ESG Double Materiality

Author: Ms.Zsuzsanna

𝐂𝐥𝐢𝐦𝐚𝐭𝐞 𝐈𝐧𝐜, specialized in providing innovative climate, sustainability & ESG solutions, came up with something excellent again:
✅ an easy-to-understand explanation of the 𝐄𝐒𝐆 𝐃𝐨𝐮𝐛𝐥𝐞 𝐌𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲’s key terminologies, and
✅ a concise summary of the steps to be followed when performing the assessment.

File Climate Inc. Double Materiality

𝑻𝑾𝑶 𝑺𝑰𝑫𝑬𝑺 𝑶𝑭 𝑻𝑯𝑬 ‘𝑫𝑶𝑼𝑩𝑳𝑬 𝑴𝑨𝑻𝑬𝑹𝑰𝑨𝑳𝑰𝑻𝒀’ 𝑪𝑶𝑰𝑵

Doublemateriality is composed of financial materiality and stakeholder materiality (which is often called in other sources ‘impact materiality’).

𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐦𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲 assessment ‘involves assessing how ESG factors can influence a company’s financial performance, risk profile, and long-term viability.
➡️ Companies analyze how these factors may affect their revenue streams, cost structures, and overall financial health.
➡️ Financial materiality is typically focused on the direct financial implications of ESG issues for the company itself.’

𝐒𝐭𝐚𝐤𝐞𝐡𝐨𝐥𝐝𝐞𝐫 𝐦𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲 (𝐢𝐦𝐩𝐚𝐜𝐭 𝐦𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲) assessment ‘involves understanding the impact of a company’s activities on external stakeholders, including the environment, society, and local communities.
➡️ It considers how a company’s operations, products, and services may affect stakeholders and broader societal issues.
➡️ Stakeholder materiality is concerned with the external consequences of a company’s actions on the world around it.’

𝑫𝑶𝑼𝑩𝑳𝑬 𝑴𝑨𝑻𝑬𝑹𝑰𝑨𝑳𝑰𝑻𝒀 𝑨𝑺𝑺𝑬𝑺𝑺𝑴𝑬𝑵𝑻 𝑺𝑻𝑬𝑷 𝑩𝒀 𝑺𝑻𝑬𝑷

𝐂𝐥𝐢𝐦𝐚𝐭𝐞 𝐈𝐧𝐜’s publication goes beyond the definitions: it also provides key insights about the steps to be followed.
1️⃣ 𝐄𝐬𝐭𝐚𝐛𝐥𝐢𝐬𝐡 𝐭𝐡𝐞 𝐬𝐜𝐨𝐩𝐞 (ESG factors, industries, geographies, stakeholders)
2️⃣ 𝐈𝐝𝐞𝐧𝐭𝐢𝐟𝐲 𝐄𝐒𝐆 𝐟𝐚𝐜𝐭𝐨𝐫𝐬 (listing & categorizing based on relevance, industry-specific guidelines, standards, frameworks)
3️⃣ 𝐈𝐧𝐭𝐞𝐫𝐧𝐚𝐥 𝐟𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐦𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲 𝐚𝐬𝐬𝐞𝐬𝐬𝐦𝐞𝐧𝐭 (assessing risks & opportunities affecting revenue, cost structure, long-term financial viability, quantification with data, metrics & models)
4️⃣ 𝐄𝐱𝐭𝐞𝐫𝐧𝐚𝐥 𝐬𝐭𝐚𝐤𝐞𝐡𝐨𝐥𝐝𝐞𝐫 𝐦𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲 𝐚𝐬𝐬𝐞𝐬𝐬𝐦𝐞𝐧𝐭 (assessing impacts of the company’s operations by engaging stakeholders & using their feedback)
5️⃣ 𝐈𝐧𝐭𝐞𝐠𝐫𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐩𝐫𝐢𝐨𝐫𝐢𝐭𝐢𝐳𝐚𝐭𝐢𝐨𝐧 (identifying commonalities & differences, prioritization)
6️⃣ 𝐌𝐚𝐭𝐞𝐫𝐢𝐚𝐥𝐢𝐭𝐲 𝐦𝐚𝐭𝐫𝐢𝐱 (visual representation, materiality levels)
7️⃣ 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠 𝐚𝐧𝐝 𝐜𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧 (integration into reports, clarity)