New Metrics

From Reporting Checkbox to Strategy Input:
The New Case for Double Materiality

For years, double materiality assessments have been treated as a box to check ahead of CSRD reporting deadlines. With that scope now narrowing, sustainability teams are left asking what the exercise is actually for, and the answer emerging is a shift from periodic disclosure to ongoing strategic input.

Brand Provided | By Nick Sanscartier | Published 2 hours ago | About a 6 minute read

Image: Photo by Lukas Blazek on Unsplash

Double materiality assessments have spent the past few years being treated primarily as a compliance exercise; a box to check ahead of CSRD reporting deadlines. But as the regulation's scope has narrowed under the Omnibus revisions, a different question is emerging for sustainability teams: what is the assessment actually for, once compliance alone isn't the driving force?

For many companies, the answer is that materiality is shifting from a periodic disclosure requirement into an ongoing input for risk management and strategy; something revisited as markets, supply chains, and operating footprints change, rather than redone from scratch every few years. That shift also changes who's in the room: if materiality findings are meant to inform business decisions rather than just satisfy a reporting requirement, finance and operations teams increasingly need a seat at the table alongside sustainability.

Nick Sanscartier, Vice President of Partnerships & Strategy at Novisto, spoke about what a more continuous, data-driven approach to materiality looks like in practice, and where human judgment still has to override the data.

What's actually changing about materiality assessments right now: is it the regulations, the stakeholders, or how companies are using the outputs internally?

NS: It’s really a combination, but I think the biggest change is how companies are using the outputs. Regulation has been an important driver, particularly in Europe, but companies are increasingly looking at materiality as more than a reporting exercise. The assessment can help identify which sustainability issues could affect the business, where the company has its most significant impacts, and where those issues should factor into risk management and strategy. So we’re starting to see materiality move from something companies do periodically for disclosure purposes to something that can inform broader business decisions.

CSRD's scope has narrowed significantly since the Omnibus changes. Does that make double materiality less urgent for mid-sized companies?

NS: CSRD has been an important driver for double materiality, but the value of the process goes beyond compliance. Companies still need to understand what sustainability topics and data points they need to report to their stakeholders on, and importantly which sustainability-related risks and opportunities could affect the business and where they are having their most significant impacts. For organizations outside the scope of CSRD, double materiality can still provide a useful framework for risk management, sustainability planning and business strategy.

What does "continuous" materiality assessment look like in practice?

NS: Continuous materiality means moving away from a one-time assessment that quickly becomes outdated. Instead, companies can revisit and update the assessment as business circumstances change, such as entering a new market, acquisition/divestments, supply chain shifts, or any alterations in operational footprint. Furthermore, the external context is constantly evolving whether it’s regulatory landscape, technological advancements, or scientific research – and it’s critical to monitor these material changes over time.

Stakeholder engagement is the slowest part of a traditional assessment. How do you keep that meaningfully ongoing without it becoming a box-checking exercise that stakeholders tune out?

NS: Stakeholders remain an important part of evaluating materiality, the approach is just different. Traditionally, stakeholders have been the primary source of idea generation for material topics and IROs via a cumbersome series of workshops and interviews. Despite these exhaustive efforts, much still gets lost due to the qualitative nature and limited sample size being considered. With a data-driven approach, a highly representative array of objective considerations become embedded in the assessment. This then allows for more effective stakeholder engagement leveraging a more focused subset of stakeholders. Any areas of divergence between data-driven recommendations and stakeholder feedback can then be investigated, allowing resources to be solely concentrated where novel anecdotal evidence can be acquired to refine the assessment and strategy.

You're using GIST Impact's methodology as the scientific backbone. What does "science-backed" mean concretely here: is this peer-reviewed, third-party validated, benchmarked against other frameworks?

NS: GIST Impact have been experts in measuring impact for nearly two decades, and have expanded on this foundation to develop a comprehensive scoring model for materiality. The methodology combines primary data stored in Novisto’s system of record, with a variety of external sources including scientific literature, media, regulations, and peer/sector level datasets. It is therefore scientific both in terms of the type of sources it incorporates, but also in terms of the objectivity it yields by calibrating against peer and sector datasets. The methodology has been endorsed by some of the largest assurance providers in the world.

What happens when a company's materiality outputs from this tool conflict with judgment calls their sustainability team wants to make for strategic reasons? Does the tool defer to the data or to the team?

NS: Ultimately, the discretion and agency resides with the practitioners driving the assessment. The purpose of the tool is to inform decisions, by making recommendations with complete traceability, including rationale and lineage to underlying sources. Anecdotal gathered through the stakeholders that cannot be captured through data, can then be compared against to identify any potential recommendations that can be overridden.

What's the closest existing alternative, and what does this actually do that a well-run internal process with a shared tracker doesn't?

NS: The closest alternatives exist in three forms: 1) a consultant-led assessment, 2) a documentation workflow embedded in a sustainability platform, or 3) a materiality engine that is not embedded into a sustainability management platform.

Consultant-led assessments have been the conventional approach historically, and are primarily driven by stakeholder feedback and typically result in high costs and long timelines, while also being a static point in time analysis. In the second instance, these platforms offer a DIY approach to materiality that is absent of data or methodology, allowing practitioners to document their findings and decisions stemming from stakeholder exchanges. In the last case, these standalone solutions can offer a more robust analysis than the first category of alternative, however they still lack the bottom-up granularity gained by leveraging the businesses bottom up data stored in a system of record. Further, they do not benefit from the continuity of the materiality assessment directly driving the data points you manage and report on.

If double materiality becomes less of a compliance requirement and more of a strategy input over the next few years, what changes about who owns this process inside a company?

NS: I think it becomes much more cross-functional. Sustainability teams may still lead or coordinate the process, but if materiality is being used to inform risk management, strategy and other business decisions, functions like finance and operations will naturally need to be involved. If an issue can have a real impact on the business, it needs to be understood and managed beyond the sustainability team.

What's the one thing sustainability teams get wrong about materiality assessments that you wish more companies understood before starting one?

NS: Getting started doesn't have to be daunting. Technology lowers the barriers in terms of time and cost, so it stops being a special project and can actually become integrated as part of the annual reporting cycle. You also don't need perfect data to begin. Companies earlier in their maturity can start with estimates and convert to a higher resolution assessment as their data improves. The assessment improves each cycle as a result rather than starting from scratch each time, building on an incremental foundation. Materiality truly is a journey that anyone can begin today.