Double Materiality
Short Explanation: Double materiality is the idea that companies should report (1) how sustainability issues affect the business and (2) how the business affects people and the environment.
In-Depth Explanation
Traditional materiality looks at what is financially relevant to the company. Double materiality adds a second lens: the company’s impact on society and the environment. Many sustainability frameworks and regulations in Europe use this concept to make reporting more complete and to connect sustainability topics to strategy and risk. In B2B, double materiality matters because customers and procurement teams increasingly ask for credible ESG data, not only statements. It also changes internal priorities: topics can be material even if the financial impact is not visible yet, as long as the impact on stakeholders is significant.
How it Works:
- Identify topics: List relevant ESG topics for your industry (climate, labor, supply chain, governance, product safety).
- Assess financial materiality: Evaluate how each topic can affect revenue, costs, assets, liabilities, and risk over time.
- Assess impact materiality: Evaluate how your operations, products, and value chain impact people and the environment.
- Engage stakeholders: Use input from employees, customers, suppliers, and other stakeholders to validate what matters most.
- Prioritize and report: Focus reporting and actions on topics that score high in either lens, and document methods and assumptions.
Real-Life Example
A logistics company reviews emissions and finds two material topics. First, rising fuel costs and carbon pricing could hit margins (financial materiality). Second, the company’s transport emissions contribute to climate impact across its value chain (impact materiality). Even if carbon costs are still low today, the company reports both lenses, sets a reduction plan with suppliers, and updates its fleet strategy. A large enterprise customer uses that reporting in procurement scoring and renews the contract.