What is Material?
Anything which can affect the company is material. Be that financial material (I can’t produce anymore) to impact material (humans are suffering). Can be either or, can be both.
- Dynamic Materiality
- impact materiality becoming financial materiality
- e.g. chocolate producer which has the impact materiality (climate change) turn into a financial materiality (loss of raw resource due to heatwaves/wildfires)
- “Double Materiality” means that we take a look at both perspectives
- it does not need to be financial and impact to count as double
Perspectives
outside-in perspective (financial)
- aka “financial materiality”
- getting costs of outside factors into the reporting
- relevant for investors
- e.g. due to climate change there is less water in the river → less production in water power plant
- e.g. due to climate change your farm is experiencing worse droughts → higher costs for watering (if possible even to operate further)
- “finanzielle Wesentlichkeit”
inside-out perspective (impact)
- aka “impact materiality”
- getting costs from the supply chain into the reporting
- costs which are not financially carried by the company but by other communities or the environment
- e.g. CO2 emmissions
- e.g. human rights violation in production chains
- “auswirkende Wesentlichkeit”