Double Materiality
The Next Frontier in ESG
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What is a Double Materiality Assessment?
The term “double materiality” refers to how social and environmental information disclosed by a company can be material both in terms of its implications for the organisation’s financial value, as well as their external impact on society and the environment.
‘Materiality’, in this sense, is referring to the issues, both financial and sustainability-related, that are most important for an organisation to address. In other words, companies should not only consider how their decisions will affect their bottom line, but also how they will affect society and the environment.
Double materiality assessments has gained increasing attention in recent years as organisations’ impacts on the world around them are subject to new levels of consumer and regulatory scrutiny.
Double Materiality Solutions
Regulation around sustainability reporting is getting tighter. In the EU, the Corporate Sustainability Reporting Directive (CSRD), with the concept of Double Materiality at its heart, requires around 50,000 companies to report non-financial information in a consistent and comparable manner, aligned to the EU Taxonomy.
These changes present an important opportunity to bring greater rigour and credibility to disclosure and action on impacts, opportunities, and risks. But keeping a focus on that value in the face of increasingly complex and mandatory reporting processes can be a challenge.
Our Approach to Double Materiality
ESG Issues Scoping – Assessing organisational context to identify long-list of ESG issues
Stakeholder Engagement – Objective: Shortlisting issues and collecting stakeholder input
Scoring, Assessment and Report – Synthesising and prioritising issues to develop final-list and materiality report
Training and Guidance – Preparing internal stakeholders to conduct future assessments aligning to best practice
Discover how we can support businesses to understand materiality through an impact, financial and double materiality lens, with a focus on building capacity in the organisation to support integrated sustainability management.
Double Materiality Guide
Regulation around sustainability reporting is getting tighter. How can you meet the emerging regulatory requirements on double materiality, but also make sure you use the process to make your organisation more sustainable?
Double Materiality and CSRD
Organisations will be required to follow a double materiality process as part of the EU Corporate Sustainability Reporting Directive (CSRD). The CSRD double materiality guidelines were developed by the European Financial Reporting Advisory Group (EFRAG) as the technical advisor to the European Commission developing draft EU Sustainability Reporting Standards (ESRS).
Watch our webinar with Gemma Sánchez Danés from the EFRAG leadership team to learn more about the EFRAG double materiality guidelines, how to effectively tackle the challenges and seize the opportunities presented by double materiality.
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Case Studies
Why Double Materiality is Important
In sustainability reporting, assessing materiality has evolved over time in response to stakeholders wanting greater transparency and accountability from companies about their non-financial impact and performance.
Manage Risks
It can help companies to identify and manage risks. For example, a company that is not taking into account the potential impact of climate change on its business is at risk of losing out to competitors that are.
Build Trust
Double materiality can help companies to build trust with stakeholders. Investors, customers, employees, and the public are increasingly demanding that companies be transparent about their sustainability performance. By embracing double materiality, companies can demonstrate their commitment to sustainability and build trust with these key stakeholders.
Sieze Opportunities
Double materiality can help companies to identify and seize opportunities. For example, a company that is investing in sustainability initiatives may be able to attract new customers and partners, or reduce its costs.
Double Materiality in Sustainability Reporting
With mandatory sustainability regulation continually tightening, we’re expecting to see double materiality become business
as usual for all organisations, regardless of size.
| Title | Voluntary / Mandatory | Materiality Approach |
|---|---|---|
| US Securities and Exchange Commission (SEC): Climate Change Disclosure | Mandatory | Single – Financial Materiality |
| Corporate Sustainability Reporting Directive | Mandatory | Double Materiality |
| International Sustainability Standards Board Standards (ISSB) – IFRS Sustainability Standards | Jurisdictional authorities and regulators can determine whether to mandate the use of the ISSB’s standards in their territory. | Single – Financial Materiality |
| Global Reporting Initiative | Voluntary | Single – Financial Materiality |
| Task Force on Nature Related Financial Disclosures | Voluntary | Double Materiality |
Related Double Materiality Insights
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