Capital Advisory
From our experience supporting clients through double materiality assessments, we’ve seen that a well-executed approach not only helps navigate key challenges but also unlocks strategic value. When done right, it informs sharper prioritisation, more focused efforts, and better alignment with stakeholder expectations and value creation opportunities, ultimately saving time and resources down the track. We’ve identified essential design considerations that can help you get it right and maximise the long-term benefits.
Double materiality is changing the game.
As ESG expectations rise, businesses must move beyond traditional materiality. Driven by stakeholder demand, evolving standards, and regulations like CSRD, double materiality brings a sharper focus on both financial relevance and environmental and societal impact.
It’s a dual lens approach.
- Impact materiality looks at how your business affects the world.
- Financial materiality examines how sustainability issues affect your bottom line.
This shift demands a more strategic, inclusive, and evidence-based process, one that identifies real and potential IROs, not just perceived ones. It’s not just about what matters, it’s about what matters most, and why.
Careful planning and resourcing commitment
Conducting a double materiality assessment is a meaningful but resource-intensive process
It’s important to ensure that your organisation has sufficient time, capacity, and expertise to carry out the assessment thoroughly. This work often spans several months, involving detailed analysis, extensive stakeholder engagement, and validation with senior leadership. Allocating the right budget, resources, whether internal teams, external support, or digital tools, not only helps maintain momentum but also ensures the quality and credibility of the outcomes. Investing in this process upfront will pay dividends in the form of clearer insights, stronger reporting, and more credible and informed strategic decisions.
Establish a list of useful, fit for purpose topics and definitions
Framing topics to surface IROs
Start with research, not assumptions. Topic selection should be grounded in evidence to avoid bias and ensure relevance. Skip the self-made lists; they often miss the mark. AI can be a useful tool for scanning internal documents, industry reports, and peak body publications. Frame topics neutrally to let positive and negative impacts, and risks and opportunities surface. For example, use “nature” instead of “protecting biodiversity,” or “economic contribution” over “positively contributing to society.” This approach leads to clearer insights and more authentic stakeholder engagement.
Grouping topics for strategic clarity
- Strike the right balance: Group related topics to reveal systemic connections and streamline stakeholder engagement, but avoid over-grouping. Broad categories like “environmental management” can blur critical issues and make it harder to pinpoint specific IROs. Instead, break them down into focused areas like air quality, water, noise, and soil.
- Keep it manageable: More than 30 topics? That’s a red flag. Complexity skyrockets and slows everything down.
- Let the research lead: Build your topic list thoughtfully. Start with broad inputs from expansive research, then allocate the necessary time and effort to group strategically. Use frameworks like GRI or SASB and peer benchmarks to guide and validate your structure.
Set clearly defined assessment criteria
Establish a clear set of assessment criteria
To effectively prioritise IROs in a double materiality assessment, it’s critical to co-develop clear, validated assessment criteria with senior leadership. Applying scores or weightings helps align IROs with strategic priorities. Engaging leadership early fosters ownership and supports change management. IROs should then be ranked by severity, likelihood, and relevance across time horizons, ensuring the most material issues drive strategic planning and reporting.
Drawing out short, medium, and long-term IROs
Double materiality demands a multi-temporal lens. Short-term risks may be operational, medium-term opportunities might relate to innovation or market shifts, and long-term impacts could involve climate resilience or social equity. Explicitly identifying IROs across these timeframes during stakeholder engagement strengthens strategic planning and disclosure.
Differentiating time horizons and likelihood criteria
A robust double materiality assessment requires clear separation between time horizon definitions and likelihood criteria. Time horizons define when an impact might occur (short, medium, long term), while likelihood assesses the probability of occurrence. Keeping these distinct ensures analytical clarity and avoids conflating risk with timing.
Understand the breadth of information sources
A blend of both primary and secondary research
Engaging directly with stakeholders through interviews, workshops, or surveys provides invaluable insights into how sustainability topics are perceived and experienced across your value chain. This primary input helps surface real-world IROs that might not be visible through data alone. Equally important is secondary research, drawing on credible sources such as government white papers, scientific studies, industry reports, and peer disclosures. These sources offer evidence-based context and help validate stakeholder perspectives, ensuring your assessment is both grounded and comprehensive. Combining these information sources strengthens the credibility of your findings and supports more informed decision-making.
Engage with the right stakeholders
Designing stakeholder engagement alongside analysis
Design engagement approach in parallel with analysis design, not as an afterthought. This ensures that insights are timely, relevant, and embedded in the analysis. Stakeholders can be engaged as experts to assist in identifying topics and IROs, or as invested parties that validate the results and findings.
Engaging the right stakeholders
Ensure that the stakeholders you engage in identifying topics and IROs are not only familiar with your business but are also experts in identifying and evaluating IROs for the relevant topics you select. Their domain knowledge is essential for surfacing nuanced insights and ensuring the assessment reflects real-world dynamics across both financial and environmental and societal dimensions.
The value chain lens
Double materiality goes beyond your operations. Engage expert stakeholders who understand upstream and downstream impacts to uncover IROs across the full value chain.
Co-located stakeholder sessions
Bringing invested stakeholders together in the same room fosters shared understanding and initiates the change management process. Co-located sessions build trust, surface blind spots, and accelerate alignment. Real-time dialogue fosters shared understanding and drives change.
Bridging the knowledge gap between traditional and double materiality
Help stakeholders shift from traditional influence/importance models to double materiality. Clarify that their input is one of many data points shaping a holistic view of what truly matters.
The double materiality method is a strategic lens for understanding your business in a complex world. By grouping topics thoughtfully, framing them for deeper analysis, and engaging stakeholders meaningfully, organisations can unlock powerful insights and drive sustainable value in strategy development and refresh.
