Strategic Focus: Understanding Approaches To Materiality

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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
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

About the Authors

Luke Gowland

Luke Gowland

Senior Analyst

Luke is a Senior Analyst in the Verdantix ESG & Sustainability practice. His current research agenda focuses on the ESG reporting and data management landscape, as well as…

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Kim Knickle

Kim Knickle

Research Director, ESG & Sustainability

Kimberly Knickle is Research Director of the ESG & Sustainability practice at Verdantix. Her research areas encompass ESG regulations and reporting, ESG risk, supply chain…

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