We are currently designing a new functionality in our platform - Double Materiality Assessment Tool.
Our platform will introduce a comprehensive and dynamic functionality for Double Materiality Assessment, aligning with the evolving landscape of corporate sustainability reporting. This functionality is designed to support organizations in identifying, evaluating, and addressing their most significant environmental, social, and governance (ESG) issues from a dual perspective: their financial impact on the organization (financial materiality) and the organization's impact on society and the environment (impact materiality).
The platform's structured approach will allow for a granular assessment across a predefined set of topics and sub-topics, reflecting critical areas such as climate change, pollution, water resources, and more, in alignment with the European Sustainability Reporting Standards (ESRS). Users, ranging from owners to internal and external stakeholders, can actively participate in the assessment process through roles that facilitate a comprehensive gathering of insights and data. The inclusion of surveys will enable direct engagement with stakeholders, ensuring that the assessment captures a wide range of perspectives and is reflective of actual and potential impacts, both positive and negative.
At the heart of Faradai's Double Materiality Assessment functionality is the ability to not only collect and analyze data but also to visualise these insights through an intuitive double materiality chart. This bubble chart, generated automatically upon completion of the assessments, visually represents the dual dimensions of materiality on a matrix, aiding organisations in prioritizing their sustainability efforts. Issues of high financial materiality and significant societal or environmental impact are highlighted, guiding strategic decision-making and resource allocation. This visualisation serves as a powerful tool for communicating with stakeholders, demonstrating the organization's commitment to sustainability, and identifying areas for action and improvement.
Here you can find the important components of this feature:
Definitions
| Components | Explanations |
|---|---|
| User Roles | OwnerInternal Stakeholders (employees, etc)External Stakeholders (suppliers, investee companies) |
| Materiality Sections | Double materiality covers two sections: impact materiality and financial materiality. |
| Impact Materiality | the material information about the main organisation's impacts on people or environment related to CSRD Topics and Sub-topics |
| Financial Materiality | the material information about risks and opportunities related to Topics and Sub-topics |
| Topic | Identifies relevant topical ESRS. This is a standard list: E1 Climate ChangeE2 PollutionE3 Water and marine resourcesE4 Biodiversity and ecosystemsE5 Circular economyS1 Own workforceS2 Workers in the value chainS3 Affected communitiesS4 Consumers and end-usersG1 Business conduct |
| Sub-topic | Each topic has sub-topics. The relationship between Topic, Sub-topic and Sub-sub-topics is given in the below table. This is standard list as seen in the table below. |
| Sub-sub-topic | Some sub-topic has Sub-sub-topics. The relationship between Topic, Sub-topic and Sub-sub-topics is given in the below table. This is standard list as seen in the table below. |
| Locations | Each materiality assessment can be conducted in location/site level |
| Organisation Group | Each materiality assessment can be conducted in whole organisation or sub-group / busines unit / department etc level |
| External Stakeholders | Each materiality assessment will be systematically disseminated to external stakeholders, such as suppliers, in the form of a carefully structured survey. This approach ensures that external stakeholders are provided with a clear and concise framework to evaluate and provide feedback on the reporting company's specific impacts, risks, and opportunities. While participation in the Impact Materiality assessment is essential for stakeholder engagement, contributing to the Financial Materiality assessment, although highly beneficial, is considered optional. This dual-level engagement empowers stakeholders to contribute valuable insights, enhancing the overall accuracy and relevance of the materiality assessment process. |
| Assigned to | Each materiality assessment must be assigned to users (external or internal) who are responsible to fill the survey. |
| Reporting Period | Each materiality assessment has its own reporting period so that the data and the assessment result can belong to a time period. |
| IMPACT MATERIALITY ASSESSMENT | |
| Impacts | Owners (the responsible people in the main reporting company) can add impacts and link them to Topic, Sub-topic and Sub-sub-topic, so that they can define the issues to be assessed. |
| Impact Type | Impact type can be actual or potential and positive and negative. Owners can define the impact type while they add the impact. Impact Type list: Actual positive, Potential positive, Actual negative, and Potential negative |
| Survey | The Impact Materiality assessment is meticulously designed to engage both internal and external stakeholders through a streamlined survey format. This survey is distributed directly to stakeholders' emails, containing a link to access the assessment. Upon clicking the link, stakeholders are presented with an intuitive form designed to capture their perspectives on various dimensions of the reporting company's impact, including Scale, Scope, Irremediable Character, and Likelihood. The responses from stakeholders are then aggregated into a centralized data repository, allowing the company owner to access and analyze the comprehensive feedback. This process ensures a holistic understanding of the company's impact from the viewpoint of all stakeholders, facilitating informed decision-making and strategic planning. |
