Materiality as a sustainability accounting concept: Three definitional streams and critiques

Abstract

This paper contributes to accountancy literature with a systematic review of how materiality is defined as a sustainability accounting concept. It patterns prior definitional works into three streams (the simple synonym, the shareholder-based, and the stakeholder-based), and then critiques each of them. Compared to the other two streams, the stakeholder-based stream, which has been adopted as the mainstream in sustainability accounting community, is justified as to offer a more holistic and long-term scope on judging materiality of sustainability issues. But the current state of this stakeholder-based stream is problematic in failing to resolve the complexity of the stakeholder environment where business organizations operate. Accordingly, this paper proposes three critical questions: (1) all stakeholders or only primary stakeholders should be taken into account of materiality assessment; (2) how to address the diversity of stakeholder interests in the framework of materiality; and (3) how to apply the materiality concept in informal reporting practices. These critical questions highlight potentials of advancing the sustainability accounting conceptualization of materiality in the track of the stakeholder-based stream.