Double materiality assessment

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With evolving EU regulations, and specifically the Corporate Sustainability Reporting Directive (CSRD), the double materiality assessment has become a priority assessment for most companies operating in Europe and beyond. In addition to being the foundation of effective sustainability reporting, it also serves as a strategic tool for your business.

The double materiality assessment is the basis for reporting under the European Sustainability Reporting Standards (ESRS), but it is also valuable for companies not required to comply with the CSRD.

When combined, the double materiality assessment provides an overview of where the company has the greatest impact, how ESG factors affect the business, and how sustainability should be integrated into the strategy to ensure long-term success and resilience.

The assessment is based on business operations, the value chain, and stakeholders. It identifies which areas of sustainability are material to your business. In short, it is a strategic tool that ensures you focus on and report on the areas of sustainability where your company has the most significant impacts, risks, and opportunities.

Topics can be considered material from two perspectives. If a topic is deemed material from at least one of these perspectives, it must be reported on.

Financial materiality: This refers to how the external environment affects your business, including factors that influence development, earnings, and results.
Impact materiality: This refers to the impact your business has on the world, including the climate, environment, and people.

Christian Møllegaard

Partner, Audit

KPMG in Denmark

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Why conduct a double materiality assessment?

Mandatory regulations

Many Danish businesses are required to report according to CSRD. One requirement of the directive is to conduct a double materiality assessment, and it can be both wise and profitable to start preparing early
Increases trust with stakeholders

Dialog with stakeholders helps understand how they are affected and to see and understand their point of view.
Increases risk management

The assessment will help you identify sustainability challenges and risks that can be important to integrate into your business risk management.

Improves prioritization

You will be able to identify which areas should be prioritized in your sustainability work and therefore most essential to focus on.
Strategic tool

The assessment can be used to develop a solid sustainability strategy that sets the right direction and level of ambition and delivers actual results.
Ownership by the board and management

The analysis contributes to ensuring ownership and anchoring of sustainability broadly, and particularly at management level.

We can help you

We map your company's context around relevant processes, value chain, stakeholders, markets, and sectors, etc.

We collect data through conversations, desk research, benchmark analysis, and workshops with internal and external stakeholders.

We identify actual and potential impacts, and their severity. In addition, we facilitate the exploitation of opportunities that can impact the business's value creation and assess the materiality of identified risks and opportunities.

We support you in determining a threshold, which decides the scope of your CSRD report.

The double materiality assessment has a holistic perspective, and the assessment should involve different functions in the company – especially finance, risk, and strategy – as well as the sustainability team. This helps bridge the gap between sustainability and the rest of the business.

We can help you prepare your sustainability report, as well as an action plan for implementing measures and processes to strengthen the company's overall sustainability efforts.

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