THE ISSUE OF „DOUBLE MATERIALITY“ IN THE CONTEXT OF ENTITY’S SUSTAINABLE DEVELOPMENT

Abstract

The relevance of the issue of “double materiality” is determined by the fact that it is a key approach in the European Union strategy for sustainable development of entities and for sustainability management and reporting. The role of “double materiality” is crucial for its application in accordance with the new regulatory requirements. The European Commission published a final regulation to supplement the Corporate Sustainability Reporting Directive (CSRD) applicable in the European Union Member States. This regulation has been enforced since 5 January 2023. At the same time, the European sustainability standards are applied by all entities falling within the scope of the Corporate Sustainability Reporting Directive. The importance of “double materiality” is also crucial for the formation of the business strategy and disclosure of sustainability issues and its aspects in the entity’s sustainability report. It must be highlighted according to CSRD (article 1 (4) and (7), recital 57), disclosure of sustainability issues is part of the management report, which is a component of the entity’s financial statements.
The object reviewed in this publication is the issue of “double materiality” as a system, and in this respect, in the unity of its two elements in the context of entity’s sustainable development. The first element of “double materiality” is formed with view of the entity’s impact on the environment and/or on people, and the second one – with view of the impact of current or future effects of sustainability issues and requirements on cash flows, financial performance, financial position, financial stability, financial equilibrium, development and performance of the entity on the market, being characterized with a level of entropy, both in short- and in long-term aspect. The article studies the two elements of “double materiality” described above, not only within their interrelations and dependencies, but within their relative self-dependence and independence as well.
The publication focuses on the identification and integration of ESG risks arising from social, environmental and governance aspects of sustainability within the general system for risk analysis, control and management.