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.

Table of contents

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

Table of figures

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

Industry Analyst

Luke is an Industry Analyst in the Verdantix ESG & Sustainability practice. His current research agenda focusses on emerging technologies and trends in the ESG software space. Prior to joining Verdantix, Luke worked as an analyst at GlobalData where he gained experience in ESG and key business technologies. Luke holds an MSc in Sustainability and Management from the University of Bath.

Kim Knickle

Research Director, ESG & Sustainability

Kim leads the Verdantix ESG & Sustainability practice, addressing business challenges and priorities in ESG and sustainability through technology and services. Her current research agenda focuses on ESG regulatory and market drivers, sustainability reporting, risk management, supply chain sustainability, circular economy, social impact.  Knickle has worked for more than 20 years in the IT industry, providing research and analysis to help companies invest wisely in new technologies. Before joining the analyst industry, she held various roles in IT services, engineering, and product safety testing, beginning her career at Underwriters Laboratories, Inc.  Knickle holds a MBA from Boston University and a BS in electrical engineering from Cornell.

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