03/26/2024
Thinking ahead with the double materiality assessment
How to remain compliant, sustainable and competitive in an ever-changing business landscape?
Materiality analysis is a basic practice for identifying priority issues and defining a company’s sustainability strategy. With the European CSRD (Corporate Sustainability Reporting Directive) in force since January 2024, it is becoming an essential part of the regulatory framework. The outcome is expected to take the form of a double materiality analysis, providing an objective assessment of both the impact of the company on society and the environment, and the potential impacts of sustainability issues on the business. It is based on active listening to internal and external stakeholders, supplemented by expert advice.
Double materiality analysis is used to assess how specific issues may impact a company in terms of business dependencies, resources and regulatory constraints, as well as the scale, scope and remediability of the company’s impact on society and the environment. By providing an updated and prioritized view of sustainability issues, the double materiality assessment enables to develop an effective sustainability strategy that is as close as possible to stakeholder expectations.
Below, you will find an overview of GEODIS' approach to the double materiality assessment process and its key steps.
Conducting a double materiality assessment
Assessing materiality involves identifying the social, governance and environmental issues that are the most likely to have an impact on the company and its stakeholders. It is specific to each company according to its activity, size, governance and geographical footprint.
Which sustainability issues are relevant for my business?
Besides maybe CO2 emissions and work conditions, materiality of environmental or social issues vary from one company to the other. It is therefore necessary to identify, refine and assess the issues that are specific to your business and/or stakeholders, and organize them into a shortlist of the most relevant ones.
This can be achieved through a systematic approach that draws on multiple sources (internal and external). The objective is to develop a holistic view which requires to maintain an open dialogue with the senior leadership, relevant experts, and internal and external stakeholders. Information gathered through desk research, online questionnaires or interviews with internal and external stakeholders and experts should also be balanced with objective data and evidence. Benchmarking competitors’ sustainability policies and reports can also provide insights into which issues and topics are considered material in the industry as well as reviewing the assessment criteria used for ESG ratings for your industry.
Unpacking the "Double Materiality"
Analysis From a double materiality perspective, a sustainability issue may be material in terms of social or environmental impact and/or in terms of risks and opportunities for the company. Unless it is an issue identified by the regulator as mandatory for a given sector, feedback from stakeholders and experts will determine whether an impact in either direction is significant or not.
At GEODIS, we undertook a double materiality assessment in 2023 to update and prioritize our list of sustainability issues in order to accelerate the development of our CSR strategy and be ready to comply with the upcoming EU CSRD in 2024. For this first exercise, we have used 3 data sources to define the external factors that have a material financial impact on our performance and 2 to assess our impact on society:
A Key Tool: The Stakeholder Dialogue
Uncovering a company's true strategic priorities through double materiality analysis requires the engagement of the entire organization and its stakeholders, not just those directly involved in sustainability management and reporting.
At GEODIS, we maintain an ongoing dialogue with a wide range of stakeholders. By fostering this dialogue, we gain insight into the company's impact, but also build trust to ensure the sustainability of relationships and the co-creation of value.
As part of the double materiality assessment, we conducted interviews with more than 50 of our stakeholders. The idea was to gather information about GEODIS’ impacts, risks and opportunities from the perspective of our ecosystem. Internal and external stakeholders were invited to discuss their expectations regarding responsible business practices, working conditions, relations with local communities and all the different impacts GEODIS may have on the society and the environment. This allowed us to identify trends, put different points of view into perspective, and prioritize issues.
The Challenges of Prioritization in a Double Materiality Assessment
Prioritizing stakeholders
The double materiality assessment presents several challenges, not the least of which is to correctly identify the stakeholders to be involved, so that the overall double materiality assessment is both comprehensive and representative.
For a global company like GEODIS, which encompasses a variety of cultural and regional landscapes, the cultural dimension of materiality needs to be considered. Depending on their values, beliefs, and social and political contexts, stakeholders from different cultures will not attach the same importance to a given sustainability issue. Regional differences must be carefully mapped to ensure that they are proportionately represented.
Prioritizing issues
The double materiality exercise helps both a prioritization of stakeholders’ expectations and of the financial impacts on the company and it is the combination of these two aspects that brings value to the exercise. For example, noise pollution is a major issue for people and the environment but has a low financial impact on GEODIS' business; on the other hand, if we look at employee engagement, it has a high impact on GEODIS' business, but a moderate impact on society at large. Both issues are important and need to be addressed, but in terms of priority, issues such as greenhouse gas emissions or health and safety have a high impact on all stakeholders and should therefore prioritized.
Taking these two dimensions into account enables us to act on the issues that create the greatest global value, minimizing risk and maximizing positive impact.
Thinking Ahead Through Double Materiality Assessments
Assessing double materiality makes sense from both a regulatory and a business sustainability perspective. In today's ever-changing business landscape, it is becoming an essential tool for forward-thinking companies. By considering both financial and non-financial dimensions and engaging with a wide range of stakeholders, the double materiality assessment uncovers ongoing trends and previously overlooked issues, enabling a reassessment of priorities. As a critical "reality check", this analysis prompts you to look at your sustainability strategy and practices from a broader perspective that also reflects the broader community and environment in which you operate.
