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Double materiality- The future of corporate sustainability research

We know that the availability of raw materials, a company needs to produce its products, is negatively impacted by climate change and the overexploitation of natural resources. Climate change, among other things, affects natural resources as a result of changes in climatic conditions (rainfall patterns, drought events and so on), which have a significant impact on the ecosystems where these natural resources and their functions are located.

Let's presume that a company that produces and sells furniture wants to conduct a materiality analysis of its operations, incorporate the results into its strategy, and then include the results in its annual sustainability report.

With a single materiality assessment, the company will recognize the materiality of the above issues and identify their potential negative impact on its future financial profile and activities.

With a "double materiality" analysis a company will identify how its own actions regarding climate, environment and natural resources affect the economic consequences it will suffer in the future

However, if the company should conduct a double materiality assessment, it will first identify the impact of climate change and natural resource management on its operations (supply chain, production, etc.), and then, it will identify how itself (the company) with its actions (greenhouse gas emissions, poor management of natural resources, non-compliance with environmental legislation, etc.) affects the climate, the environment and the availability of natural resources. As a result, the business itself affects the economic consequences it is likely to suffer in the future.

In general, a single materiality assessment identifies the issues that affect the financial situation of a company from "outside to inside" (company). On the other hand, double materiality assessment extends to identifying the effects of the company from "inside to outside", i.e. towards the environment and society.

Double materiality analysis focuses on the long-term sustainability of a business through its own operations and strategy

Double materiality assessment has two interrelated dimensions, impact materiality, and financial materiality.

Starting from impact assessment, an issue is material to a business when it relates to the actual or potential, positive or negative consequences of its activities on the environment, climate, or society in the short, medium, or long term and is most highlighted by stakeholders such as investors, consumers, employees, and the wider community. If this issue has significant short- or long-term financial implications for the business itself, it can then be "translated" into a financial material problem and will be raised more by investors or managers (shareholders, the board of directors, executives).

Double materiality assessment focuses on the impact of material issues on the long-term sustainability of a firm through its operations and strategy. Therefore, the inclusion of this information in the annual sustainability report gives a more complete picture of the company's ESG performance.

RiskClima cloud platform, enables companies to automatically produce their double materiality assessment. With specific for each business questionnaires it collects data from a variety of stakeholders (inside and outside the business), while at the same time links the results to the financial data of the business. Additionally, it automatically generates analytical reports and dashboards of the findings from materiality surveys as well as materiality matrices to identify impacts, risks, and opportunities relevant to the business. This increases transparency, improves communication between stakeholders and allows for informed decisions to be taken on the basis of the results of the analysis.


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