The One-Minute Summary
Double materiality means looking at sustainability from two angles:
- Impact Materiality: How your business affects the world (environment and people)
- Financial Materiality: How sustainability issues affect your business financially
Under CSRD, you must report on both. If something is material from either perspective, you need to include it in your reporting.
The Two-Way Mirror Analogy
Think of double materiality as a two-way mirror:
- Looking OUT: You see how your business impacts the world (pollution, jobs, community)
- Looking IN: You see how the world's changes impact you (climate risks, regulations, reputation)
Both views matter equally under CSRD. This is different from traditional reporting that only cared about the "looking in" part.
Why Double Materiality Matters
The Old Way (Single Materiality)
Companies only reported sustainability issues if they affected profits. A factory's pollution only mattered if it led to fines or lost customers.
The New Way (Double Materiality)
Now that same pollution matters regardless of financial impact. If it significantly harms the environment or community, you must report it - even if you face no fines or customer backlash.
Breaking Down the Two Types
Impact Materiality (Inside-Out)
Question: How does our business affect the environment and society?
Examples:
- Your carbon emissions contributing to climate change
- Fair wages and working conditions for employees
- Water consumption in water-stressed regions
- Waste sent to landfills
- Community employment opportunities
Key point: This matters even if there's no immediate financial consequence to your business.
Financial Materiality (Outside-In)
Question: How do sustainability issues affect our financial performance?
Examples:
- Carbon taxes increasing your costs
- Extreme weather disrupting your supply chain
- Skilled worker shortages affecting productivity
- Changing consumer preferences affecting sales
- New regulations requiring expensive upgrades
Key point: This is what investors traditionally care about.
How to Conduct a Double Materiality Assessment
Step 1: Identify Your Impacts (2-3 days)
Map out all the ways your business interacts with the environment and society:
- What resources do you consume?
- What do you emit or discharge?
- Who do you employ?
- Who uses your products/services?
- What communities do you operate in?
Practical tip: Walk through your entire value chain from suppliers to end-of-life disposal.
Step 2: Identify Your Dependencies (2-3 days)
Map out what you depend on that could be affected by sustainability issues:
- Natural resources needed
- Stable climate conditions
- Skilled workforce availability
- Social license to operate
- Regulatory permits
Practical tip: Ask "What could disrupt our business model?"
Step 3: Engage Stakeholders (1-2 weeks)
You can't do this in a bubble. Talk to:
- Employees
- Customers
- Suppliers
- Local communities
- Investors
- NGOs relevant to your industry
What to ask them:
- What impacts of our business concern you most?
- What sustainability risks do you see for our company?
- What should our priorities be?
Step 4: Score and Prioritize (3-5 days)
Rate each topic on two scales:
Impact Materiality Scale:
- Scale of impact (how big?)
- Scope of impact (how many affected?)
- Irremediability (can it be fixed?)
- Likelihood (how probable?)
Financial Materiality Scale:
- Magnitude of financial effect
- Likelihood of occurrence
- Time horizon
Step 5: Create Your Materiality Matrix (1 day)
Plot all topics on a matrix:
- X-axis: Financial Materiality (low to high)
- Y-axis: Impact Materiality (low to high)
Anything scoring high on EITHER axis is material and must be reported.
Common Double Materiality Topics by Industry
Most Industries:
- Climate change (emissions)
- Own workforce conditions
- Business ethics
- Energy use
Manufacturing:
- Resource consumption
- Waste and circular economy
- Product safety
- Supply chain labor
Services:
- Data privacy
- Diversity and inclusion
- Skills development
- Customer satisfaction
Retail:
- Product sustainability
- Supply chain impacts
- Consumer information
- Packaging waste
Practical Example: A Furniture Manufacturer
Let's walk through double materiality for "Wood Sourcing":
Impact Materiality Assessment:
- Deforestation impact: HIGH (contributes to habitat loss)
- Community impact: MEDIUM (affects forest communities)
- Climate impact: MEDIUM (forests are carbon sinks)
- Overall: MATERIAL ✓
Financial Materiality Assessment:
- Supply risk: MEDIUM (certification requirements increasing)
- Price risk: HIGH (sustainable wood costs more)
- Reputation risk: HIGH (customers care about forests)
- Overall: MATERIAL ✓
Result: Wood sourcing is double material - report required on forestry practices, certification, sourcing policies, and targets.
The 3 Most Common Mistakes
Mistake 1: Only Considering Financial Materiality
Many companies still think like investors and ignore impact materiality. Under CSRD, this means missing half the picture.
Mistake 2: Setting Thresholds Too High
Being conservative might seem safe, but reporting on clearly material topics is mandatory. When in doubt, include it.
Mistake 3: Doing It Once and Forgetting
Materiality changes over time. Plan to update your assessment every 1-2 years or when major changes occur.
Tools and Templates
What You Need:
- Stakeholder interview templates
- Scoring methodology document
- Matrix visualization tool
- Documentation templates
Helpful Resources:
- EFRAG's materiality assessment guidance
- Industry-specific materiality maps (SASB)
- Peer company reports for benchmarking
- Stakeholder engagement specialists
Your 30-Day Action Plan
Week 1: Internal assessment
- Map impacts and dependencies
- Review existing stakeholder feedback
- Identify key stakeholders to engage
Week 2: Stakeholder engagement
- Conduct interviews/surveys
- Host stakeholder workshop
- Gather external perspectives
Week 3: Analysis and scoring
- Score all topics
- Create preliminary matrix
- Identify clear material topics
Week 4: Validation and documentation
- Review with leadership
- Validate with key stakeholders
- Document methodology and results
The Bottom Line
Double materiality is the foundation of your entire CSRD reporting. Get this right, and everything else follows. Get it wrong, and you'll either report on the wrong things or miss mandatory disclosures.
Remember: It's not about what YOU think is material - it's about what IS material from both impact and financial perspectives. Be thorough, be inclusive in your stakeholder engagement, and document everything.