The new stricter requirements for sustainability reporting resulting, among others, from the European Corporate Sustainability Reporting Directive (CSRD) demand to define and report about the most material topics of a business with a double materiality perspective.
But what does this mean?
Double materiality implies that not only the impact of the planet and society on a company is considered significant, but also the impact of the company on the planet and society.
Double Materiality is essential for CSRD reporting obligations. The reporting standards GRI, the Global Reporting Initiative, and DNK, the German Sustainability Codex, already work with this concept and meet the requirements of corporate sustainability reporting in non-financial reporting obligations.
In the materiality analysis and the sustainability reporting, non-financial information and data on sustainability issues like, for example, climate change, resource consumption, emissions, diversity, employees’ concerns, and respect for human rights are assessed.
In materiality and non-financial sustainability reporting, the company’s risk management, practices, and processes implemented regarding social and environmental issues, as well as timeframes and information on opportunities, risks, results, and future prospects, are also relevant.
What topics are significant?
The concept of Double Materiality requires that all information should be transparently published in the company’s reporting that is relevant to its business activities. For example, aspects are material if impacts have a financial impact on the company and lead to financial risks.
What do Outside-In and Inside-Out perspectives mean?
Outside-In
The Outside-In perspective focuses on external aspects. Their impact on the company and its financial business results are captured. These are, for example, the risks resulting from climate change or changing demographic development.
Inside-Out
Conversely, the Inside-Out approach deals with the company’s impact on environmental and sustainability aspects and its impact. Relevant topics could be the company’s influence on environmental pollution and biodiversity loss and how the business strategy prevents and counteracts corruption.
Why is Double Materiality important for creating a positive impact?
The principle of Double Materiality encourages a company to understand its connections and impacts in both directions. It expands awareness and understanding. If a company sees itself not only as affected by external environmental or social impacts but also assesses its effects on climate change, human rights, and social issues, it gains a more holistic perspective. In that case, it can lead to a better understanding of its role as an active actor in the sustainability field and can use its role better to solve environmental and social challenges in a positive way.
