Practical steps to complete a double materiality

You’ve probably already come across the term ‘double materiality’, especially if you are following the evolving EU sustainability framework Corporate Sustainability Reporting Directive (CSRD). But what does it mean, and how does it differ from the traditional materiality assessments that many companies have already completed and are used to? 

In this blog, I’ll break down the concept of double materiality, explain why it matters, and share practical steps to help you carry out an assessment in a way that adds real value to your business. 

What Is Double Materiality? 

Traditional (single) materiality focuses on how sustainability-related risks and opportunities affect your organisation’s performance, including future financial performance. The key to a traditional materiality is to understand the environmental, social, and governance (ESG) priorities from a broad range of stakeholders, including the leadership team, customers, employees and investors. The exercise output should indicate how each of the material ESG topics impact the business, e.g. could this issue impact our profits, balance sheet, or even access to capital? 

A double materiality exercise expands the view and considers two different dimensions:

1. Financial Materiality – how environmental, social, and governance (ESG) topics impact the business; and 

2. Impact Materiality – how the business impacts people, the environment, and society. 

   
   

This broader perspective recognises that companies don't just respond to sustainability risks but also contribute to them. Following the initial review of CSRD, the EU Omnibus retained the requirement for in-scope companies to complete a double materiality.   

It might seem like another burden, and undoubtedly there are associated costs, but it does offer your company insights into hidden risks, untapped opportunities, and helps you to align your values to those of your key stakeholders.   

A Practical Guide to Completing a Double Materiality Assessment 

Whether you’re starting from scratch or building on existing work, here’s a step-by-step approach that works. 

1. Clarify your purpose and scope – are you aligning with a particular framework such as CSRD, GRI, or ISSB? 

2. Identify the potential environmental, social, and governance issues that might be relevant to your business. Using frameworks such as GRI and SASB, as well as sector or industry guidance, is really useful when doing this and common categories will likely include climate change and emissions, resource use and circularity, labour practices and human rights, and governance and ethical business conduct.   

3. Engage with stakeholders, directly or indirectly to understand impacts, priorities and business operations. Remember that you’ll need to do this through two lenses for double materiality; impact (what is the scale and scope of your impacts?) and financial (could this topic impact the company financially or reputationally?). 

4. Combine individual viewpoints to form a collective evaluation. We would always recommend gathering both qualitative and quantitative feedback from stakeholders to reduce subjectivity when doing this. And, for CSRD, keep all documentation as an audit trail and for transparency. 

5. Produce a double materiality matrix where you will plot ESG topics based on their financial impact on the business and the company’s impact on society and the environment. This visual helps to communicate your priorities clearly and supports strategic decision-making. 

   
   

Final Thoughts 

Double materiality might sound technical and yes, it’s becoming a regulatory requirement for many, but it is also a great chance to purposefully engage with your stakeholders and to inform any future ESG-related strategy. It offers clarity on where to focus limited resources, how to tell an authentic ESG story, as well as offer guidance on how to close the gap between your company’s public ESG information and the information that your stakeholders actually want to see.   

If your organisation doesn’t have the capacity or knowledge to tackle this internally, you’re not alone. We have helped many companies to make sense of double materiality and you can read some of our case studies here.   

Get in touch to find out how we can support your journey. 

Authored by Sarah Kirton.