Double Materiality:
How to get started in 5 simple steps
The new Corporate Sustainability Reporting Directive (CSRD) adopted by the EU Commission will mandate over 50,000 companies in Europe to conduct a double materiality assessment.
Download this free ebook to learn what double materiality is, and how to get started to integrate that approach in your materiality assessment process.
Whether you have already started to adopt a double materiality approach for your annual reporting, or this is the first time you hear about it, this ebook is for you.
Adopted by the EU Commission in April 2021, the new Corporate Sustainability Reporting Directive proposal (CSRD) is setting common European reporting rules, requiring more than 50,000 companies to report sustainability information according to mandatory EU sustainability reporting standards and to conduct a double materiality assessment.
Despite the name, a double materiality assessment does not require to conduct two separate assessments or draw two separate matrices. It requires gathering evidence, assessing, and explaining why issues are material from the “impact” (stakeholders) perspective and/or from the “financial” perspective. But where to start?
Download this free ebook to learn the key elements of the new EU Sustainability Reporting Standards, and how to conduct a double materiality assessment in 5 simple steps.
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"Clarification of the notion of “Double” and “Dynamic” materiality is a major step forward for both ESG reporting and ESG investing.
An ESG integration process driven by double materiality allows to differentiate between ESG issues which are currently “externalities” vs. the ones which are currently affecting the financial results of a company. As such, every user of ESG data can design an investment process which best suits their own objectives."
What will I find in this ebook?
In this guidance, you will find everything you need to:
- Understand the key aspects of these policy developments, and how requirements are changing;
- Adopt a double materiality approach in your strategic planning, risk management, board oversight, and annual reporting processes;
- Set up a structured, systematic, data-driven and regular double materiality assessment process; and
- Establish the needed governance structures to ensure oversight on the materiality assessment process.
Frequently asked question (FAQs)
Click on each question to learn more.
First introduced by the EU Commission as part of the 2019 Non-Binding Guidelines on Non-Financial Reporting Update (NFRD), double materiality speaks to the fact that risks and opportunities can be material from both a financial and an impact perspective. In other words, issues or information that are material from an environmental and social point of view can have financial consequences at present or in the future.
With the adoption of the Corporate Sustainability Reporting Directive (CSRD) in 2021, more than 50,000 companies (all large companies and all companies listed on regulated markets except listed micro-enterprises) will be required to report sustainability information according to mandatory EU sustainability reporting standards, and to conduct a double materiality assessment. EFRAG is expected to release the first draft of the standard on double materiality assessment by Q2 2022.
The concept of dynamic materiality was popularized in 2020 by the World Economic Forum, in a paper titled “Embracing the new age of materiality”. In this paper, materiality is described as a dynamic process, based on the consideration that what appears financially immaterial today can become business-critical tomorrow.
Importantly, double materiality and dynamic materiality are interrelated concepts acknowledging different aspects of the same process; while the former describes more accurately the impacts “on” and “of” a company (as described above), the latter articulates the pathway an issue follows to become financially material, highlighting the triggers and catalysts that eventually determine financial impacts.
An inadequate or uninformed materiality assessment approach exposes companies to different risks including: financial, reputational, and legal. The only defense against these risks is to ensure that your materiality assessment is flexible, time-variant, and context-driven.
That's where a data-driven approach can help: allowing companies to be proactive in relation to materiality and doing it in an efficient manner, without relying purely on subjective judgements, nor compromising on its quality. Technology also provides corporate leaders the ability to identify and react to emerging risks in a timely manner, and dynamically monitor their evolution over time.
About Datamaran
Datamaran is the only software analytics platform in the world that identifies and monitors external risks, including ESG. Trusted by blue-chip companies and top tier partners, it brings a data-driven business process for external risk and materiality analysis. In house - at any time.
Datamaran’s patented and award-winning technology offers real-time analytics on strategic, regulatory and reputational risks, specific to your business and value chain.
The only software in the world for external risk management.
