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The 101 on double materiality

In recent years, the term “double materiality” has become increasingly important in the realm of sustainability. It represents a shift in how companies assess their impact and report on their activities. But it also creates a lot of confusion. So, what exactly is double materiality, and why is it crucial for a sustainable future?

For some, double materiality means only adding sustainability impacts to the mix. Even official definitions may read like that at the first pass. The ESRD states that “Double materiality is the union (in mathematical terms, i.e., union of two sets, not intersection) of impact materiality and financial materiality. A sustainability matter meets therefore the criteria of double materiality if it is material from either the impact perspective or the financial perspective or both perspectives.”

But double materiality is a concept that expands even further. Double materiality also implies understanding how an organization impacts the world at the same time than how the world impacts the organization, on all dimensions (financial and sustainable). And why is it that what seems to be a subtle difference is important? Because it allows companies to think beyond the obvious topics that our minds go to when hearing the acronym ESG. While the obvious topics are obvious because many times, they are quite material for most organizations (think climate change), it is important not to miss other material things.

So how can you make sure your materiality assessment is truly grasping a double materiality approach? Here are 5 tips:

  1. Engage Diverse Stakeholders. Involve a broad range of stakeholders, including investors, your entire team, your entire board, customers, suppliers, NGOs, and community representatives. This helps capture different perspectives and ensures that all relevant issues are considered.
  2. Conduct Thorough Research. Perform extensive research on industry trends, regulatory changes, and emerging sustainability issues. This includes reviewing reports from industry associations and academic institutions.
  3. Use Established Frameworks. Review all well-established frameworks and guidelines such as GRI, SASB, TCFD, and ISSB to identify potential material topics.
  4. Benchmark Against Peers. Analyze materiality assessments and sustainability reports from industry peers and leaders. This can provide insights into common material topics and emerging issues that might be relevant to your company.
  5. Transparent Communication. Communicate the materiality assessment process and findings transparently to stakeholders. Invite feedback to validate the identified material topics and ensure that no critical issues have been overlooked.

 

Double materiality represents a transformative approach to corporate sustainability. By adopting this dual perspective, companies can enhance their risk management, stakeholder engagement, regulatory compliance, and overall sustainability performance. As global challenges such as climate change, social inequality, and resource scarcity continue to evolve, the adoption of double materiality will be essential for companies committed to driving positive, long-lasting change for both their business and society. As a side benefit, it will very likely position them to comply with future regulations and investor demands.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

 

Best,

Marimar

CEO, Miranda ESG

Contacts at Miranda Partners

Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com

Marimar Torreblanca
Miranda-ESG
marimar.torreblanca@miranda-partners.com

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