European guidelines on reporting climate-related information, 2019
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Primary Audience: Investors, civil society, employees, customers, suppliers, local communities
Defined: Double materiality considers both the impact of ESG issues on your financial performance and the impact of your business on people and the planet. It recognizes that your ESG performance doesn’t just affect your financial performance – it also affects the economic and social systems in which we all operate.
Double materiality is endorsed by several voluntary and mandatory reporting initiatives, including the Global Reporting Initiative (GRI) and the EU’s Corporate Sustainability Reporting Directive (CSRD) and Sustainable Finance Disclosures Regulation (SFDR).
Double Materiality
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Primary Audience: Employees, customers, suppliers, local communities, investors
Defined: Impact materiality looks at your company’s outward impacts on the economy, environment, and people. For instance, how are the GHG emissions from your operational and supplier facilities exacerbating the climate crisis? How are supplier communities impacted by the extraction of raw materials needed to create your goods?
ESG or Impact Materiality
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Primary Audience: Investors
Defined: Financial materiality considers how ESG issues impact your company’s performance, business model, operations, and financial outlook. Since financial materiality is geared towards investors, it focuses strictly on external factors likely to expose you to financial risk. For instance, if you’re a packaged foods company, the financial impact of water scarcity on your short- and long-term sales.
Financial materiality is required by several voluntary and mandatory ESG reporting frameworks and standards setters, including the TCFD, ISSB, and US SEC.
Financial or Single Materiality
