Double materiality is the evaluation of a sustainability topic from two directions: the organization’s impact on that topic (impact materiality) and that topic’s effect on the organization’s financial position (financial materiality).
A topic falls within the scope of reporting even if it is material from only one of these two perspectives. Water consumption, for example, may carry impact materiality because of its environmental impact; for an organization operating in a region with water scarcity risk, it also carries financial materiality.
Because the analysis determines the scope of reporting, it is one of the early steps of the sustainability effort. A materiality analysis carried out without stakeholder engagement is considered incomplete.
Related terms: Stakeholder · Sustainability Reporting
Related training: Sustainability and ESG Fundamentals