Integrated Approach to Materiality

Identifying relevant SDGs linked to a company’s core business through a materiality assessment and analysis is essential to understanding the link to value creation. In determining material and relevant SDGs for their businesses, companies should follow an integrated approach to materiality.

An integrated approach to materiality suggests that sustainability (including ESG) issues are material when they reflect the significant economic, environmental, and social impacts of a company and are therefore essential in creating long-term value for a broader set of stakeholders and helping investors understand the future prospects of the company.

This is consistent with the European Union’s concept of double materiality for sustainability issues, which includes:

  • financial materiality: the impact of sustainability on a company’s development, performance, and position
  • environmental and social materiality: the significant economic, environmental, and social impact of the company’s activities
The double materiality perspective of the Non-Financial Reporting Directive in the context of reporting climate-related information

Source: European Commission