Current (draft) double materiality guidelines from the European Financial Reporting Advisory Group (EFRAG) are… heavy. They include guidance for organisations on understanding topic boundaries across impact and financial lenses, who the affected stakeholders and users of data are and assessing impact, risks and opportunities across value chains and time horizons. It also looks at evaluating against sector-agnostic, sector-specific and entity-specific disclosures – it could be a time-heavy and intensive process for businesses.
For us, the direction of travel is clear. Double materiality will help in establishing a more robust baseline in European non-financial reporting and disclosure. But it should also provide a more credible evidence base to build a sustainability strategy from. Our work across double materiality projects so far has shown how important finding the right process is for clients so they can address their compliance requirements, but also consider strategy implications, and on-the-ground impact decisions more effectively and efficiently.
Considerations on an approach to double materiality
We think there are some considerations to note when considering the right process on double materiality, including:
- Getting to grips with CSRD applicability – CSRD (Corporate Sustainability Reporting Directive) applicability guidance means the timing of when you do a double materiality assessment to comply with disclosure requirements is clear. There are implications for the process: for example, if you are a business that needs to report in 2026 on 2025 data, it may be worth considering a lighter touch process now (in 2023) to ready stakeholders for the more complete approach in 2024.
- Assessing current maturity – Do you have a sustainability team in place already? Based on applicability, it is worth considering how impact and financial materiality topics are identified, assessed and prioritised – and at what stage different stakeholders are involved.
- Educate up front – Double materiality processes could require businesses to engage senior stakeholders from across the business, and more specifically your risk, audit, and finance colleagues. Holding briefings setting out the context for these processes is critical – in generating useful inputs into the process, as well as readying stakeholders for what is required of them when it comes to strategy, and technical (and disclosure) implementation.
- Making stakeholder engagement work harder – Stakeholder interviews are not tests! Traditional sustainability assessments rely on expert input from stakeholder interviews to generate insights. While this could still be a component of double materiality assessments, think using these sessions to inform and educate stakeholders where necessary, and following up with a survey to generate clearer data points across on specific lenses could be critical. This will only become increasingly more important with auditability requirements in CSRD.
Whatever the combination of answers in the above, we have a number of services that can be tailored to your needs – ranging from lighter touch ‘health checks’ and ‘train the trainer’ materiality, through to fully CSRD-compliant double materiality. We have also provided a free guide to Double Materiality and a free webinar to get you started on the CSRD requirements. We’d love to talk to you wherever you are in your journey, get in touch via the form below.