Focus on ESG: what is double materiality?

By: Trademagazin editor Date: 2024. 07. 02. 11:57

The widespread adoption of sustainability measures and ESG policies is creating new challenges for companies. Under the Sustainability Act (Act 108 of 2023) and the EU’s Corporate Sustainability Reporting Directive (CSRD) – which was adopted in December – large companies will be required to conduct a double materiality assessment.

This article is available for reading in Trade magazin 2024/6-7

The concept of double materiality is an essential element of ESG strategies. This approach brings together impact and financial aspects, ensuring sustainable business operations.

Financial materiality: ESG factors can have financial effects that can affect the performance and stability of a company. Important considerations include financial performance, investor relevance, industry relevance and regulatory environment. Impact materiality: according to the ISSB and ESRS standards, an event or issue has an impact materiality if it has a significant effect on the environment or society. There are direct and indirect impacts and future risks and opportunities must also be considered.

What are the benefits of double materiality? In developing and implementing an ESG strategy, the principle of double materiality makes it possible to: 1. identify business opportunities and risks; 2. support strategic decisions; 3. create a sustainable business model; 4. strengthen stakeholder relations. “It is important to look at ESG or sustainability strategy and materiality assessment as a forward-looking process, as it has a positive long-term impact on companies”, says Dr András Balásfalvi-Kiss, head of ESG and sustainability at Grant Thornton. //