This July, we held a webinar on
double materiality: how to successfully implement it?
, with our expert consultant in sustainability and CSR, Arnau Domènech.
This webinar has been key to discovering how to develop double materiality, following the indications of the Commission’s Delegated Regulation 2023/2772 regarding rules for the presentation of information on sustainability and other sources of information, with the objectives of having more efficient and sustainable internal management and being prepared for future Sustainability Reports, which will replace the current Non-Financial Information Statements (NFIS).
If you were unable to attend, this article provides a summary of the session and the most important conclusions.
Introduction to Double Materiality
Double materiality is the evolution of conventional materiality, which focuses exclusively on our impact on the outside and the assessment by stakeholders. This impact materiality is still valid and can be a useful tool until double materiality is developed.
However, it is important to understand double materiality. This is mandatory for companies that have to prepare their Sustainability Reports and brings a number of advantages for all organizations, since it analyzes both the financial dimension and the dimension of impact and, with the results obtained, identifies the steps to follow.
Double materiality focuses on the importance of organizations not only considering how their activities impact their environment, positively or negatively, in the social, environmental, economic and governance fields, but also taking into account other external or internal factors in sustainability matters that affect or may positively or negatively affect their finances. In this way, double materiality focuses on how the organization’s activities impact the outside and how finances can be significantly affected by sustainability issues.
In this line, it is necessary to identify and evaluate the impacts, risks and opportunities of companies (IROs), as well as having a well-defined value chain.
The Commission’s Delegated Regulation 2023/2772 defines the value chain as “the full range of activities, resources and relationships linked to the company’s business model and the external environment in which it operates”. This includes the entire process from the development of products or services to their delivery, consumption and end of useful life.
Therefore, it could be classified as follows:
- Upstream: Supply chain operations (companies supplying products or services). Not only direct contractual relationships.
- Own operations: This section includes the parent company and subsidiaries, and process maps can be useful to keep in mind the activities carried out in the organization.
- Downstream: This refers to the products or services sold until the end of their useful life. For example, customer service or waste management.
Other aspects that may come into play when determining the IROs and the affected stakeholders are the financing, geopolitical and regulatory environment in which the company operates.
What are its Phases?
When developing double materiality, the process can be divided into 3 phases:
Phase 1. Contextualization of the sector
This phase is essential, since it includes the analysis of the business model, the context, sector and internal and external stakeholders, aspects that will help to identify the value chain. It is also necessary to observe the competitors and the voluntary indicators that can provide information, such as the sectorial Global Reporting Initiative (GRI). Both internal and external sources of information must be used.
Phase 2. Identification of possible IROs
Based on the knowledge of the first phase, and the internal knowledge of the organization, possible IROs to be taken into account for the evaluation of double materiality are identified and selected. It is important to know, at a minimum, all the topics addressed in the thematic European Sustainability Reporting Standards (ESRS) (environmental, social and governance).
Phase 3. Evaluation of the IROs
Finally, the IROs are evaluated to identify the most significant ones, following the criteria of the impact dimension and the financial dimension indicated in Delegated Regulation 2023/2772. From Energía Local we take several sources of reference in addition to the Regulation, such as the EFRAG or GRI guides to find the most appropriate double materiality development methodology for each organization.
The result of double materiality is the essential basis for future Sustainability Reports, since information on the IROs identified will have to be reported.
At Energía Local We Help You with Double Materiality
As mentioned in the article, double materiality is key for future Sustainability Reports and their reporting obligations. In addition, it benefits the proper functioning of the organization, through the identification and management of IROs, and to proactively anticipate possible internal or external changes.
If you are interested in learning more about double materiality,
do not hesitate to contact our team
. We will advise you personally.