What is ‘double materiality’?

With a materiality analysis, the undertaking determines which information is relevant to share with its stakeholders. Information is material if its omission, or misrepresentation, could influence the judgement of the user of the sustainability information. Which information is material to an undertaking therefore varies from undertaking to undertaking.

Double materiality entails looking at the undertaking from two perspectives:

the impact on the undertaking (financial materiality); and
the impact of the undertaking (impact materiality).

This is the starting point of the sustainability report.

By means of sustainability reporting, the undertaking provides, on the one hand, insight into how the undertaking is affected by the developments in the field of sustainability, for example the influence of climate change on the business model. This is called financial materiality.

On the other hand, the undertaking reports on what kind of influence it has on its environment. Consider, for example, the effect of emissions from production processes on the air quality of local residents. This is called impact materiality.

These two perspectives (the impact on and the impact of the undertaking) together are called 'double materiality'. The sustainability report covers all material information, meaning the information on the topics that is or are material from one or both perspectives.

When assessing materiality, undertakings should consider actual and potential impacts, risks and opportunities as well as negative and positive impacts, risks and opportunities. This should be considered over the short-, medium- and long-term.

All undertakings must report on certain reporting requirements and data points. These are the requirements and data points from ESRS 2 and the thematic ESRS (on the description of processes to identify and analyse material pollution impacts, risks and opportunities). This information is always mandatory, as it is considered material information.

For more information, reference is made to EFRAG's implementation guideline on double materiality and the report ’Ten waypoints for CSRD – Double Materiality’ of the Dutch Authority for Financial Markets (AFM).

More information:

Reference is made to question 'What sources can I use to determine my social material themes within my own organisation?'.

Questions CSRD & ESRS

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