Materiality – identifying our material issues

Definitions and background

NZ Post has been using integrated reporting since 2013, giving a fully formed enterprise view of how value is created across our six threads. Materiality is central to integrated thinking and reporting, with its multi-stakeholder approach identifying the impact on our ability to create value over time. This approach enables us to address the most important issues in our strategic plans and communicate how we are mitigating risks and leveraging opportunities. The results of this research are presented to our executive team and Board and our plans are assessed against the issues identified.

What is a material issue?

We define a material issue as a risk or opportunity as determined by our stakeholders (internal and external) that could significantly impact our business performance over the medium or long term.

How we approached materiality in FY21

In FY21, we made further changes to how we approach materiality, moving away from the once-a-year three-step process of desktop research, interviews, and a survey to shorter more frequent check-ins with our stakeholders.

Six years of research has shown us that we have not significantly shifted the perception of how we are managing our top material issues. After reviewing the results of the 2020 research, we decided to focus most of our efforts and communication on the top eight material issues as ranked by our stakeholders, with the aim that we improve their confidence in how we are addressing these issues. To understand whether our choice of focus areas and the communication of what we are doing is hitting the mark, we agreed to conduct a series of shorter check-ins over a 24-month period and to take corrective action as appropriate. At the end of the 24 months, we will consider the options for ongoing research including resuming the three-step (desktop, interview and survey) process we have previously used.

Our primary goal in adapting the materiality research is to ensure that we are conducting it in such a way that we obtain honest insights from key stakeholders that are useful to our strategic planning and decision making.

Note that our focus in 2021 on the top eight issues does not mean that we are neglecting to take action on the remaining ten material issues. We have activities happening around all 18 issues but have prioritised effort based on their ranking by stakeholders.

In June, we completed the first check-in, surveying internal stakeholders only. We asked how confident people are in how NZ Post manages risks and opportunities associated with each of the top nine material issues. (We chose to include data security and cyber safety as its prominence had risen in the months preceding the survey.) Although not a like-for-like comparison with our 2020 research, it does provide an indication of sentiment. We will repeat this check-in survey at the beginning of next year, with some improvements to better capture insights. We will also extend the scope to include external stakeholders and some in-depth interviews. With two check ins complete, we will be able to see if there are any trends developing.

Overall, the June results were positive, with respondents feeling more confident in how we are managing four of the top nine issues – commercial mindset, technology and digitisation, customer experience, and brand and reputation. Confidence remained the same for three issues – workforce health, safety and wellbeing; dynamic business model, and data security and cyber safety. Stakeholders felt slightly less confident about how we are managing competitor threat and disruption and future-ready workforce.

Based on the results of this first check-in, we feel that the actions we are taking and how we are communicating them is largely on the right track.

Our materiality process and research findings for FY20

2020 was the 6th year of reviewing NZ Post’s material issues. We did this by engaging internal and external stakeholders in an independent comprehensive piece of research that has provided us with some incredibly valuable insights.

How we identify material issues

In FY20, we made some changes to how we had conducted the research building on the best-practice methodology used over the preceding 5 years. We retained a three-step process including desktop research, interviews, and a survey with one change, we switched the order of the survey and interview stages, choosing to interview our stakeholders before surveying them.

Completing the qualitative interviews with stakeholders first to understand how the issues may have changed, identify any new issues and understand if our definitions were correct enabled these insights to be incorporated into the survey questionnaire. This resulted in the definitions of many material issues being updated for the purpose of simplicity, and one issue, availability of capital, was considered to more appropriately be described as commercial mindset, reflecting the need to improve profitability, use of resources and prioritisation of opportunities. The list of all issues and their refined definitions can be found below.

A change was also made to the survey questions, we asked stakeholders to classify issues from NZ Post’s perspective into three categories: still important but part of business as usual; growing relevance and immediacy; highly current, front of mind and urgent. This replaced a previous question asking stakeholders to identify their top three issues as this is covered in the ratings question. We believe the outcome has given us a more nuanced view of the issues and how we may choose to address them.

Stakeholders surveyed

A total of 23 interviews were completed across internal and external stakeholder groups. Each participant discussed two topics of their choice and were allocated another one or two topics to get coverage across all 18 materiality issues. A total of 70 surveys were also completed across both internal and external groups. The response was up on our 2019 research, with greater participation from suppliers and partners and industry and business associations. A list of our stakeholder groups and the issues of most importance to each group can be found below.

The impact of surveying during COVID

We were mindful that we were completing this research during a pandemic. The interviews took place in 2020 when New Zealand was experiencing the first wave of COVID lockdowns. Most interviews were conducted during Alert Level 1, with two interviews being conducted during Alert Level 3. The survey period ran when most of New Zealand was at Alert Level 2, while Auckland moved from Alert Level 3 to 2.5.

We specifically asked stakeholders about the impact of COVID on their responses and found that it both exposed and exacerbated issues – heightening risks, increasing the urgency of some issues and accelerating change and opportunities, specifically the relative immediacy of issues around commercialisation, technology, and customer experience. All 18 issues now sit within a completely different context, which strongly influences their meaning and how they are perceived, with all of them rated as more important this year compared with previous years.

Overarching insights

Commercial mindset came through as the number one issue internally and in the combined averages. Whilst this change may be the influence of COVID and the looming recession, it is nevertheless front of mind for our people. External stakeholders rated this less highly (11th) possibly because they have less exposure to the internal dynamics of NZ Post. The reframing of this issue (from availability of capital) may also have contributed to the increase in its importance. This is the first time since 2016 that there has been a change to the top five issues with data security and cyber safety pushed down to 9th from 4th in 2019.

The other top issues remain constant (apart from commercial mindset), with customer experience, technology and digitisation, workforce health, safety and wellbeing and dynamic business model all remaining in the top five. Customer experience is still the number one issue for our external stakeholders.

Performance against the issues is also largely aligned between internal and external stakeholders although NZ Post rates itself more harshly than do external stakeholders for its management of the issues. Communication continues to be highlighted as an area for improvement, with one stakeholder stating, “Completing this survey has made me realise I have a very limited understanding of what NZ Post is actually doing to address these issues.”

Other points of note

COVID-19 highlighted challenges for us as we were tested and found wanting. NZ Post is about keeping the country going but also about operating a sustainable, commercial business model. Our ability to prioritise, execute and partner successfully have been highlighted as important skills and capability throughout a number of issues, whether this be commercial mindset, technology and digitisation, customer experience, data security and cyber safety or wider demographic and workforce change. Innovation, agility, and future thinking are required more than ever. Leadership and a more proactive tone on social (and environmental) responsibility is expected from us.

Our external stakeholders particularly focused on social issues and the wider impact NZ Post can have and how broader positive impact will come back around to deliver value to the organisation. The issues are strongly interconnected – it is important to look at them as a system. Delivering well in one area will also elevate other related issues, while lagging in one issue will also have a broader impact.

Materiality Matrix FY20

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Material issues with descriptions – in order of priority

Our stakeholders

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