Preparing for CSRD reporting: double materiality assessment

The Corporate Sustainability Reporting Directive (CSRD) is reshaping how companies in the EU and beyond approach sustainability reporting. As part of this process, understanding and implementing a double materiality assessment (DMA) is critical.  

Let’s dive into what a double materiality assessment is, why it matters, and how it fits into CSRD compliance and strategic business planning.

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Understanding double materiality assessment

A double materiality assessment is a process for evaluating and prioritizing sustainability topics that are relevant to a company’s operations and value chain. It assesses materiality from two perspectives:

1. Financial materiality: This perspective focuses on how sustainability issues impact the company’s financial performance. E.g., risks such as changes in environmental regulations, resource scarcity, or shifting consumer preferences could directly affect a company’s costs, revenues, or overall financial stability.

2. Impact materiality: This perspective considers the broader impact a company’s activities have on society and the environment. This might include a company’s carbon emissions, water usage, or social contributions, such as promoting diversity and inclusion.

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By assessing these two dimensions, a company gains a comprehensive understanding of the sustainability issues that are most relevant to its business and stakeholders.

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Double materiality and the CSRD

The double materiality assessment is central to achieving compliance with the CSRD. Under the CSRD, companies need to provide a detailed account of how their operations and activities affect the environment and society (impact materiality) and how sustainability issues may affect their financial position (financial materiality).

This dual perspective ensures that companies are transparent about their sustainability practices and the risks and opportunities they face. It also helps investors, stakeholders, and regulators better understand how companies are responding to sustainability challenges and contributing to broader societal goals.

Learn more about CSRD-aligned double materiality assessments in this article by KPMG.

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The strategic value of double materiality

Though initially rooted in corporate responsibility and regulatory compliance, the role of double materiality has evolved. Organizations now employ it as a broader business strategy and risk assessment tool. This approach allows them to:

• Integrate sustainability practices into existing business operations.

• Align their sustainability strategies with their overall business goals.

• Anticipate potential impacts on financial performance and plan for business resilience.

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A foundation for effective CSRD reporting

Double materiality assessment is more than just a reporting exercise; it is a strategic process that can transform how a company views and manages sustainability. As you prepare for CSRD reporting, incorporating a robust DMA will set a solid foundation for compliance, strategy development, and long-term business success.

Would you like guidance on how to implement a double materiality assessment, or want to explore further questions on CSRD? Schedule a free 30-minute consultation with our partner KPMG to gain tailored insights into your sustainability journey.