Double Materiality: What It Is and Why It Matters for Your Business

In the ever-evolving world of sustainability and ESG (Environmental, Social, Governance), one concept has rapidly gained prominence—double materiality. While the term may sound technical, its real-world application is both powerful and urgent, especially for small and medium enterprises (SMEs) striving to balance growth with responsibility.

At Viridis, we help companies simplify complex sustainability principles like double materiality into actionable business strategies. This article demystifies the concept and shows you how to use it to your advantage.

What Is Double Materiality?

Traditionally, businesses focused on financial materiality: how environmental and social issues could impact the bottom line. This was a one-directional view—outside-in.

But as sustainability practices evolved, so did our understanding of corporate responsibility. Enter double materiality, which adds an inside-out lens: how your company’s actions impact the environment, society, and future generations.

In short:

•Financial Materiality (outside-in): How climate change, regulations, or social unrest affect your company’s performance.

•Environmental & Social Materiality (inside-out): How your company’s operations, emissions, labor practices, or supply chain impact people and the planet.

Together, these perspectives form double materiality, a holistic framework for understanding risk and responsibility.

Why It’s More Than a Buzzword

Double materiality is not just a trend—it’s a legal and strategic imperative. Under the EU Corporate Sustainability Reporting Directive (CSRD), companies are now required to assess both types of materiality in their ESG disclosures.

Why this matters:

•It expands the scope of reporting, encouraging transparency not only about risks, but also about a company’s impacts.

•It enables stakeholder-centric strategies, recognizing that long-term business success is tied to social and environmental responsibility.

•It prepares businesses for future regulation and investor expectations, both of which are rapidly evolving.

Even if your company isn’t (yet) required to report under CSRD, embracing double materiality now gives you a competitive edge.

Examples of Double Materiality in Practice

Let’s say your company is in the manufacturing sector:

•Financially material (outside-in): New carbon taxes increase operational costs. Supply chains are disrupted by droughts or floods.

•Environmentally/socially material (inside-out): Your factory emits greenhouse gases. Your procurement policies affect workers in emerging markets. Your packaging contributes to plastic pollution.

Both angles matter. Investors, clients, regulators—and increasingly, consumers—want to know:

What are you doing to mitigate your risks and your impacts?

The SME Opportunity

While large corporations are in the regulatory spotlight, SMEs have a unique opportunity: to act proactively, build credibility, and differentiate themselves in the market.

Adopting a double materiality approach allows SMEs to:

•Anticipate stakeholder concerns

•Build trust with clients and partners

•Access sustainable finance options

•Attract and retain talent, especially younger workers driven by purpose

•Future-proof their operations against economic and regulatory shocks

How to Get Started

1.Map your value chain

Understand where your activities intersect with environmental and social systems.

2.Engage stakeholders

Listen to employees, customers, suppliers, and communities. What concerns them?

3.Perform a materiality assessment

Evaluate which topics are significant from both the outside-in and inside-out perspectives.

4.Integrate findings into strategy

Use the results to guide priorities—from carbon reduction to social equity, from governance improvements to responsible sourcing.

5.Communicate transparently

Whether in internal reports or public disclosures, share your journey honestly. Authenticity builds credibility.

How Viridis Can Help

At Viridis, we specialize in helping SMEs navigate complex sustainability concepts like double materiality. Our sector-specific assessments and strategic consulting services simplify the process and provide clear, actionable insights.

If you’re ready to transform regulatory pressure into opportunity—and show your stakeholders that you’re a company that truly walks the talk

Let’s start the conversation.

Visit our EcoTrack tool to take your first step toward understanding your ESG position.

Ready to assess what really matters to your business and the world around it?

Contact us today to learn how we can support your journey toward impactful, strategic sustainability.