| Assessment tool | Owners can also fill the Scale, Scope, Irremediable Character and Likelihood of each impact from their company perspective in the assessment tool. The tool automatically shows the “Materiality” as Yes or No according to Owner's answers to each impact. |
| FINANCIAL MATERIALITY ASSESSMENT | |
| Risks | Owners can add each risk and link them to Topic, Sub-topic and Sub-sub-topic, so that they can define the issues to be assessed. |
| Opportunities | Owners can add each opportunity and link them to Topic, Sub-topic and Sub-sub-topic, so that they can define the issues to be assessed. |
| Assessment tool | Owners can fill the Likelihood of Occurence and Potential Magnitude of each risk and opportunity from their company perspective in the assessment tool. The tool automatically shows the “Materiality” as Yes or No according to Owner's answers to each risk and opportunity. |
| Doube materiality chart | A bubble chart will automatically be generated after all Impact and Financial Materiality assessment done by the owner. The double materiality chart is typically a two-dimensional matrix:Horizontal Axis (X-axis): Represents the significance of ESG issues to the organization's financial performance, operations, or value creation. This axis ranges from low to high financial impact. Vertical Axis (Y-axis): Represents the significance of the organization's impact on society and the environment through its operations, products, or services. This axis also ranges from low to high impact.Interpreting the Chart****Quadrants: The matrix is divided into four quadrants, each representing different categories of materiality based on the combination of financial impact and societal/environmental impact.Top Right Quadrant: High financial materiality and high impact on society/environment. ESG issues falling into this quadrant are of the highest priority for the organization to address.Top Left Quadrant: Low financial materiality but high impact on society/environment. These issues are less critical to the organization's financial performance but important for meeting societal expectations or regulatory requirements.Bottom Right Quadrant: High financial materiality but low impact on society/environment. These issues are important for the organization’s financial performance but have less direct impact on broader societal or environmental concerns.Bottom Left Quadrant: Low financial materiality and low impact on society/environment. ESG issues in this quadrant are considered the least material and may receive less immediate attention or resources.  |
The relationship between Topic, Sub-topic and Sub-sub-topics
| Topic | Sub-topic | Sub-sub-topics |
|---|---|---|
| E1 Climate Change | Climate change adaptation Climate change mitigationEnergy | |
| E2 Pollution | Pollution of airPollution of waterPollution of soilPollution of living organisms and food resourcesSubstances of concernSubstances of very high concernMicroplastics | |
| E3 Water and marine resources | WaterMarine resources | Water consumption, Water withdrawals, Water discharges, Water discharges in the oceans, Extraction and use of marine resources |
| E4 Biodiversity and ecosystems | Direct impact drivers of biodiversity loss | Climate Change, Land-use change fresh water-use change and sea-use change, Direct exploitation, Invasive alien species, Pollution, Others |
| Impacts on the state of species | Examples:Species population sizeSpecies global extinction risk | |
| Impacts on the extent and condition of ecosystems | Examples:Land degradation, Desertification, Soil sealing | |
| Impacts and dependencies on ecosystem services | ||
| E5 Circular Economy | Resources inflows including resource useResource outflows related to products and servicesWaste | |
| S1 Own workforce | Working conditions | Secure employment, Working time, Adequate wages, Social dialogue, Freedom of association the existence of works councils and the information consultation and participation rights of workers, Collective bargaining including rate of workers covered by collective agreements, Work-life balance, Health and safety |
| Equal treatment and opportunities for all | Gender equality and equal pay for work of equal value, Training and skills development, Employment and inclusion of persons with disabilities, Measures against violence and harassment in the workplace, Diversity | |
| Other work-related rights | Child labour, Forced labour, Adequate housing, Privacy | |
| S2 Workers in the value chain | Working conditions | Secure employment, Working time, Adequate wages, Social dialogue, Freedom of association including the existence of work councils, Collective bargaining, Work-life balance, Health and safety |
| Equal treatment and opportunities for all | Gender equality and equal pay for work of equal value, Training and skills development, The employment and inclusion of persons with disabilities, Measures against violence and harassment in the workplace, Diversity | |
| Other work-related rights | Child labour, Forced labour, Adequate housing, Water and sanitation, Privacy | |
| S3 Affected communities | Communities’ economic social and cultural rights | Adequate housing, Adequate food, Water and sanitation, Land-related impacts, Security-related impacts |
| Communities’ civil and political rights | Freedom of expression, Freedom of assembly, Impacts on human rights defenders | |
| Rights of indigenous peoples | Free prior and informed consent, Self-determination, Cultural rights |
|
| S4 Consumers and end-users | Information-related impacts for consumers and/or end- users | Privacy, Freedom of expression, Access to (quality) information |
| Personal safety of consumers and/or endusers | Health and safety, Security of a person, Protection of children | |
| Social inclusion of consumers and/or endusers | Non-discrimination, Access to products and services, Responsible marketing practices | |
| G1 Business Conduct | Corporate cultureProtection of whistleblowersAnimal welfarePolitical engagementManagement of relationships with suppliers including payment practices | |
| Corruption and bribery | Prevention and detection including training Incidents |