Materiality Assessment Creates the Foundation for Responsibility Goals and Sustainability Reporting
The Materiality Assessment tells about the sustainability risks to which the company is exposed, as well as the effects of the company’s own operations on people and the environment.
The materiality assessment helps to understand the most significant activities related to responsibility for the company and to identify the issues that have a key impact on the company’s ability to create value. With the help of a materiality assessment, companies have a clearer picture of the sustainability risks to which the company is exposed, as well as the effects of the company’s own operations on people and the environment.
The double materiality principle guides the materiality assessment of companies
With the help of a comprehensive materiality assessment, the most significant sustainability aspects for the company are defined and the issues that have a central effect on the company’s ability to create value are identified. Companies should act on time and map the situation of the operating environment that is essential for the company. Forerunner companies have the best opportunities to ensure new business opportunities through responsible operations.
The materiality assessment of corporate responsibility serves as the basis for the company to have up-to-date information on what kind of effects sustainability risks, such as climate change, can have on the company’s results and operations (outside-in). Companies must also be aware of the effects of their own operations on people and the environment (inside-out). This principle of reporting from both perspectives is called double materiality, which is clarified in the EU Sustainability Reporting Directive (CSRD).
The principle of double materiality means that the company has to make two separate materiality assessments. In the future, double materiality will serve as a central guiding principle in assessing sustainability effects, but Corporate Responsibility cannot rely on it alone. The company must assess the materiality of sustainability issues and risks from two different perspectives (outside-in and inside-out).
The aspects of materiality must be taken into account separately, and in addition, the key aspects that are essential for the company from both perspectives must be taken into account. Sustainable Development goals cannot be deprioritized just on the basis that some sustainability risk does not seem to have financial effects on the company. Companies should keep their materiality assessment up to date and update it regularly.
Sustainability reporting is developing
The goals of Sustainable Development are now especially relevant for companies’ value creation. Guided by them, the company achieves results in a planned and sustainable way, respecting nature and people. Customers are more aware than before of the possibilities for companies to act in an environmentally friendly manner, and thus the market-based demand for a green transition has grown.
A company that operates in a sustainable and responsible manner makes climate goals and other sustainable development goals part of its strategy and ensures the achievement of business benefits despite changing world situations. Companies are required to have a clear situational picture of its effects on the environment, society and people, also taking human rights into consideration.
Sustainability reporting will be a regulatory obligation in the future, when the new corporate sustainability reporting directive (CSRD) becomes applicable in all EU member states. An even larger number of companies will be covered by the reporting obligation, which must report more detailed information about their business operations. At the latest, as required by regulation, company management must take a more significant role than before in setting the company’s sustainability goals and ensuring the achievement of responsibility goals.
Materiality assessment in cooperation with Ecobio
We help your company prepare a versatile corporate responsibility materiality assessment and a road map, with which the responsibility goals are more easily utilized in strategic decision-making.
