Double Materiality: Realising the Value of a Comprehensive Information Management System

Double Materiality

By Tim Bovy CEO, Six Sentinels

The changing tide of corporate reporting is set to have an impact on UK companies, especially those doing business in the EU. What are the implications for companies’ information management systems? Six Sentinels’ Tim Bovy explains.

The London Stock Exchange (LSE) guidance on environmental, social, and governance (ESG) issues recommends that issuers “should explain the relevance of ESG factors to their business model and strategy”, describing how they are positioning themselves either “to benefit from these factors or to manage and mitigate the risks associated with them”.1 There are two sides to this equation: the effect of the outside world on an organisation’s operations (Outside-In), and the organisation’s effect on people and the planet (Inside-Out). This two-way street takes us to the heart of double materiality. The first pertains to financial materiality; the second, to impact materiality.

Reporting on double materiality will cover a broad swathe of issues.

Although, like the United States, the United Kingdom tends to focus on the first of these, the European Union’s Corporate Sustainability Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) are necessitating that organisations prepare themselves for the requirements of double materiality, adding the category of impacts to risks and opportunities. These requirements will place a concentrated emphasis on the ability of an organisation’s non-financial information management systems to access a large body of information for reporting purposes.

Reporting on doubleThe systems of UK companies operating in the EU will need to be equally comprehensive. In fact, the concept of double materiality appears to be gaining traction in the UK. The LSE, for example, has noted that: “While the TCFD recommendations emphasise single materiality (information which has an immediate financial impact and therefore should appear in financial filings), companies should also pay attention to double materiality, the impact a company’s actions have on society or the environment,” adding that it “can be of significant benefit for the future”.2 The LSE is signalling that performing impact analyses is going to be as important as undertaking risk analyses.

The CSRD was adopted by the European Parliament on 10 November 2022, and by the Council of the European Union on 28 November 2022. Once implemented into the national law of EU member states, its requirements will be phased in from 2024 (for reports published in 2025). CSRD replaces the Non-Financial Reporting Directive (NFRD). The main difference between the two is that environmental, social, and governance (ESG) reporting will increase to 49,000 companies in Europe, compared to the 11,000 covered by the NFRD directive.

Some large organisations will already have experience reporting on double materiality. The 2022 KPMG Survey of Sustainability Reporting (published in October) “concluded that the GRI Standards are the world’s most widely used, adopted by 73% of the largest 250 global companies and by 68% of a wider sample of 5,800 businesses around the world”.3 Nevertheless, this still leaves a significant number of major companies and, with a reporting requirement for businesses of over 250 employees, a substantial number of SMEs without such experience.

The non-financial information related to double materiality will need to be readily acessible from a range of documents, e.g. word processing, spreadsheets, emails, and text messages.

Reporting on double materiality will cover a broad swathe of issues. Looking for the moment solely at the topic of European Sustainability Reporting Standards (ESRS) S1 (Draft) “Own Workforce”, the subtopics will include secure employment, working time, adequate wages, social dialogue, freedom of association, existence of work councils, collective bargaining, including rate of workers covered by collective agreements, the information, consultation and participation rights of workers, work-life balance, and health and safety.4 The non-financial information related to these issues, as well as others related to double materiality, will need to be readily accessible from a range of documents, e.g. word processing, spreadsheets, emails, and text messages, to name just a few.

Organisations can benefit not only from having a robust, comprehensive system to retrieve important non-financial information, such as the above, but also from knowing who the experts are within the organisation who are able to support the evidentiary materials with knowledge of their content, reliability, accuracy, and provenance. A comprehensive information management system can achieve both of these ends.

complianceIt is understandable that stakeholders are becoming increasingly more interested in the impact of an organisation on people and the planet. Like the LSE guidance noted above, the focus of the ESRS is upon an organisation’s strategy, particularly impacts, risks, and opportunities, the main difference being that the ESRS disclosure requirement will be mandatory and adds impacts as a result of the importance of double materiality. As the European Financial Reporting Advisory Group (EFRAG) has stated: “The undertaking shall disclose, in accordance with applicable [draft] ESRS, all the material information regarding impacts, risks and opportunities in relation to environmental, social, and governance matters. The information shall enable the understanding of the undertaking’s impacts on those matters and how they affect the undertaking’s financial development, performance and position.”5 An organisation’s strategy needs to take these requirements into account.

To implement its strategy and illuminate for investors the impacts, risks, and opportunities that underpin it, accurate, reliable, and timely data must be readily available, supported by the organisation’s own home-grown expertise. Done thoughtfully and thoroughly, a comprehensive information management system can yoke together ESG non-financial information and strategy, so that, at the stage that organisations are formulating strategy, data regarding ESG is embedded in the process.

This article was originally published on May 2, 2023.

About the Author

Tim BovyTim Bovy is the CEO and co-founder of Six Sentinels, which specialises in developing records and information management systems for managing non-financial information related to environmental, social, and governance (ESG) issues. He has over 40 years of experience in designing and implementing various types of information and risk management systems for major law firms such as Clifford Chance and Ashursts; and for major accountancy firms such as Deloitte. He has also developed solutions for organisations such as BT, Imperial Tobacco, Rio Tinto, the Kuwaiti government, the Royal Household, and the US House of Representatives. Tim is an elected member of The Royal Institute of International Affairs, Chatham House, an independent think tank based in central London, and holds a BA degree, magna cum laude, from the University of Notre Dame, and MA and C.Phil degrees from the University of California, Davis.


  1. “Revealing the full picture: Your guide to ESG Reporting,” January 2018, available at:
  2. London Stock Exchange Guidance to Climate Reporting Final, available at:
  3. “Interoperability between ESRS and GRI Standards good news for reporters”, 24 November 2022, available at
  4. “[Draft] ESRS 1 General requirements”,
    15 November 2022, available at assetUrl=%2Fsites%2Fwebpublishing%2FMeeting%20Documents%2F2211141505388508%2FDRAFT%20ESRS%201%20General%20requirements%2014%20November.pdf
  5. Draft European Reporting Standards”, November 2022



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