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Why Double-Materiality is Crucial for Reporting Organizational Impacts


Research sets out benefits of robust sustainability reporting alongside financial disclosure.

A white paper commissioned by GRI investigates the application of materiality in sustainability reporting. The paper highlights why disclosing impacts that go beyond those that are financially material benefits organizations while supporting sustainable development.

The paper — The double-materiality concept: application and issues — was produced by a team led by Professor Carol Adams of Durham University Business School (UK). Drawing on academic research, it assesses the challenges, opportunities, and relevance of applying double-materiality in sustainability reporting.

Key Findings

  • The identification of financially materiality issues is incomplete if companies do not first assess their impacts on sustainable development.
  • Reporting material sustainable development issues can enhance financial performance, improve stakeholder engagement, and enable more robust disclosure.
  • Focusing on the impacts of organizations on people and planet, rather than financial materiality, increases engagement with the Sustainable Development Goals.

Double-materiality is central to the European Commission’s proposed Corporate Sustainability Reporting Directive (CSRD). It also closely aligns with the materiality approach in the GRI Standards. This paper seeks to inform the debate around how this concept drives sustainability and supports better decision-making by investors and other stakeholders.

Professor Carol Adams, Durham University says, “Accountability for the impacts of an organization on society and the environment is critical in achieving sustainable development. That is why rigor in the approach to identifying material impacts and their governance oversight is required for sustainability reporting that meets the needs of all audiences. This research concludes that robust reporting of sustainability impacts is necessary for companies to determine risks and opportunities. Despite this reality, many organizations tend to prioritize financial materiality, which is not only detrimental for sustainable development but, ultimately, also affects their bottom line.”

GRI Chief External Affairs Officer Peter Paul van de Wijs states, “GRI is committed to informing and leading the debate on how transparency on organizational impacts, as enabled by reporting, can contribute to sustainable development. We are therefore grateful to Professor Adams and her team for this insightful contribution. As the European Commission seeks a sustainability disclosure solution that has double-materiality as the cornerstone, in which GRI is actively engaged, the time is right to assess the benefits of the concept. This paper provides the academic grounding for why we need a corporate reporting system with sustainability reporting on an equal footing with strengthened financial reporting.”

The white paper is an invited contribution that was commissioned by GRI. It was independently produced by the report authors: Carol Adams, Abdullah Alhamood, Xinwu He, Jie Tian, Le Wang, and Yi Wang.

On 21 April, GRI welcomed the proposed EU CSRD, which confirmed the adoption of double-materiality — reporting on two sustainability factors affecting the company (financial materiality) and how the company impacts on society and the environment (outward materiality).

The update to the GRI Universal Standards to be released later this year makes clear that understanding impacts on the economy, the environment, and people is necessary in order to identify financially material risks and opportunities.



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