Double materiality assessment

The European Commission’s proposal for the Corporate Sustainability Reporting Directive (CSRD) states in revised Article 19a of Directive 2013/34/EU that undertakings ‘shall include in the management report information necessary to understand the undertaking’s impacts on sustainability matters, and information necessary to understand how sustainability matters affect the undertaking’s development, performance and position.’ Recital 25 of (draft) CSRD elaborates on the double-materiality perspective that was introduced already in the Directive 2013/34/EU. Regarding both perspectives (impact materiality and financial materiality) the recital emphasises that ‘undertakings should consider each materiality perspective in its own right, and should disclose information that is material from both perspectives as well as information that is material from only one perspective.’

“Double materiality” seeks to broaden corporate sustainability reporting from its former investor-centric focus on how sustainability factors impact a company and its financial prospects (single “materiality” or “financial materiality”) to an equal emphasis on how the firm is impacting society and the environment (“impact materiality”)

Double materiality recognizes that a company's impact on the world around it can, in turn, create risks and opportunities that feed back into the company's financial performance and value. It's a two-way street, where the company's impact on the world, and the world's impact on the company, are both material considerations.