With the growing focus on sustainable business, the concept of "Double Materiality" is increasingly relevant. We explain where this term comes from and what it means. We delve into the two components of Double Materiality: Impact and Financial Materiality. We also share an inspiring customer story about the benefits of Double Materiality Analysis.
Where does Double Materiality come from?
The European legislation Corporate Sustainability Reporting Directive (CSRD) came into effect this year. It requires European companies to report their sustainability and Environmental, Social and Governance (ESG) strategy and performance. Although CSRD does not directly apply to SMEs yet, small business owners are already indirectly affected. CSRD-compliant companies must report on the activities of their suppliers. As a result, doing business with SMEs who do not operate sustainably becomes unfavourable. In addition, medium-sized companies must also comply with the CSRD in 2026. So if you start working on this now, not only will you have an advantage, but you will also be prepared if your company is later covered by this legislation. Part of CSRD is the Double Materiality Analysis. Despite the technical approach, it is an important concept that can add a significant value for your company. We explain it to you in more detail.
What is Double Materiality?
Double Materiality is a way to acknowledge risks and opportunities for your business and consists of two parts, hence "double”. You determine what is important to your business from two perspectives; Impact Materiality and Financial Materiality (see Figure 1).
Impact Materiality
Every business affects humans and the environment in one way or another. This impact is called Impact Materiality. It can be both positive and negative. Think for example of carbon emissions, water consumption, having an electric cars or offering a training program to employees. This perspective is also known as inside-out.
Financial Materiality
Of course, external factors also affect your business. The financial implications of your company's sustainability risks and opportunities are Financial Materiality. Certain aspects can bring opportunities, but certainly also risks. For example, consider opportunities for development of more sustainable products, physical risks such as damage from flooding and drought, or reputational risks. This is also known as outside-in.
So, these two components make Double Materiality. The 'outside-in' and the 'inside-out' perspective together provide a complete, specific focus on the most important sustainability topics for your company. So with this Double Materiality Analysis, you know exactly where the focus should be in the sustainability journey, taking into account the risks, opportunities and impacts.
Why Double Materiality?
Double Materiality helps you determine which sustainability topics are most relevant to your business. This ensures that you spend your money, time and attention on the issues most important to you. From the Double Materiality Analysis, for example, it becomes clear where opportunities lie to improve or even create positive value as a company. You discover where your company's environmental footprint is greatest and what aspects of climate change or sustainability create social or financial risks for your company. Double Materiality provides clear direction on what sustainability means for your business. It shows you where to focus on in the complicated landscape of sustainability. This way, you can make a difference.
How do you measure Double Materiality?
Determining Double Materiality is done in several steps. First, it is important to identify and possibly include your company's key stakeholders. Understanding who your stakeholders are and what their concerns are will give you a clear picture of what sustainability issues are important to both of you. It is also important to have an overview of potential relevant sustainability issues. By doing so, you ensure that you don't overlook anything relevant. This overview forms the basis for further steps and helps you to make a detailed and comprehensive analysis. You can then define and assess the impacts, risks and opportunities related to these sustainability themes. Doing this will give you a better understanding of how these themes affect your business and stakeholders.
In addition, this helps you prioritise which sustainability themes are most critical to you. Then you look at which themes your Impact Materiality and Financial Materiality is the highest on, you place these in an overview. By assessing both parts of Double Materiality, you get a complete picture of the relevance of each theme. Subsequently, this helps you make decisions about which sustainability themes should receive your focus. Finally, you create an overview of strategic implications. This overview helps you translate the findings from the analysis into concrete strategic actions and plans. Now you can focus on the key sustainability themes with the greatest positive impact on both society and your company.
Double Materiality in action: customer story
At Eevery, we assisted CYAN, a managed IT support provider for purpose-driven organisations, in conducting a Double Materiality Analysis. It gave them key insights after which they further refined their sustainability strategy.
"The output actually made us think differently", said Glyn Cheesman, the IT Security & Operations Director at CYAN.
At first, CYAN's primary focus was on lobbying. However, the Double Materiality Analysis showed that their stakeholders saw this as a low priority. This was an eye-opener for CYAN, Glyn said. Before working together with Eevery, the company focused primarily on environmental issues. While this is an important factor, the Double Materiality Analysis showed that their actual environmental impact was much less than they thought. This outcome allowed them to adjust their strategy and focus on where they could make a real difference. For example, the analysis showed that this is in areas such as cybersecurity, brand protection and the well-being of their employees.
“The actual report made us think a lot differently. We don’t have a direct impact but we can have an indirect impact.”
Furthermore, Cheesman mentioned gender equality as a social challenge. After all, it is difficult for a technology company to build a gender-equal workforce in an industry dominated by men. Although having a direct impact on this appeared difficult for CYAN, they discovered from the analysis that they could contribute indirectly. For example, they support their customers and nonprofit organizations and work with local colleges to encourage more women to consider careers in technology and cybersecurity. The Double Materiality Analysis is a valuable process and helps your company contribute to broader social change.
"The most provoking one for us was the gender equality."
Our platform's Double Materiality Analysis provides direction on the truly relevant topics in which you can make a difference. And, as with CYAN, can lead to new, important insights that take your company's sustainability and ESG aspects to the next level.
"It was a very, very good process to go through."
Double Materiality Analysis can sound like quite a challenge. With a little help, however, it leads to valuable insights. With our sustainability platform we support you in this, this way you can get started with what is really relevant to you. Want to know more about Double Materiality and how we can help you in this process? Contact us now.
