Double materiality analysis

From 2024, the first companies will have to prepare their sustainability report in accordance with the Corporate Sustainability Reporting Directive (CSRD), an EU directive that aims to harmonize reporting. In addition to a double materiality analysis, the directive requires companies to report according to common standards, the European Sustainability Reporting Standards (ESRS). Depending on which issues are considered material in the context of the DMA, the company must concretely describe how they work based on their risks, opportunities and impacts for each standard. Read more about CSRD and ESRS here.

The CSRD does not mention specific stakeholders but gives companies great flexibility in who is included in the stakeholder dialogue. However, it is important that all those affected are represented, which requires a careful balance between complex interview processes and materiality. Most companies include various key people from within the business, including management, board and employees, as well as external parties such as local community representatives, investors and banks.

Materiality analysis has long been a feature of sustainability reports, but in the past it has focused on how the company affects the world around it. What makes a DMA different is that it includes how changes in the external environment, such as global warming, can affect the company financially. By identifying risks and opportunities, it provides a more nuanced picture of how the company in question interacts with the world around it and which issues are at the top of the priority list.

Financial materiality reflects how changes in the business environment create risks and opportunities for a company from a financial perspective. These may include supply chain disruptions, destruction of arable land or other consequences that have a negative or positive impact on performance.

Significant impact reflects how the company's activities affect the outside world from a positive or negative perspective. It can include greenhouse gas emissions or causing workplace accidents through poor safety practices.