A white paper commissioned by GRI investigates the application of materiality in sustainability reporting – highlighting why disclosing impacts that go beyond those that are financially material benefits organizations while supporting sustainable development.
Research sets out benefits of robust sustainability reporting, alongside financial disclosure
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 in the paper include:
- The identification of financially materiality issues are 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), while 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.
Accountability for the impacts of an organization on society and
the environment is critical in achieving sustainable development. That
is why rigour 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 to
their bottom line.”
Professor Carol Adams, Durham Universisty
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.”
Peter Paul van de Wijs, GRI Chief External Affairs Officer
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 both
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.
GRI
© GRI - Global Reporting Initiative
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