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 organisations 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. 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 organisations 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.

Professor Carol Adams said: “Accountability for the impacts of an organisation 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.

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This research concludes that robust reporting of sustainability impacts is necessary for companies to determine risks and opportunities. Despite this reality, many organisations tend to prioritize financial materiality, which is not only detrimental for sustainable development but, ultimately, also to their bottom line.”

Peter Paul van de Wijs, GRI Chief External Affairs Officer, said: “GRI is committed to informing and leading the debate on how transparency on organisational 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.”