Crafting tomorrow's narrative
Double materiality as an innovation trailblazer
Whether you've already started documenting your sustainability plans or not, you may have stumbled upon the concept of 'double materiality.' In the CSRD - Corporate Sustainability Reporting Directive - this concept plays a crucial role. But why is it essential, what does double materiality entail exactly, and how does it influence your sustainable innovation agenda?
Navigating new regulations
As we previously highlighted in an earlier article about the CSRD, new legislation requires companies to report on their sustainability performances starting from 2024. Hence, it's wise to contemplate reducing associated risks and determining how you'll comply with these regulations. While at it, consider future opportunities. All this can be structured within an agenda for sustainable innovation.
Bear in mind that your reporting needs to adhere to specific regulations. These are termed the ESRS (European Sustainability Reporting Standards). One standard within this framework involves companies conducting a double materiality assessment together with all their shareholders to determine the relevant sustainability themes - material ones - which consequently take precedence on your innovation agenda.
A balanced view
The CSRD mandates companies to evaluate a sustainability issue from two perspectives: double materiality. This entails looking at financial materiality - how your company creates value from sustainability. Companies are already reporting on this in their annual reports, but is interesting to learn what percentage of their profit they can be proud of. On the other side, you're also examining the impact materiality your company has on society, people, and the environment. For instance, the pollution caused by emissions or the working conditions for both direct employees and those within the supply chain.
A sustainability theme meets the criterion of 'double materiality' when relevant from either one of these perspectives or from both. Both perspectives hold equal importance.
The key innovation steps
Now that you understand what double materiality entails, the next step is its implementation. Conducting a double materiality analysis provides a clear insight into the requirements of various stakeholders. The truly significant challenges rise to the top of your analysis and form the foundation for your innovation agenda.
How do you determine what's relevant for society, people, and the environment? Ask your stakeholders. To specify the questions, it's beneficial to delve deeper into ongoing discussions, perhaps through sentiment analysis on social media, news articles, scientific reports e.g., from the IPCC (Intergovernmental Panel on Climate Change), and other scientific sources.
Bring your double materiality analysis to us, as a great starting point to identify your Pathways to Impact filled with thriving circular business opportunities. Including defining an Impact goal, strategic value chain positioning, a comprehensive solution and business model roadmap, and risk mitigation strategies. For a sound direction toward a blooming business transition.