Corporate Sustainability Reporting Directive (CSRD) Double Materiality

Double materiality focuses on two main areas and is fundamental to CSRD compliance:

1. Your organization’s impact on the environment and people (inside-out position)
2. Sustainability-related developments and events that create risks and opportunities for your organization (outside-in position)

Under the CSRD, your organization must disclose its impact on the above and how they could affect your organization going forward.

A double materiality assessment enables you to identify which sustainability aspects are most material to your business and its stakeholders. This assessment:

• Determines the scope of sustainability reporting
• Enables efficient allocation of the resources needed for CSRD compliance
• Provides essential insights for shaping company strategy

Under double materiality, a sustainability topic can be material for an organization when it meets impact materiality and/or financial materiality criteria, hence the use of “double.”

Impact materiality looks at your organization’s actual or potential material, positive or negative impacts on people and the environment over the short, medium and long term. This includes your organization’s full value chain, not just contracted business relationships.

Financial materiality looks at the impacts on your organization. These impacts generate or may generate risks or opportunities that have or could have a material influence on your organization’s cash flow, development, performance, position, cost of capital or access to finance in the short, medium and long term.

Although the CSRD has guidelines, your organization must determine whether a subject is material or not, and choices must be substantiated either way. Assessing which topics are relevant/material to include in sustainability reports, is a crucial early step toward CSRD compliance.

A double materiality assessment’s outcome will determine which reporting standards, disclosures and data points should be included in your organization’s sustainability reports, and which can arguably be left out.

A double materiality-led report and strategy enhance transparency and decision-making, and ensure that time and resources are focused on the topics that matter most to the organization, stakeholders and society.