For companies operating in Europe, double materiality is becoming a regulatory imperative. With the EU's Corporate Sustainability Reporting Directive (CSRD) in place, large organisations must disclose not only how sustainability issues impact their business (financial materiality) but also how their operations affect people and the planet (impact materiality).
Looking at sustainability through the lens of double materiality helps you see the whole picture, encompassing both the impacts on your business and the impacts of your business. Whilst CSRD is driving attention to it, it’s not just about ticking regulatory boxes. It’s a way to build a strategy that’s transparent, responsible, and built to last.
UNDERSTANDING THE TWO DIMENSIONS OF DOUBLE MATERIALITY
The difference between these two lenses is:
Impact Materiality: The Inside-Out Perspective
Material impact considers how a company's actions are reflected in the real world, affecting people, society, and the environment. Some common areas can include:
- Greenhouse gas emissions
- Labour practices and human rights
- Biodiversity and ecosystem impacts
- Community health and well-being
Financial Materiality: The Outside-In Perspective
Financial materiality examines how sustainability issues impact
the company's financial health and performance. Some examples include the following:
- Carbon pricing and climate-related costs
- Supply chain disruptions
- Regulatory changes and compliance risks
- Asset devaluation and liability exposure
WHY INTEGRATE BOTH PERSPECTIVES?
By integrating these two perspectives, businesses gain a more comprehensive understanding of sustainability risks and opportunities, which enables them to develop a stronger strategy, governance, and resilience.
THE CHALLENGE IN CONDUCTING A DOUBLE MATERIALITY ASSESSMENT
There are challenges with delivering a double materiality assessment as it requires careful planning and cross-functional expertise. Many healthcare organisations face internal knowledge gaps, particularly in areas such as ESG data collection and stakeholder engagement. Input must be gathered from employees, investors, communities, and regulators, each with varying priorities.
Most organisations currently treat double materiality as a compliance obligation rather than a strategic exercise, leading to assessments that are disconnected from their core business strategy.
WHY EARLY ACTION ON REPORTING MATTERS?
The regulatory landscape with the CSRD is evolving rapidly, and industry best practices for double materiality are still in development. Initially, the CSRD's timeline required large companies to report 2025 data by 2026, and smaller companies in the following years. However, the EU commission released in February 2025 the “stop-the-clock” directive, which is part of the Omnibus package. This directive postpones the deadline for sustainability reporting of large companies to 2028. Since the assessment process can be complex, getting a head start is key. Starting early can give healthcare organisations a competitive edge by focusing sustainability efforts where they matter most.
TURNING COMPLIANCE INTO A STRATEGIC OPPORTUNITY
Here are strategic benefits a double materiality assessment offers beyond regulatory compliance. It helps align your sustainability strategy with the EU Green Deal's objectives, while creating tangible long-term business value.
For example, a hospital could identify ESG risks and opportunities through:
- Uncovering areas for greater operational efficiency as they operate energy-intensive facilities, which contribute to greenhouse gas emissions.
- Investing in energy-efficient projects such as LED lighting, efficient HVAC, and renewable energy to reduce operational costs and carbon footprint.
- Designing improved waste segregation, recycling, and safe disposal practices, as hospitals produce significant amounts of hazardous and non-hazardous waste.
- Recognising changing patient preferences, where they may increasingly prefer facilities with green credentials that adopt sustainable practices.
DRIVING GROWTH THROUGH SUSTAINABILITY INSIGHTS
When healthcare organisations start to see climate risks not just as threats but as financial signals, it will open the door to smarter investments, such as building more resilient supply chains or adopting low-carbon technologies. This will be imperative for healthcare in Europe to survive the financial challenges of the 2020s and the climate-related health challenges of the 2030s.