Corporate social responsibility is about managing risks and being accountable for them. The double materiality offers you an important tool in acting accordingly. In doing so, it underpins corporate sustainability reporting, as required by the Corporate Sustainability Reporting Directive (CSRD). For many businesses, the technicality of the term only speaks to the imagination. This blog unpacks the principle and importance of double materiality for you, as an entrepreneur.
What is materiality?
Materiality is cited as part of European legislation – most recently in CSRD – that requires companies with more than 250 employees and/or 40 million euros in revenue annually to report both plans and performance on sustainability. In practical terms, materiality asks companies which components they consider most relevant. Thus, materiality must amount to a logical allocation of resources, based on the importance of the topic at stake.
The materiality analysis is double in the sense that it weighs two components, namely the impact on the business and the impact of the business. The first principle involves identifying the most significant risks to the companies. This is also called “outside-in”, referring to external risks that can or already do affect internal business operations. You can think here of reputation risks or Co2 levies. The second principle refers to any impact the company has on sustainability, or “inside-out, in a negative or positive sense. Examples include damage caused to biodiversity or positive contributions to solving the nitrogen crisis.
The principle of double materiality thus allows companies to mark important topics. These topics are selected by considering, among other things, probability, scale, recoverability and social relevance. The results of this double materiality test provide a clear starting point for writing corporate sustainability policies. This also brings us to the benefits of this double materiality.
The most obvious advantage of double materiality is that it allows resources to be focused on the most crucial issues. After all, the analysis brings a complete picture of the situation for the company and the environment. In this way, companies can operate as effectively as possible. In addition, the principle brings one clear structure to the formulation of sustainability strategy and related reporting. Finally, by making sustainability negotiable among stakeholders, double materiality contributes to extra support for this theme.
Double materiality of your business
As always, the success of the principle hinges on its implementation. So it is worth mentioning that double materiality analysis is not easy, especially when the company lacks the manpower, knowledge and expertise. This results in organisations in many cases doing more than is reported. Therefore, it is important to acknowledge this to then look at what a company needs to understand and, more importantly, apply the abstractness of the principle.
Eevery’s goal is to support companies in the process of becoming more sustainable. The double materiality analysis is an important part of this. That is why we have built this materiality into our sustainability tool, to give you, entrepreneurial results in an easy but reliable way.
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