How to use a Double Materiality Assessment?

Published on

April 15, 2024



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Iris Skrami

Co-founder and CSO

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Materiality assessment serves as a compass for businesses navigating sustainability challenges. What does it exactly entail and how can different companies leverage this tool will be covered here.

What is Materiality Assessment?

It involves identifying and prioritizing issues that are significant to both the company and its stakeholders.

In the context of sustainability, there's a growing emphasis on the more modern concept of "double materiality," which considers both the impacts of the company on the environment and society (external) and the impacts of environmental and social factors on the company (internal). This approach acknowledges the interconnectedness between corporate activities and broader societal concerns.

Example of a Double Materiality Assessment

Furthermore, materiality assessment is closely tied to Environmental, Social, and Governance (ESG) criteria, which are increasingly considered essential for long-term business success. 

Regulatory requirements, such as the Corporate Sustainability Reporting Directive (CSRD), further underscore the importance of materiality assessment in disclosing relevant sustainability information to stakeholders.

Materiality or Double Materiality?

A Double Materiality Assessment is usually more complex to be carried out compared to the single dimensional option, however it provides a wider perspective that can be crucially beneficial for a company.

The decision to start with either one of them depends on the company's goals and necessities.

Double Materiality: how retail companies can use it

As a Retail company, you are facing a myriad of sustainability challenges, from supply chain transparency to waste management.

Materiality assessment provides a structured approach to addressing these challenges by helping prioritize sustainability initiatives.

By identifying the most significant environmental and social impacts of their operations, retail companies can gain clarity on where to focus their efforts and resources.

For instance, leading retail brands leverage materiality assessment to enhance brand reputation, reduce operational costs through efficiency gains, and promote innovation by identifying new product offerings and business models.

How Fashion & Luxury companies can use Double Materiality

The fashion and luxury industry grapples with unique sustainability challenges, including resource depletion, labor rights violations, and pollution.

Materiality assessment enables fashion companies to identify hotspots within their value chain where sustainability efforts can have the most significant impact. For example, a comprehensive materiality framework for fashion and luxury brands may include topics such as Privacy & Security, Transparency and Labeling, Value Chain Management, Climate Change, Circularity and Waste, Emissions and Environmental Impact, Biodiversity, and Human Rights, Diversity, and Inclusion, as per the example below. 

Double Materiality Assessment for fashion and luxury

Is Double Materiality a requirement for CSRD? 

Corporate Sustainability Reporting Directive (CSRD) was proposed by the European Commission to enhance sustainability reporting requirements for companies operating within the European Union.

While the CSRD emphasizes the importance of sustainability reporting, including environmental, social, and governance (ESG) considerations, it does not explicitly mandate the concept of double materiality.

However, the CSRD does require companies to report on a wide range of sustainability-related matters, including environmental, social, and governance issues, that are material to their business.

This reporting aims to provide stakeholders with transparent and comparable information to assess a company's sustainability performance and impacts.

While double materiality is not explicitly required by the CSRD, companies may find it beneficial to adopt this approach voluntarily to comprehensively assess both the external impacts of their operations on the environment and society, as well as the internal risks and opportunities arising from external sustainability factors.

This broader perspective can help companies better understand and manage their sustainability risks and opportunities, aligning their strategies with long-term value creation and stakeholder expectations.

Materiality assessment serves as a strategic tool for retail and fashion companies to navigate the complex landscape of sustainability.

At Renoon we understand the challenges, and we are happy to help your team leverage Materiality Assessments. 

To find out more how we can help, reserve a free consultation here

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