Double Materiality Assessment


A double materiality assessment evaluates how sustainability issues affect a business (financial materiality or "outside-in") and how the business impacts society and the environment (impact materiality or "inside-out"). This approach integrates stakeholder perspectives and strategic business impacts to provide a holistic view of sustainability priorities.

  • Financial Materiality (Outside-in):

            Considers how environmental, social, and governance (ESG) factors impact the company's financial performance, risks, and opportunities.

  • Impact Materiality (Inside-out):

            Evaluates the company's positive and negative effects on people, communities, and the environment.

Procedures to Conduct a Double Materiality Assessment:

Step 1: Scoping and Planning

  • Define objectives and purpose clearly.
  • Identify internal stakeholders (e.g., senior management, ESG teams) and external stakeholders (e.g., customers, regulators, investors, communities).
  • Set boundaries for assessment (organizational, geographic, value chain).

Step 2: Identify Sustainability Topics

  • Gather a comprehensive list of potential ESG topics using international frameworks (GRI, SASB, ISSB, SDGs etc).
  • Benchmark with peer organizations and industry.

Step 3: Stakeholder Engagement

  • Conduct surveys, interviews, and workshops with key internal and external stakeholders.
  • Capture stakeholder perceptions on the importance of various ESG topics, both from a financial and impact perspective.

Step 4: Assessment and Prioritization

  • Financial Materiality Assessment:
    • Analyze ESG topics for their potential to influence financial performance (revenues, costs, risks, capital availability).
    • Utilize internal financial data, market trends, investor reports, and scenario analyses.
  • Impact Materiality Assessment:
    • Evaluate and rank ESG topics based on significance of the company’s impacts on the environment and society.
    • Consider severity, scale, likelihood, and stakeholder perspectives.

Step 5: Validation and Reporting

  • Review and validate results with senior management and key stakeholders.
  • Document clearly in sustainability reporting, aligned with standards (e.g., GRI, ISSB, ESRS).
  • Explain the rationale behind selected material issues and their strategic implications.

Step 6: Integration into Strategy

  • Use results to inform ESG strategy, target-setting, and resource allocation.
  • Integrate double materiality findings into risk management processes and strategic planning.

Step 7: Ongoing Review

  • Regularly update the assessment to capture changing stakeholder expectations, evolving risks, and market dynamics.

Benefits of Double Materiality:

  • Enhanced stakeholder trust and transparency.
  • Compliance with emerging regulatory standards (EU Corporate Sustainability Reporting Directive - CSRD).