Double Materiality Assessment

A double materiality assessment is a framework used to determine which environmental, social, and governance (ESG) issues are most relevant to a company and its stakeholders. It requires evaluating materiality from two interconnected viewpoints: an "outside-in" perspective and an "inside-out" perspective.

The "outside-in" view, or financial materiality, assesses how external sustainability factors create financial risks and opportunities for the enterprise. This aligns with conventional risk modeling and directly affects metrics such as EBITDA and long-term valuation. The "inside-out" view, or impact materiality, assesses the company's actual and potential impacts on the economy, environment, and people, such as carbon emissions or labor practices in the supply chain.

The outcomes of a double materiality assessment are foundational for corporate strategy, regulatory compliance, sustainability reporting, and integrated business planning (IBP). It ensures that critical non-financial factors are formally considered in strategic and operational decision-making.