Double materiality assessment: two directions, one exercise

A double materiality assessment decides which sustainability topics a company has to report on, and it asks the question twice. Impact materiality: what effect does the business have on people and the environment. Financial materiality: what effect do sustainability matters have on the business — its costs, its access to capital, its licence to operate. A topic is material if it passes either test, which is why the exercise produces a longer list than the financial-only version companies were used to.

What a double materiality assessment produces

• A list of topics assessed, including the ones ruled out — the exclusions are as much part of the evidence as the inclusions.
• For each topic, an impact score and a financial score, with the scale and thresholds stated.
• The reasoning per topic, in a sentence or two, so a reader can see why a threshold was crossed.
• The stakeholders consulted, and what they said, since impact materiality cannot be assessed credibly from inside the building alone.
• The value chain considered: upstream, own operations, downstream. Most impact sits outside your own operations, and stopping at the factory gate is the usual weakness.
• A date and an owner, because the assessment has to be repeated and compared.

Running it without a consultancy

1. Start from a published topic list rather than a blank page — the reporting standards enumerate topics, and inventing your own categories makes comparison impossible.
2. Map the value chain first, at the level of activities rather than legal entities. This is the step that determines whether the assessment is real.
3. Score impact on severity and likelihood, and remember that for actual impacts severity alone is enough — likelihood applies to potential impacts.
4. Score financial effect on magnitude and likelihood over short, medium and long horizons, stated as years rather than adjectives.
5. Consult stakeholders proportionately: for a mid-sized company that means a handful of structured conversations, not a survey programme.
6. Take the resulting list to whoever signs the report, and record their decision — this is a governance output, not an analyst’s spreadsheet.

The two directions genuinely differ, and conflating them is the most common error. Climate is financially material to almost everyone; whether your own emissions are impact-material depends on their size. A topic can be impact-material with no financial consequence to you at all, and reporting it anyway is the point of the double test rather than an oversight in the design.

Where assessments go wrong

• Scored once and never revisited, so the assessment describes the business as it was two years ago.
• Stakeholder consultation reduced to a customer survey, which captures one group and misses workers and affected communities entirely.
• Thresholds chosen after the scoring, which is how every topic conveniently lands just below the line.
• The value chain drawn to the first tier only, when the material impacts are usually two or three tiers out — the same problem a modern slavery statement runs into.
• No link to the risk register, so a topic assessed as financially material does not appear anywhere in risk management.

Where the assessment lives

Ettex Records suits this as a record per topic — scores, reasoning, stakeholders, date, owner — rather than a document, because the value is in comparing this year to last and showing what changed. Keep the stakeholder input attached to the topic it informed instead of in a separate consultation file. It should feed the risk register directly, since a financially material topic that never reaches risk management has been assessed and then ignored. Ettex does not interpret reporting standards, does not score materiality and is not a substitute for advice on which regime applies to you — the thresholds and timelines differ by jurisdiction and are still moving.