Double Materiality
The concept of double materiality acknowledges that a company should report simultaneously on sustainability matters that are:
- Financially material in influencing business value and;
- Material to the market, the environment, and people.
In the Law:
Treasury has outlined its position regarding double materiality in a consultation paper, stating: “While the proposed requirements would not prevent companies adopting a double materiality approach as part of their disclosures, double materiality is not currently the main objective of the proposed mandatory climate disclosure requirements.”
During earlier consultations this year, certain stakeholders proposed a preference for a double materiality approach, requiring companies to not only consider but also disclose the external impacts resulting from their operations.
In the Company Boardroom:
From a company perspective, double materiality can help companies meet stakeholder demands for transparency. In complex corporate settings, stakeholders often have different, sometimes conflicting views on material sustainability topics. Direct stakeholder engagement can help build trust and credibility, enhance reputation, and improve long-term viability.
In the Investment Houses:
Investors are keen to see companies taking into account their material topics, and if this encompasses the comprehensive aspect of double materiality, then all the better. Typically, investment professionals determine a company’s double materiality as part of their analysis. Therefore, it would be more accurate and time-saving if companies undertook this task themselves, enabling investment professionals to rely on the company’s completed work.
Our View:
Both materiality and double materiality are essential concepts in sustainability reporting. By considering both types of materiality, companies can provide a more comprehensive picture of their sustainability performance and impact. We understand that double materiality is a more mature perspective and we would implore companies to consider a ‘singular’ materiality view first and then consider their double materiality impacts.
For additional information on this important topic or ESG assistance, contact us today at info@anabranchesg.com.au
