Materiality is a US concept where material information, e.g., financial statements, are considered matters where an average investor is reasonably informed before purchasing a security or financial instrument. Double materiality, conversely, is an EU concept introduced by the regulators in assessing ESG/CSR disclosures and information at multiple levels, not only on the official disclosures but also the environmental, social and governance issues.

The concept of EU double materiality must describe how corporate information is essential for its implications for a firm’s financial value and impact on a wide range of ESG components or the world.

Double dipping is an unethical corporate practice whereby the business earns advantages from multiple sources. Double dipping regarding financial gains (twice) can lead to reprimands, fines or suspensions from the oversight authorities, regulators and courts for offending the regulatory compliance mandates.
Double dipping is not only a practice of receiving two incomes from the same source. However, in ESG/CSR terminology and mandates, executing an inside-out and outside-in approach that goes beyond the compliance of double materiality in sustainability ESG and CSR management can be classified as a double dip.

Climate change and other environmental social governance impacts.
The key is to identify where precisely the ESG impact of a company (investment or a portfolio) impacts the climate or the broader environment that can be identified as material (the US concept). The critical issue is for the directors and management to know precisely if there is a material impact and where the material
impact affects ESG and CSR components.

The EU idea of double materiality that is also getting validity in the US comes from the recognition that a company’s impact on the environment beyond the financial impact to the immediate stakeholders can be material from the environmental viewpoint and, therefore, must be disclosed in the relevant publications for reasons other than the effect on a firm’s bottom line.

The Esguiera framework on double materiality
Therefore, before customising the corporate double materiality checklist, review the two other blogs in this newsletter on the ten pillars of sustainable governance and the five additional areas for sustainable corporate authority with a particular focus on these areas: The Esguiera framework on double materiality has five steps:

Step 1: Identify and engage stakeholders and list the strategic implications for double materiality.
Step 2: Identify, define and assess the potentially relevant sustainability issues and concerns.
Step 3: Categorise, document, and evaluate the ESG impacts, risks and opportunities for each business line.
Step 4: Assess the impact of step four based on the severity of the financial implications and the impact on a wide range of ESG components or the world at large, particularly for the business opportunities and risks.
Step 5: Customise a roadmap and framework for the ESG materiality overview, implementation, execution and monitoring of double materiality.
Step 6: The meaning of double materiality must then be debated and analysed in each business or division by going through the following double-materiality checklist to identify the components that the ESRS require companies to report on their impacts on people and the external environment alongside reporting financial risks and opportunities impacted by environmental and social issues:

The double-materiality checklist

  • How can the organisations focus their efforts on ESG sustainability matters relevant to all stakeholders?
  • Translate ESRS criteria on the impact on people and the external environment alongside the reporting of financial risks and opportunities impacted by environmental and social issues (for example, on how to assess the scale, scope, likelihood and remendability) into tailored assessment guidance to ensure experts assess impacts, risks and opportunities consistently.
  • Test your material topics with stakeholders and leave room for challenges and a discussion on strategic considerations in your dialogue with stakeholders.
  • Define and assess impacts, risks, and opportunities with relevant input from Sustainability, Strategy, Finance, Risk, HR, and Legal departments.
  • Go granular if you want to gain new strategic insights. Your assessment should also enable you to identify disclosure requirements and data points relevant to you.
  • Ensure that outcomes from the double materiality assessment are shared across the organisation and embedded in strategic decision-making.
  • Properly document all assumptions and steps in the process. You will need this to get assurance.•. Dip recessions happen when a recovery stalls prematurely, and the stall accelerates into a second and potentially more destructive recession.
  • The above plan on double materiality assessment is the first mandatory step towards EU CSRD compliance.
    For more precise information, please see the Esguiera training and certification options:

Besides getting knowledge on the above subjects, participants get the checklists, solutions, and templates to implement, execute and monitor the double materiality analysis and present it to the auditor for review, analysis, audit and ultimate certification.