Getting Started with Your Organisation’s Double Materiality Assessment

Practical tools to successfully kickstart your double materiality assessment
Getting Started with Your Organisation’s Double Materiality Assessment
Publ. date 7 Mar 2024
The idea of starting a double materiality assessment can feel overwhelming for organisations, as it may prove hard to understand where to start and how to proceed. This article provides practical steps to start your double materiality journey by leveraging the sustainability initiatives already in place within the company, understanding industry ESG trends, mapping the material impacts, risks, and opportunities within the value chain, and engaging key stakeholders. The associated download provides practical guidance to solidly launch a double materiality assessment.

Looking beyond the reporting requirements such as the Corporate Sustainability Reporting Directive (CSRD), embedding ESG within an organization’s business strategy is becoming essential. On top of remaining competitive and responding to the expectations of customers and investors, organisations can grasp opportunities, strengthen stakeholder relationships and drive business growth by incorporating a strategic perspective into their double materiality assessment.

Understanding the basics: what is double materiality?

A double materiality assessment is a process through which an organization identifies its most relevant issues from an impact and financial perspective. Conducting such assessment is fundamental for a company to build a strong base for its sustainability strategy, prioritise its initiatives, identify risks and opportunities and communicate with its stakeholders on its non-financial performance. Practically speaking, a topic can be considered material if it is relevant from either of the following perspectives:

  • the impact-perspective (also called “inside-out impact”): the positive and negative impacts that the organization can have on society or the environment;
  • the financial-perspective (also called “outside-in impact”): the financial risks and opportunities that sustainability matters can have on the organization, in terms of revenue, costs, or reputation for example.

Companies are recommended to define the scope of the assessment early on, as it will influence the duration and budget of the project. Some elements to consider are the level of granularity desired and the number and availability of the stakeholders involved. To lead the project efficiently, organisations are advised to create a cross-functional project team of about three people who have an oversight of sustainability across different departments.

Evaluating the status quo: leveraging existing resources

Even though there are different ways to approach a double materiality assessment, organizations are recommended to draft a list of ESG topics that are most important to their business as a first step. Specifically, a company should look internally at the sustainability initiatives which have been implemented until now, such as:

  • sustainability strategy & initiatives, including potential previous (single) materiality assessment;
  • performance in ESG ratings;
  • sustainability certifications;
  • latest risk assessment documentation such as Enterprise Risk Management;
  • reports on specific stakeholders: stakeholder mapping, customer satisfaction report and employee satisfaction surveys;
  • Sustainability due diligence process or results.

The organization can use these elements as a starting point for the assessment while trying to take a fresh, independent and unbiased perspective.

Assessing industry themes and peers’ material topics

The next step in defining the list of potentially material topics is to assess which are the most important ESG themes in the industry as well as in the general business context. Below is a non-exhaustive list of sources you can use for this matter:

Organizations can then look at the (double) materiality assessments of their peers, such as suppliers, industry peers, and customers to understand the ESG priorities relevant to themselves, their value chain and the overall business environment.

It is important to keep in mind that the assessment of external forces should complement a clear vision of the organization’s own focus and strategy. The combination of these internal and external assessments should enable an organization to identify 10 to 15 potential sustainability priorities and their associated impacts, risks and opportunities. Impact assessment, which is an important part of the double materiality assessment, in explained in more details in the following article.

Mapping the value chain and engaging with stakeholders

While conducting the previous recommended steps, an organization should map the areas where ESG topics are likely to arise, based on the nature of its activities, and assess potential impacts, risks, and opportunities associated with its direct and indirect business relationships in the value chain. This value chain analysis will enable the organization to identify where the greatest adverse impacts take place at stakeholder level and for which material topic. As a result, the company, in collaboration with affected stakeholders, can implement the most effective measures in the relevant steps of the value chain to prevent and mitigate potential and actual adverse impacts.

The double materiality assessment is therefore an excellent opportunity to identify and engage with key stakeholders. In particular, the value chain mapping should provide companies with important clues about which stakeholders to prioritize. After having identified who the most important stakeholders are, the organization is advised to develop an approach specific to each stakeholder group and consult them through different formats, such as interviews, workshops and panels.

Taking advantage of the results of the double materiality assessment

It is essential to embed the outcomes of the double materiality assessment within the sustainability as well as the overall business strategy of a company, as it can enable the organization to address ESG risks, uncover untapped opportunities, and gain a long-lasting competitive edge. For more information about how to build a successful ESG strategy framework, please have a look at this article.

Want to know more about double materiality assessment and its strategic benefits?

If you would like to know more about double materiality or require assistance with your double materiality assessment, get in touch with get in touch with Johana Schlotter, at johana@finchandbeak.com or call +31 6 28 02 18 80 to discuss how Finch & Beak can support you.

About Damien Manhes

Dynamic sustainability professional eager to help companies become a force for positive change.  damien@finchandbeak.com

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