Materiality concept(s) in the EU sustainability (non-financial) reporting: the challenge of equivalence

This paper presents different materiality concepts in sustainability reporting. At present, two main streams of materiality concepts in sustainability reporting are single and double materiality. While single materiality primarily deals with the financial impact of sustainability issues on enterprise value (outside-in perspective), double materiality is more far-reaching and deals with both the financial impact and the social impact of companies’ operations, i.e. how companies’ operations affect society and the environment (inside-out perspective). Both concepts are present in leading sustainability reporting standards. The EU has opted to develop its own set of standards and is, in addition to GRI, the main representative of double materiality as the European Sustainability Reporting Standards (ESRS) place this concept in the spotlight. The IFRS Foundation is the main representative of single materiality. This section will present the main characteristics of both concepts. It will then present the path to standardising reporting standards in the EU. Finally, implications of the different benchmarks employed in standards to define materiality will be explored.