Tag Archive for: double materiality

Materiality is the quality of being relevant or significant, and in terms of business and finance, materiality applies to all items that must be recorded or reported in detail in a business’s financial statements as reasonably likely to impact investors’ decision-making. 

Double materiality: For corporate sustainability reporting, the concept of double materiality applies – it goes beyond that which affects the company and its investors, extending to information on how the firm is impacting society and the environment. 

The EU Corporate Sustainability Reporting Directive (CSRD) mandates a double materiality assessment for around 50,000 reporting companies from 2024 onwards. 

The European Sustainability Reporting Standards (ESRS) explains that a double materiality assessment takes two perspectives, sometimes referred to as an ‘outside in’ / ‘inside out’ approach: 

              (1) an impact perspective “when it pertains to the [entity’s] material actual or potential, positive or negative impacts on people or the environment over the short-, medium- and long-term”; and 

              (2) a financial perspective “if it triggers or could reasonably be expected to trigger material financial effects on the [entity].” 

A double materiality assessment must cover both a business’ own operations as well as upstream and downstream value chain. It must consider the topics and subtopics covered in the 10 ESRS topical standards. These include climate change, pollution, water, biodiversity, circular economy and topics relating to governance and the workforce. 

Detailed reporting on each is required only if the company decides, following a double materiality assessment involving all stakeholders, that it is ‘material’ or relevant under the reporting rules. Where a company determines a topic to not be material, it must explain its rationale in detail. It is still necessary to have a long-term strategy in place to address your organisation’s future impacts and dependencies on nature (and future risks resulting from) biodiversity loss and climate change. 

Read more: https://www.cisl.cam.ac.uk/news/blog/double-materiality-corporate-sustainability-reporting-encompass-societal-and-environmental-impacts 

https://www.charteredaccountants.ie/Accountancy-Ireland/Articles2/Technical/Latest-News/Article-item/the-corporate-sustainability-reporting-directive-getting-to-grips-with-double-materiality