Discover the significance of double materiality in sustainability reporting today.

TLDR:

Double materiality extends the traditional accounting principle of materiality to include environmental, social, and governance factors. It requires companies to disclose not only how sustainability issues affect them, but also how their operations impact the environment and society. Regulatory emphasis on double materiality is growing, with standards like the EU’s Sustainable Finance Disclosure Regulation and Corporate Sustainability Reporting Directive. Companies operating in Western Europe need to comply with these regulations.

Key Elements:

• Double materiality extends accounting principle to include environmental, social, and governance factors.
• Companies need to disclose impacts on environment and society in addition to financial disclosures.
• Regulatory standards like the EU’s CSRD require double materiality assessment for reporting entities.
• Double materiality assessment includes impact on people and environment, risks and opportunities, stakeholder engagement, materiality determination, dynamic materiality, action plans, and monitoring and reporting.

Double materiality is crucial for companies to understand and communicate their performance in sustainability areas, comply with regulatory requirements, attract investors, and maintain market access and partnerships.