Lately, in all debates about Sustainability, there is a recurring topic on the table: Double Materiality. But what is Double Materiality in Sustainability, and what does it entail?
We can define the principle of Double Materiality as the combination of impact materiality (impacts on people and/or the environment) and financial materiality (financial risks and opportunities). Environmental and social materiality can be determined as the impact of a company’s internal activities on its surroundings, the environment, and people: a perspective from inside (the company) to outside (the environment). In contrast, financial materiality involves external causes that may affect companies’ business models: a perspective from outside (the environment) to inside (the company).
A financial accounting concept has become a strategic principle among the criteria used to assess a company’s performance and impact—the well-known E.S.G. criteria: “E” for environmental, “S” for social, and “G” for governance. However, the legislative level goes a step further and incorporates Double Materiality into several future directives on sustainability and non-financial information that will come into effect in the coming years.
The principle of Double Materiality is a means to improve the sustainability of business models and supply chains
I believe this new commonly used concept should strengthen us in risk management, not just in reporting. The principle of Double Materiality should not become the main goal; it is a means to improve the sustainability of business models and supply chains.
Like Double Materiality, Due Diligence is part of the common vocabulary of the new era of sustainability. Due Diligence is the process through which a company identifies, prevents, mitigates, and accounts for adverse impacts on people and the environment.
Fairtrade certification provides companies with standards, methodologies, and expertise to mitigate risks. A certification is not the fulfillment of a directive or law, but it can be used as a corporate responsibility tool.
Fairtrade certification provides companies with standards, methodologies and expertise to mitigate risks
At Fairtrade, both through our mission and organizational model and the development of new projects, we can provide added value and transparency in the sustainable management of supply chains. For example, the Risk Map, designed for assessing environmental and human rights risks, or the Impact Map, which contains Fairtrade projects and commissioned studies worldwide.
The Fairtrade system itself ensures the active participation of stakeholders, from the 2.1 million producers within the system through the three regional producer networks that hold 50% of the Fairtrade System’s voting rights, to the more than 2,500 companies that manage their supply chains with Fairtrade, and even to consumers of over 37,000 different products with a sales value close to 11 billion euros.
The cards are on the table. Now, all that remains is for us to define a sustainability strategy alignment beyond the legal compliance requirements.
Author: Álvaro Goicoechea, Director of Fairtrade Ibérica
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