Sustainability Disclosure Standards: Difference between Single Materiality and Double Materiality
Sustainability Disclosure Standards: Difference between Single Materiality and Double Materiality
Sustainability Disclosure Standards: Difference between Single Materiality and Double Materiality
While a variety of complex topics make up the sustainability landscape, not every sustainability-related issue will be of equal importance to organization. Understanding the scope of materiality assessment and clearly articulating the boundaries that have been set is critical. To identify which issues are most relevant for business and stakeholders, companies should conduct their materiality assessment. Materiality is affected by perceptions of the information needs of intended users of the sustainability information. Materiality in the context of financial reporting focuses on the decision-making needs of investors. Materiality in the context of sustainability reporting often considers much broader stakeholders such as local communities, employees, suppliers, customers, consumers, and regulators.
Currently, there are two different approaches which are used in determining materiality which are single and double materialities. It is important to understand the difference between "single materiality" and "double materiality" approaches to assessing sustainability-related risks and opportunities. These two approaches are distinct but interconnected in evaluating and disclosing the impact on sustainability-related matters. Without understanding these impacts, it won’t be possible to get a complete overview of financial risks affecting companies.