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Term · ESG & Sustainability

Double Materiality

SpecialistAlso: Double Materiality
In briefDouble materiality is the principle of EU sustainability reporting of examining topics from two angles: the company's impact on the environment and society, and the financial effect of sustainability topics on the company. If either perspective is material, reporting is required.

Definition

Double materiality is a fundamental principle of European sustainability reporting. It requires sustainability topics to be viewed from two perspectives: the company's impact on the environment and society (impact materiality) and the financial effect of sustainability topics on the company (financial materiality). A topic is subject to reporting if it is material from at least one of the two perspectives.

Why it matters for small caps

Smaller capital-market-oriented companies that fall under the CSRD must systematically derive their material topics via double materiality. The scope of the reporting obligation depends directly on the outcome of this analysis.

Common misreadings

  • Double materiality is often understood only as environmental impact, even though it expressly also covers the financial repercussions for the company.

In the process

→ Used in Step 4 – Business model

Frequently asked

Where is double materiality regulated?
It is part of the CSRD and the European Sustainability Reporting Standards (ESRS) built on it, which set out the framework for the materiality analysis.
What are the two perspectives specifically?
The impact perspective asks how the company affects the environment and society. The financial perspective asks how sustainability topics create opportunities and risks for the company.
Does this also affect smaller companies?
The CSRD widens the circle of companies subject to reporting. Whether a particular small company is affected depends on threshold values and transition periods.

Related terms

CSRDEU TaxonomySegment Reporting

Sources

Primary
Category: ESG & Sustainability · Sustainability ReportingRelevance: SpecialistJurisdiction: EU

Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.