Why smart companies benefit from a ‘double materiality’ reporting system
With changes under way in the sustainability reporting landscape,
clarity on what the scope of the various initiatives are, as determined
by their approach to materiality, is essential if organizations are to
understand their reporting obligations.
The latest issue of The GRI Perspective - The materiality madness: why definitions matter – demystifies the recent explosion in terminology. It explains the approaches of the GRI Standards (impact materiality), the IFRS’ International Sustainability Standards Board (ISSB) (financial materiality) and the incoming European Sustainability Reporting Standards (double materiality), and how they interconnect.
The paper sets out that, to meet the expectations of stakeholders,
companies need to disclose sustainability information that relates to
both financial value creation and their impacts on the environment and society. Taken together, these two approaches are the basis for double materiality.
Eelco van der Enden, CEO of GRI, said:
“It stands to reason that
investor-focused sustainability reporting through the financial
materiality lens alone will not allow for companies to be held
accountable for their impacts on the environment and people. To suggest
otherwise sows confusion and underlines why we need to be clear about
the differences and synergies between the various initiatives; in
particular, the approaches to materiality and the audiences they serve.
At GRI, we view the ISSB’s
sustainability-related disclosure plans and Europe’s incoming Corporate
Sustainability Reporting Directive as complementary rather than
competing. Alongside GRI’s widely-adopted standards for sustainability
impacts, there are strong opportunities for alignment between all three.
We believe it is in the interests of all
stakeholders to move to a two-pillar corporate reporting structure,
with financial and sustainability reporting on an equal footing. The
basis of this overarching system has to be double materiality. That is
the only way to achieve the comparable and effective reporting needed to
drive corporate accountability.”
GRI
© GRI - Global Reporting Initiative
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