Double materiality is a central principle of sustainability reporting under CSRD and ESRS. Companies must assess sustainability topics based on how strongly they impact the environment and society, and conversely, how strongly these topics affect the company itself.
The first perspective is impact materiality (“inside-out”). It considers the positive or negative effects a company’s activities have on the environment, working conditions, human rights, or society – along the entire value chain. This view is already familiar to many companies from traditional sustainability reports, such as those based on GRI approaches.
The second perspective is financial materiality (“outside-in”). This analyzes how sustainability topics present risks and opportunities for the business model, financial position, and future viability of the company. This includes, for example, climate risks, dependencies on resources, or supply chain risks.
A topic is considered material if a previously selected materiality threshold is exceeded from at least one of the two perspectives, i.e., there is a material impact or a material financial risk or opportunity. Materiality determines which content must be included in the reporting.
The materiality analysis can be carried out group-wide or differentiated by locations and value chain stages. Regardless of the chosen top-down or bottom-up approach, structured involvement of relevant stakeholders is crucial. A clear sustainability strategy provides the framework for prioritizing results and consistently integrating them into reporting, management, and external communication.
