed to inform C-Suite decision-making.
Dynamic materiality: what does it look like?
It is clear that the traditional materiality process is not fit for purpose, especially in a crisis situation. In practice, technological solutions such as Datamaran are the only way to extract the insights you need in order to continuously monitor emerging risks and opportunities.
Schwartz agreed with this, noting that “what happened in the past when you didn’t have the ability to access data on [the scale enabled by Datamaran] was that you got left behind and had a harder time bringing your insights to executives and board members. The insights and processes enabled here touch so many aspects of the wider business strategy.”
“We are now in a stage where management is inviting - and expecting - key strategic information from ESG and risk teams. More data means a greater impact on this process and a greater contribution to stakeholders across the value chain. We have the ability to help with prioritization and impact in a way like never before - and that rests on getting the C-Suite involved and engaged with ESG processes.”
Concluding the workshop, Calace asked Schwartz to give some practical advice to those preparing to work on their materiality. “When it comes to performing a materiality assessment today, there is a new paradigm. It is critical that you adopt it. We live in a dynamic and rapidly changing reality, and our materiality processes need to reflect that.”
Focusing on engaging investors, ensuring an auditable process, and getting decision-makers on board are the main challenges of this more dynamic world. “Technology driven solutions like Datamaran are the only ones that can rise to that challenge. It is not enough to just check off boxes any more.”
“Being proactive, agile, and informed has never been more important.”
See how Datamaran can help you
Trusted by blue-chip companies, Datamaran is the market leader in external risk management and the only software in the world that supports a data-driven business process for monitoring external risks and opportunities. In house - at any time.
Datamaran enables a fully automated and digitized approach to monitoring emerging and ESG issues, tailored to your business and value chain. It offers real-time analytics on strategic, regulatory and reputational risks to strengthen decision-making - with the power of AI and Big Data.
Fill the form on the right to get your complimentary demo of Datamaran.