28 September 2022

Single vs double materiality: An academic debate?

Much has been written, and indeed spoken, about double versus single materiality - and by extension ISSB versus EFRAG or EU versus International - but for many this is far from the reality of doing business.

Read Corporate Disclosures' own contribution to the ocean of ink dedicated to single & double materiality here: Touching the void [of sustainability reporting]

Yen-Pei Chen, subject matter expert in corporate reporting at ACCA, says: "The thing that I'm a bit worried about with both the ISSB and EFRAG standards is that we are losing contact with the basics of business. In the sense of, what does the company actually do? What's its core business? And what's the board's vision of where they want to take the company? Because at the end of the day, that will drive the determination of what the key risks are and who the key stakeholders for the business are."

Luca Brusati, professor of business administration at Udine University, goes further: "On this specific point of materiality, I see a debate among the specialists that has very little bearing on the real world, at least for the time being. The real world has a very hard time in understanding what materiality really means."

Materiality should link to the strategic dimension of a company's sustainability reporting, he continues. "If you perceive sustainability reporting as a formal obligation, you report whatever you can, or want, to report and you pretend that this is material. Because it's not something that you do for yourself but something that you do in order to tick the box.

"So the intellectual debates of the definition, once it boils down to companies, who in some cases see it as a way to look good, they don't care much about the definitions."

Similarly, for ACCA's Chen both the ISSB and EFRAG standards will be good tools against greenwashing as they will provide a common set of disclosures and metrics but for that they need to link back to the company's business model and strategy.

"It's only within the context of the business model and strategy that stakeholders – not only lenders and investors but also current and potential employees, business partners and customers – can assess for themselves whether the company's board is focusing on the right things," she says.

The ultimate objective of these standards is not more information for users but to change things on the ground in the ways that boards manage their companies, Chen continues. "Reporting can change board decision-making, if approached in the spirit of learning and improvement. However, a tick-box mentality will never get us there."