Environmental Social and Governance Materiality Assessment: A Research Agenda

ABSTRACT Environmental, social, and governance (ESG) requirements are increasingly gaining attention worldwide, prompting regulators in many countries to set mandatory ESG disclosure policies. However, there are major assertions that these policies will likely bring about unintended consequences, as some organizations may disclose deceptive information (greenwashing) while others might even ignore material ESG issues to comply with the policies. These issues raise concerns regarding organizational commitments to conducting proper materiality assessments. Subsequently, such concerns represent an emerging research stream in ESG policy development and literature. This article seeks to further the discussions by scientifically mapping the body of knowledge on ESG materiality assessment. Specifically, the review integrates co‐citation, keyword co‐occurrence, and thematic analyses to describe the past and present state of ESG materiality literature. Consequently, four major clusters of articles that researchers and policymakers rely on for ESG materiality philosophical background were identified, i.e., (1) The need for materiality assessment in corporate sustainability, (2) Materiality assessment disclosures for stakeholders, (3) Stakeholder activism for corporate legitimacy, and (4) Integrated reporting frameworks and institutional mechanisms. In contrast, the analysis uncovers five major clusters explaining the present state of ESG materiality assessment. The study further presents insightful research gaps with future research and policy implications. Therefore, the review contributes to contextualizing ESG materiality assessment by stressing the need to deeply understand the underlying constructs explaining the double materiality principle in the mandatory ESG disclosure policy.