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Understanding Materiality Assessments
Understanding Double Materiality Assessments
Understanding Double Materiality Assessments
Andrew Lingley avatar
Written by Andrew Lingley
Updated over a week ago

Before we dive into the Double Materiality Assessment process, let's understand its core components: Impact Materiality and Financial Materiality.

Impact Materiality refers to how your business impacts the environment and society, also called an ‘Inside out’ approach. Learn more about Impact Materiality Assessments.

Financial Materiality focuses on how ESG issues could impact your business financially and is described as an ‘Outside In’ approach. Learn more about Financial Materiality Assessments.

When these two aspects are combined, they form what is known as a Double Materiality Assessment. This holistic approach is increasingly recognised as best practice and is mandated in various regulations, like the Corporate Sustainability Reporting Directive (CSRD) in Europe.

A Double Materiality Assessment is a comprehensive approach to understanding both the impact of your business on society and the environment and the financial implications of these impacts. With this assessment, you can determine and rank all sustainability impacts, financial risks, and opportunities associated with ESG issues. This process aligns these elements with the priorities and views of your stakeholders, enabling the development of a comprehensive strategy that integrates seamlessly into your core operations and business strategy.

Why do a Double Materiality Assessment?

A Double Materiality Assessment is recommended over just doing a Financial Materiality Assessment or an Impact Materiality Assessment, as it provides a full picture of ESG risks and opportunities, considering both the risks the company faces and the risks it poses to the environment and society. It builds more stakeholder trust, aids in regulatory compliance, improves your strategic planning, risk management, execution, and results.

By adopting a double materiality approach, you gain a deeper understanding of the interconnectedness between your business and the broader ESG landscape. This enhanced understanding will empower you to prioritize ESG initiatives that not only mitigate risks and enhance your brand value but also create shared value for your stakeholders and contribute to a more sustainable world. That’s why it’s increasingly being required by regulators and recommended by experts.

What are the outcomes of a Double Materiality Assessment?

Once you have completed the full Double Materiality Assessment process, you’ll end up with a double materiality matrix that delivers a clear visual representation of your results, enabling you to confidently prioritise the ESG issues that stand out as materially significant due to their combined impact and financial implications.

Engage your key internal and external stakeholders to further enrich the assessment process by reviewing this final list of issues and gather their valuable insights. The platform seamlessly captures and incorporates their feedback to finalise the double materiality results and produce a high-value report that can be shared with regulators, auditors, and stakeholders.

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