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Unveiling Double Materiality: Exploring Its Impact and Critique

Updated: Nov 22, 2023

What is double materiality?

The concept of "double materiality" is an innovative and fundamental perspective in the field of sustainability-oriented corporate reporting. It refers to the simultaneous consideration of two dimensions of relevance in business activities and related reporting: financial materiality and non-financial materiality. Financial materiality pertains to the economic impacts traditionally associated with a company's profitability and financial stability. Non-financial materiality encompasses the social, environmental, and ethical impacts of business activities.

Introduced in 2009 by the European Commission, double materiality has gained widespread adoption, particularly in European Union (EU) countries. The approach of double materiality aims to balance these two dimensions, recognizing that both financial and non-financial aspects can be relevant to a company's long-term success.

The practical application of double materiality as it concerns sustainability reporting enhances stakeholder engagement. It requires broader and more direct stakeholder engagement to gain a comprehensive understanding of what is material in complex corporate settings, as different stakeholders have various, sometimes conflicting, views on material sustainable topics. The enhanced stakeholder engagement required by the double-materiality analysis contributes to diverse and reciprocal accountability relationships between the organizations, their stakeholders, and the wider society and enables discussions and evaluations on sustainable development. ­As organizations continuously define, manage, and communicate their identities, activities, and impacts in relation to sustainability through their double-materiality analysis, the conception of sustainable development is gradually shaped and reshaped.

Critique on double materiality

However, the innovative concept of double materiality is not without its criticisms. Here are some of the main criticisms and challenges associated with double materiality:

  • One of the main criticisms concerns the subjectivity in identifying material factors. Since the concept is based on the perception of relevance, this could lead to significant variation among different companies in determining what is "material" from both a financial and non-financial perspective. This subjectivity could undermine the comparability of corporate reports. This variability can make it challenging to compare corporate performances, especially if clear criteria for evaluating material factors are lacking. Harmonizing such criteria could help mitigate this criticism.

  • The concept of double materiality has not been standardized globally yet. The absence of global standards can make it complex for companies to follow uniform procedures. However, many standardization bodies are developing guidelines and frameworks to standardize this approach, making it easier for companies to implement the concept.

  • Integrating financial and non-financial data into a single report can be complex. Gathering, analyzing, and presenting data of such a diverse nature requires significant resources and specialized skills.

  • Another criticism is that companies might be induced to overly focus on short-term financial impacts at the expense of long-term ones, which can negatively affect the company's long-term sustainability.

  • Some critics argue that the concept of double materiality could be misused by some companies to "greenwash" their reports, presenting a more sustainable image than they actually are.

  • Integrating double materiality into corporate processes and reporting may require substantial investments in terms of human and financial resources. This can be a weighty burden for small and medium-sized enterprises.

  • Some companies may have difficulty effectively communicating their results in terms of double materiality to various stakeholders, including investors and consumers. This can lead to a lack of understanding and appreciation from the public.

Despite these criticisms and challenges, double materiality is essential to the evolution of sustainability-oriented corporate reporting. Its emphasis on balancing financial and non-financial impacts reflects the growing awareness of sustainability's importance in the business sphere, and many companies continue to seek ways to address these challenges and improve their sustainable reporting.



  1. Puroila and Mäkelä, 2019, The double-materiality concept Application and issues.

  2. Brown, 2009; Brown and Dillard, 2013; Brown and Tregidga, 2017; Puroila and Mäkelä, 2019, The double materiality concept. Application and issues.

  3. Cooper and Morgan, 2013; Brown and Dillard, 2015; Puroila and Mäkelä, 2019, Matter of opinion: Exploring the socio-political nature of materiality disclosures in sustainability reporting.

  4. ‘Double materiality’: what is it and why does it matter?

  5. Carpenter et al., 1994; Lai et al., 2017, The double-materiality concept. Application and issues.

  6. Puroila and Mäkelä, 2019; Tregidga and Milne, 2006, The double-materiality concept Application and issues.




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