Strategic Focus: Understanding Approaches To Materiality
05 Jun, 2023
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Executive Summary
With an unprecedented wave of recent and impending reporting regulations, corporates must understand the reporting landscape and the different approaches to materiality. Although there are two distinct definitions of materiality, executives should be prepared to embed both impact and financial materiality into their ESG and sustainability disclosures. Doing so will allow an organization to communicate a comprehensive picture of its sustainability impact as well as its approach to managing ESG and sustainability risk. This report provides an overview of the current and forthcoming developments relating to materiality assessments and the impact these will have on firms’ reporting processes.
Materiality assessments lay foundations for sustainability strategies
Firms must contend with two coexisting pillars of materiality
Widespread adoption of double materiality brings new challenges for firms
Firms will align materiality assessments with their ESG ambitions
Firms must contend with two coexisting pillars of materiality
Widespread adoption of double materiality brings new challenges for firms
Firms will align materiality assessments with their ESG ambitions
Figure 1. Example of double materiality matrix
Figure 2. Double materiality is gaining traction amongst corporates
Figure 3. Comparison of impact, financial and double materiality assessments
Figure 2. Double materiality is gaining traction amongst corporates
Figure 3. Comparison of impact, financial and double materiality assessments
One Concern, Goldman Sachs, EY, Sustainalytics, Position Green, European Financial Reporting Advisory Group (EFRAG), Global Reporting Initiative (GRI), S&P Global, International Sustainability Standards Board (ISSB), AXA, C3.ai, RepRisk, MSCI Inc., ERM, International Financial Reporting Standards Foundation (IFRS), Datamaran, UL Solutions, Halliburton, Sustainability Accounting Standards Board (SASB), Norges Bank Investment Management, Bureau Veritas, Jupiter, Cervest, ESG Global Advisors, TSC, US Securities and Exchange Commission (SEC), Climate X, UK Financial Conduct Authority (FCA)
About the Authors
Luke Gowland
Senior Analyst
Luke is a Senior Analyst at Verdantix, specializing in ESG and sustainability reporting software and financial ESG. He advises both technology buyers and software vendor and s…
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Kim Knickle
Research Director
Kim Knickle is a Research Director at Verdantix, bringing more than two decades of analyst experience to the evolving world of sustainability. Her current research spans ESG a…
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