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Performing a double materiality assessment

Completing a double materiality assessment

As part of the Corporate Sustainability Reporting Directive (CSRD), conducting a double materiality assessment is crucial. Whilst you may be aware of this requirement, you may need further guidance on how to apply the double materiality process within the implementation of your company’s CSRD. This guide is intended to offer practical insights into the application of double materiality. Building on the fundamental pillars of context and stakeholder analysis, impact assessment, and risk and opportunities analysis, our step-by-step approach is designed to assist you in executing this process effectively. This is the first step to developing your annual CSRD report.

The aim

A double materiality assessment is completed to identify which disclosures are relevant for inclusion in the CSRD report. A two-sided assessment, double materiality requires companies to evaluate the relevance of a sustainability matter from two perspectives: inside looking out (how a company is impacting people and the environment), and outside looking in (the risks and opportunities associated with sustainability for the company). Both perspectives involve looking at the Environmental, Social, and Governance (ESG) matters using the ESRS standards from EFRAG. Following the assessment, you can ascertain what is material from each perspective, allowing you to determine what information to disclose accordingly.

The diagram below outlines the steps involved in applying the double materiality assessment in practice.

Double Materiality

1. Context and stakeholder analysis

Integrating the materiality analysis within the context of your business is crucial as it establishes a framework for considering impacts, risks, and opportunities. This context encompasses the operational environment in which your business, and your upstream and downstream value-chain partners, operate. Additionally, it provides insight into the different stakeholders you will encounter. Clarifying both these aspects at the outset establishes the groundwork for the subsequent steps.

2. Impacts analysis

The second step involves employing an inside looking out perspective. This is looking at your company’s impact on the surrounding environment and people. It deals with identifying impacts per topic, which can be done with external experts or based on an internal pre-scan. Impacts can be positive or negative and result from your company’s operations. Validating the listed impacts, through stakeholder interviews or a stakeholder validation workshop, or a combination of both, results in a comprehensive list of validated impacts.

After identifying and validating impacts, they are scored based on scope, scale, reversibility, likelihood of occurrence, and whether they involve human rights concerns. This approach leads to a ranking, and a cut-off is applied to determine which impacts make the final list. Achieving balance is crucial; the list should capture significant aspects without becoming all-encompassing.

3. Risk and Opportunities analysis

In this next stage, the outside looking in perspective is followed. The objective is to identify risks and opportunities that influence the company’s business model and operations, considering the operational context. This analysis is conducted for each matter and its underlying topics. Relevant internal stakeholders (e.g., HR, RD&I, HSE, IT, Legal, Procurement, etc.) contribute insights to provide a broad perspective.

Once identified, risks and opportunities are scored by internal stakeholders, focusing on financial or business model implications and likelihood of occurrence. This process can be questionnaire-driven or take place in a workshop setting. Scoring is applied and a cut-off is determined.

4. Materiality Matrix

After scoring, ranking, and applying the cut-off, impacts, risks, and opportunities are combined on a topic level. This creates an overview of what is material, allowing for the plotting of outcomes on a materiality matrix. This matrix simplifies the information and provides a visualisation of topics that are deemed material in terms of impacts, risks, and opportunities. With these elements in place, it is possible to translate this information into the disclosures required by the ESRS standards, therefore identifying what needs to be reported. Additionally, it may become evident during the process that supporting policies and KPIs need development.

Methodology Report

Finally, the process and choices made are documented to create a methodology report. This report aids in the audit and serves as guidance for subsequent years.

Ecomatters support

We have a long track record of executing materiality assessments for GRI and other frameworks, and currently support clients with completing the double materiality assessment for their CSRD. We can help in the following ways:

  • Support your double materiality assessment process, either fully or partially.
  • Act as an expert on matters or topic level.
  • Workshop facilitation and organisation and executing interviews with stakeholders.
  • Impact, risk, and opportunities scoring and cut-off decision support.

If you want to discuss your double materiality assessment, you schedule a call with one our consultants.

CSRD services

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Max Sonnen

Managing Director
Eelco van IJken

Eelco van IJken

Senior Consultant

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