We create a double materiality analysis for companies, pragmatic and lean. With artificial intelligence applied in the right places, so that you receive a materiality matrix with little effort.
Brief introduction>
Since the introduction of the Corporate Sustainability Reporting Directive (CSRD) in January 2023, companies within the EU have had to submit detailed reports on non-financial aspects in the areas of environmental, social and governance from 2024. The content of these reports is based on the European Sustainability Reporting Standards (ESRS), which provide a clear guideline for implementation.
A central component of the CSRD is the concept of double materiality: A crucial element in assessing both the impact of their activities on the environment and society and the relevance of social and ecological issues to their business activities.
Basics >
The double materiality analysis is a sustainability reporting framework that encourages companies to consider the impacts of their business activities from two perspectives:
Impact Materiality (Inside-Out): This perspective assesses how a company's activities affect the environment and society. The aim is to understand what positive or negative effects the company has on external sustainability issues.
Financial materiality (outside-in): This perspective focuses on how environmental and societal changes affect the company itself. It examines the financial risks and opportunities arising from external changes and how these can influence the future viability of the business model.
An issue is material and subject to reporting if it has a significant impact on the environment and people (inside-out) or poses risks and opportunities for business success (outside-in), even if it is only classified as material from one of these perspectives.
As soon as a mandatory sustainability report is prepared, a materiality analysis MUST be carried out.
Medium-sized to large companies with
Smaller companies with
CoPLIANCE Using artificial intelligence for efficiency>
Our double materiality analysis process is highly efficient and avoids unnecessary steps. We only involve stakeholders when it makes sense and is necessary in order to gain valuable insights.
The identification and assessment of risks is automated and based on sound scientific analysis, including the use of artificial intelligence. Our experts validate the elements to demonstrate our high standards of quality and ensure auditability. This ensures accurate and fast collection of relevant data, making the best use of time and resources. This efficiency allows us to ensure that all material sustainability aspects are covered without complicating or delaying the process.
Importance and advantages>
The dual materiality analysis transforms corporate governance by promoting a holistic understanding of environmental and social impacts as well as business opportunities and risks. This analysis enables companies to respond proactively to the growing demands for transparency and sustainability, which is essential for compliance with new global standards such as CSRD. By identifying critical issues from both perspectives, companies can not only improve their compliance, but also develop innovative approaches to mitigate risk and increase value. This leads to greater resilience to environmental risks and an improved reputation with stakeholders, which ultimately secures the company's long-term prospects for success.
Validation by experts - prioritization via stakeholders>
The second stage of our double materiality analysis begins with the creation of a longlist of relevant topics. Experts with in-depth industry or topic expertise validate this longlist, which confirms any topics that have been finally excluded. A shortlist is then drawn up and further refined through a stakeholder dialog. The final prioritized shortlist contains the key topics. This process is efficient as expert validation ensures that only technically sound topics are considered before stakeholders are involved. Automated, science-based analyses and artificial intelligence support the precise identification and assessment of risks, thereby avoiding delays.
Step-by-step instructions>
In order to determine which topics are material for companies, it is essential to carry out a double materiality analysis. This process begins with careful preparation and requires the active involvement of company management. The following steps are crucial:
Initial considerations: Companies should start by compiling a broad range of possible relevant sustainability topics. Here it is helpful to pay attention to existing standards such as the ESRS and also to consider the entire supply chain in order to obtain a holistic overview.
Stakeholder involvement: Including the views of all relevant stakeholders is essential. This includes not only internal groups such as employees and management, but also external groups such as customers, suppliers and the local community. Through their feedback, companies can better understand which topics are actually relevant.
Transparency in the analysis process: It is important that the materiality analysis process is transparent and comprehensible. Companies should openly explain the criteria and methods used to carry out the analysis in order to increase the credibility and acceptance of the results.
Expert support: The complexity of the materiality analysis often makes it advisable to bring in external consultants. These experts can ensure that the process is methodologically correct and that all relevant aspects are taken into account.
Documentation and publication: Once the analysis has been completed, the results must be carefully documented and made public as part of the management report. This documentation is not only a legal requirement, but also serves the purpose of transparent communication with stakeholders.
For further information and detailed instructions on conducting a double materiality analysis, please refer to our white paper. This offers practical tips and helps companies to design the process effectively and in compliance.
Blog>
Understanding the concepts of "materiality" and "double materiality" is crucial for the effective implementation of sustainability reporting in accordance with current standards such as the CSRD. These concepts play a central role in the way companies report on their activities and their impacts.
Learn more
The preparation of a double materiality analysis as part of the CSRD is a complex process that presents companies with numerous challenges. Comprehensive stakeholder engagement is required to ensure a complete view of the relevant issues, which requires in-depth dialog and a great deal of time. The collection and analysis of data covering both the company's impact on the environment and society and vice versa must be precise and comprehensive. In addition, prioritizing these issues requires a clear methodology and an understanding of the importance of each aspect.
In view of these complex requirements, it is highly advisable for companies to seek professional support at an early stage. Adapting to constantly changing regulatory frameworks and communicating the results effectively are further issues that are difficult to master without specialized knowledge.
In the context of sustainability, the term materiality refers to the identification and assessment of material sustainability issues. The focus is on the question of which topics must be reported in the sustainability report due to their importance for the company and its stakeholders.
This is referred to as "dual" materiality, as it takes into account not only how ESG issues affect the company (outside-in perspective), but also how the company affects society and the environment (inside-out perspective).
Traditional materiality analyses focus mainly on the impact of sustainability factors on corporate activities and finances. Dual materiality therefore expands this one-sided perspective.
The dual materiality analysis makes it possible to identify and assess both the financial risks and opportunities that affect the company as a result of external sustainability issues and the impact that the company itself has on the environment and society.
The process of dual materiality analysis first involves understanding the company context. This includes identifying the internal and external factors that influence the company. Then the actual and potential ESG issues that are relevant to the company and its stakeholders are identified. Finally, the ESG issues are assessed according to their significance and influence in accordance with the ESRS criteria.
The double materiality analysis is a central component of mandatory sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD). It forms the basis for transparent and meaningful sustainability reports and determines which standards must be reported.
This largely depends on the size of the company. For large companies, it is essential to get to grips with the basics of double materiality analysis in order to be successful in the world of ESG compliance. For small and medium-sized enterprises (SMEs), there are voluntary reporting standards in the form of the VSME.
The division into financial and material materiality is necessary to enable a comprehensive assessment of sustainability issues. This structured method enables companies to make informed decisions, optimize their sustainability strategies and strengthen their long-term resilience. The results of the dual materiality analysis show the extent to which the company needs to address the respective ESG issues. This enables prioritization, the efficient use of resources and provides guidance and support for strategic decisions.
As things stand today, there are two options: Annual review of the analysis with minor changes or no adjustment and then a completely renewed analysis every three years.
The aim of the dual materiality analysis is to identify those ESG issues (environmental, social, governance) that have the greatest impact or are financially most significant for the company and must therefore be reported.
The materiality matrix is an analytical tool that takes the results of the materiality analysis and presents them in a clearly structured form. It visualizes the relevance of various topics on a two-dimensional axis: one axis represents the importance of the topics from the stakeholders' perspective, while the other axis reflects the relevance of these topics for the company itself.
By presenting them in matrix form, companies can quickly identify which issues have the highest priority and take action accordingly. The materiality matrix helps to guide the company's strategic decisions and ensure that resources are used in a targeted and efficient manner. In addition, the materiality matrix helps to strengthen stakeholder trust as it provides a transparent and comprehensible basis for sustainability reporting.
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