Dual materiality is the new central concept introduced by the Directive. CSRD (Corporate Sustainability Reporting Directive). It replaces the classic vision of simple materiality, previously used by companies to prioritize their ESG issues. This analysis of double materiality is much more than a prioritization tool: it is a mandatory step to comply with the reporting requirements imposed by the CSRD. It makes it possible to identify the information to be published in the sustainability report, by clearly explaining the methodology followed.

The cornerstone of the CSRD, this analysis determines the quality, relevance and conformity of the report. So it's a a real strategic lever to anticipate the expectations of stakeholders and build a credible dialogue around ESG issues.

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What are the foundations of double materiality analysis?

The concept of double materiality pushes the boundaries of simple materiality, introducing the notions of impact materiality and financial materiality. These two complementary approaches allow for a more strategic vision of ESG issues.

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How are impact materiality and financial materiality defined?

Impact materiality makes it possible toidentify the real or potential impacts that a company generates on the environment, people, or its value chain, both upstream and downstream. Financial materiality, on the other hand, adopts the opposite logic: it aims to identify information that is likely to have a significant effect on financial performance or on the value of the company in the medium or long term.

Here is an example illustrating the concept of double materiality for the “Water Consumption” issue:

• Impact materiality : A company that consumes large quantities of water in its production processes has a negative impact on the environment. It contributes to the degradation of water resources, affecting in particular biological water reservoirs.
• Financial materiality : Droughts, which are becoming more frequent, represent a risk for this company. They can lead to water restrictions or shortages, forcing production to be reduced, which would directly affect financial performance.

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Why do a double materiality analysis?

The analysis of double materiality makes it possible toidentify the material challenges for your business, i.e. the issues to be included in your sustainability report in accordance with the CSRD. Each issue can be associated with an impact (positive or negative), a risk, or an opportunity for your business model.

Any issue considered relevant is considered material, either from the point of view of impact, or from a financial point of view, or both.. It is therefore essential to take these two dimensions into account during your analysis and to rigorously assess the impacts, risks and opportunities — the famous IROs. The results will directly guide the information to be published according to the relevant ESRS standards.

Dual materiality reduces the space left to subjective appreciation, by requiring an evaluation of sustainability topics based on specific criteria (severity, scope, probability, irremediability), based on factual and numerical sources. It is distinguished by its methodological ambition and its strengthened legitimacy, by establishing a clear link between financial performance and environmental and social performance.

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What are the essential steps in the analysis of double materiality?

To carry out a double materiality analysis in line with the expectations of the CSRD, you must follow four essential steps:

1. Pre-select ESG issues
2. Engaging with your stakeholders
3. Quoting your IROs
4. Select a materiality threshold

These steps structure the approach, guarantee the robustness of the results and facilitate the traceability of the method used.

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1. Pre-selection of ESG issues

It all starts with identifying ESG issues that are potentially relevant to your business. It's about broadening your field of vision by analyzing the global context in which you operate. Ask yourself strategic questions: what is my sector of activity? What are my dependencies on natural or human resources? where are my operations located?

This pre-selection of ESG issues allows you to filter out irrelevant issues and focus your analysis on those that deserve particular attention.

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2. Dialogue with stakeholders

Once the issues have been pre-selected, it is time to confront your analysis in the field. The aim is to gather accurate data from internal and external stakeholders. For each issue, ask yourself: who has the most relevant information? For example, for issues related to procurement, procurement or supply chain teams are key. For social issues, HR or unions can be contacted.

Ce dialogue with stakeholders is fundamental to enrich and legitimize analysis. It reinforces the quality of the assessment and aligns you with the CSRD's transparency requirements.

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3. IRO Rating (Impacts, Risks and Opportunities)

At this stage, you have a list of ESG issues, accompanied by qualitative and quantitative information. Now is the time to list each impact, risk, and opportunity. The CSRD and the ESRS standards provide rating criteria: severity, scope, probability, irremediability, size of financial effects, etc. It is a question of adapting these criteria to the context of your business. Each IRO will therefore be attached to a note. The IROs rating will therefore allow you to have a hierarchy of ESG issues for your report.

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4. Materiality threshold and formatting of results

The analysis is almost complete. It remains to set a materiality threshold: a score level beyond which an issue is considered material (e.g. 3/5). This threshold can be adapted to your sector and your business.

Once the threshold is defined, you can format the results: list of material issues, visualization by matrix or table, link between issues and the relevant ESRS standards. These results should be clearly presented in the CSRD report, with an explanation of the method used, the sources used and the selection criteria.

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Conclusion

Dual materiality analysis is revolutionizing the way companies integrate ESG topics into their strategy. By reconciling impact and financial materiality, it becomes a real strategic exercise in identifying risks and opportunities in the medium and long term. The double materiality analysis must be carried out according to a precise methodology to ensure its legitimacy. It therefore allows companies to focus on the issues that really concern them in order to build a credible and useful sustainability report for the management and expectations of readers.

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