Dual materiality is a concept that involves two major perspectives: on the one hand, assessing the impact that the company's activities have on the environment and society, and on the other hand, how sustainability risks and opportunities affect the company's financial performance.

Guide EFRAG IG 1: Materiality Assessment Implementation Guidance, provides essential details on the assessment of dual materiality, a fundamental process for companies' sustainability strategies under the European Corporate Sustainability Reporting Directive (CSRD).

Scoping and identifying relevant ESG topics

The first step in assessing dual materiality is scoping, which involves identifying the relevant topics from an ESG (environmental, social and governance) perspective. According to EFRAG guidance and ESRS standards, this process requires a tailor-made analysis according to the specifics of each organisation. Companies need to include topics such as greenhouse gas emissions, resource management and internal governance in order to fully understand where risks and opportunities are concentrated.

Stakeholder involvement

An essential step in the evaluation process is consultation with stakeholders: customers, employees, investors, public authorities and local communities. Engagement methods, such as interviews, surveys and focus groups, help to get an integrated view of the company's impacts. Consultations provide a comprehensive perspective on how the company's activities influence the environment and society and help to identify relevant risks and opportunities for assessing materiality.

Determining impact materiality and financial materiality

Impact materiality involves assessing the effects that the company's activities have on the environment and society, including criteria such as the scale and severity of the impact. Financial materiality, on the other hand, focuses on identifying risks and opportunities that could affect the company's financial performance, such as costs associated with new environmental regulations or opportunities for resource efficiency. These two dimensions of materiality are analysed simultaneously to determine the relevance of each issue from both perspectives.

Value chain analysis

A critical element of dual materiality assessment is the inclusion of the entire value chain in the analysis. It is important to assess environmental and social impacts at all stages of the supply chain, from suppliers to distribution. Through this approach, companies can identify critical points of risk or opportunity that may influence sustainability reporting and improve risk management strategies.

Prioritising ESG topics and assessment methods

Once the relevant topics have been identified, companies need to prioritise them according to their impact and importance, both financially and in terms of social and environmental impact. This is done using both qualitative and quantitative assessment methods such as risk scoring, benchmarking or comparative analyses. Proper prioritisation ensures that resources are focused on the issues that are essential for the long-term success of the sustainability strategy.

Documentation and transparency of the process

Full documentation of the materiality assessment process is mandatory in order to demonstrate transparency and compliance with CSRD requirements. This involves detailing the data sources, the methods used to analyse and the reasoning behind each decision. In addition, the assessment needs to be regularly updated to reflect changes in the business context and environmental regulations.

Dual materiality assessment is not only a compliance requirement imposed by CSRD but also a valuable strategic tool for companies. It provides a deep understanding of the impact of business activities on the environment and society, while helping to identify financial risks and opportunities. Through a rigorous and transparent approach, companies can improve organisational resilience and long-term performance.