Over 20 years ago, a company that I co-founded (called CSR Network) produced annual benchmarks on the state of social and environmental reporting by FORTUNE magazine’s G100 list of the world’s largest companies.  Looking back at the results from 2003, one of the key findings related to materiality.

“Materiality is currently a hotly debated topic in the UK, in particular. In light of the governments Company Law Review, the DTI has set up a working group to review this issue and explore how directors can assess whether an item is material to their company and merit inclusion in an Operating and Financial Review (OFR)”. 
Material World, CSR Network 2003

In that year’s survey, we found that only 48% of G100 companies produced structured disclosures on their social and/or environmental performance. 

Fast forward to the present day, sustainability reporting by global companies is commonplace, and the concept of double materiality has been enshrined in the European Union’s Corporate Sustainability Reporting Directive (CSRD).  However, to say that the UK Government has been dragging its heels on this topic for the last twenty years is an understatement.  In Autumn 2023, the UK Government published further details on their proposed Sustainability Disclosure Standards (SDS), which will be underpinned by the International Sustainability Standards Board’s (ISSB) inaugural climate and general sustainability standards. 

It is still possible that the concept of double materiality will be included within the SDRs, but given the ISSB’s track record of only seeing the world through the single materiality lens of financial materiality, I wouldn’t hold my breath.  The ISSB Chairman, Emmanuel Faber is recently quoted in Le Monde as saying that accounting for a company’s impacts using double materiality is “unrealistic” and “a mammoth task” due to difficulties in measuring impact metrics, such as those relating to biodiversity.  27 years on since the founding of the Global Reporting Initiative, and all the work they have done since to define a common set of sustainability impact metrics, it is somewhat ironic that accountants are now complaining it all seems too complicated and not like the currency valuations and balance sheets they are used to.

And who will check whether a company’s materiality analysis has applied and interpreted impact and financial thresholds correctly and consistently to generate a meaningful output?  What about the accountants again, with their new draft assurance standard: the proposed International Standard on Sustainability Assurance 5000 (ISSA 5000), general requirements for sustainability assurance engagements.  Unfortunately, the draft of ISSA 5000 does not address the concept of double materiality in any meaningful way, nor does it offer any guidance on the approach an assurance provider should take when differences arise on analysis of materiality between the assurance practitioner and the reporting entity.

This debate also misses the elephant in the room – that in moving from a standard that addressed ‘non financial information’ (ISAE3000) to one that addresses ‘sustainability’ (ISSA 5000), there are no explicit instructions on how assurers should tackle actual sustainability topics.  For example, the type of information and data an assurance provider might expect to review as evidence for GHG emissions, will be very different to the information (and maybe data, maybe not) you would evaluate in relation to other topics such as human rights.  How should assurance providers form an opinion when handling information that appears to suggest conflicting views?  Who has the competency to provide that type of expert opinion?

At Challenge Sustainability our team members have provided sustainability report assurance for many hundreds of reports over the last 30 years.  We are working with a range of companies on materiality and assurance, seeking to align with standards and emerging best practice.  If you would like to know more, please get in touch.