Why it’s time for every industry to rethink impact
The business landscape is evolving rapidly, driven by changing regulations, shifting consumer expectations, and an urgent need for a more sustainable and equitable future. Today, success is no longer measured solely by profit margins. Companies are being asked to think bigger—to consider their impact on society, the environment, and the wider world.
This is where Double Materiality comes in.
What started as a concept rooted in the financial services sector is now gaining traction across all industries. It’s redefining how businesses assess their performance and make decisions, shifting the focus from shareholder value alone to a more holistic understanding of success.
What is double materiality?
Double materiality pushes beyond traditional financial metrics by introducing a dual perspective that considers both financial and impact materiality:
- Financial Materiality
How external sustainability factors (such as climate risks, social trends, and environmental regulations) impact the financial performance of a business. - Impact Materiality
How a company’s own actions and decisions affect the broader environment and society, beyond its immediate financial outcomes.
This means that companies are now being evaluated not just on how they generate profit, but at what cost—and the implications are significant.
Those that successfully incorporate double materiality are setting themselves up for long-term resilience, competitive advantage, and a reputation as leaders in responsible business.
Why does double materiality matter now?
The world is changing faster than ever, and businesses that fail to adapt risk being left behind.
Here’s why double materiality is becoming essential across all sectors:
- Regulatory pressure
Governments and regulatory bodies are setting new standards for transparency and accountability.The EU’s Corporate Sustainability Reporting Directive – CSRD – and the task force on Climate-related Financial Disclosures – TCFD – are just the beginning.
This means companies must now disclose not only financial risks but also the broader social and environmental impacts of their activities.
- Consumer and investor demand
Modern consumers and investors want to support brands that align with their values. A 2024 global survey by Edelman found that 68% of consumers would switch to a company that prioritises sustainability and ethics, even if it meant paying a premium. The same study revealed that 72% of investors are actively seeking businesses that demonstrate positive social and environmental impact. - Operational resilience
Incorporating double materiality into decision-making helps businesses anticipate risks, from supply chain disruptions to reputational damage. This proactive approach allows firms to adapt more quickly, ensuring they remain resilient in the face of global challenges such as climate change, social inequality, and geopolitical shifts.
Real-world application across industries
Manufacturing
With new regulations targeting carbon emissions and waste management, manufacturers must account for both the financial risks associated with non-compliance and the environmental impact of their production processes. By adopting double materiality, they can innovate cleaner technologies, optimise resource use, and enhance supply chain sustainability.
Technology
Tech companies are under increasing scrutiny to address not only their energy consumption but also the societal impact of their products and services. From data privacy concerns to the environmental impact of hardware production, integrating double materiality helps them navigate complex stakeholder expectations.
Consumer goods
For retailers and consumer goods companies, it’s no longer enough to just sell products. They must demonstrate how they contribute to—or detract from—social and environmental goals. By embracing double materiality, these businesses can redefine their value proposition, attract conscious consumers, and build stronger brand loyalty.
The path forward | From compliance to strategy
While many companies are beginning to incorporate sustainability into their reporting, the majority are still treating it as a compliance exercise rather than a strategic imperative.
A 2024 PwC study found that while 78% of companies recognise the importance of sustainability, only 29% have integrated it into their core business strategy.
To move beyond box-ticking, companies need to:
- Embed sustainability into governance
Leadership teams must prioritise sustainability and ensure it’s woven into every aspect of the business, from boardroom decisions to everyday operations. - Leverage data for decision-making
Reliable, actionable data is key. Companies need to invest in technology and analytics to monitor their environmental and social impact in real time, enabling better strategic planning. - Communicate authentically
Transparency is no longer optional. Businesses must openly share their progress and setbacks, building trust with stakeholders through honest communication.
What’s at stake | The cost of ignoring double materiality
The stakes are high. A 2024 report by the World Economic Forum estimates that companies failing to integrate double materiality into their operations risk losing up to 35% of their market value over the next decade due to factors like regulatory penalties, reputational damage, and loss of investor confidence.
Meanwhile, the potential rewards are substantial. The UN Sustainable Development Goals (SDGs) highlight that companies leading the charge in sustainability stand to unlock an estimated $12 trillion in business opportunities by 2030.
A candid conversation: The Road Ahead
To explore how companies can navigate these complexities, we invite you to watch our latest video where industry experts discuss the transformative power of double materiality.
In this insightful conversation, we break down what double materiality means for businesses across sectors and how leaders can use it to drive long-term value creation.
Watch: The Future of Business – A Double Materiality Deep Dive
How can Rio help you?
At Rio, we empower organisations to make smarter, more sustainable decisions, unlocking both business growth and a more equitable future.
Our platform enables you to:
- Measure and track your carbon footprint
Get precise insights into the environmental impact of your operations and value chain.
- Streamline sustainability frameworks and integrations
Easily incorporate sustainability metrics into your business strategies and traditional financial models.
- Ensure regulatory compliance
Stay ahead of evolving regulations and requirements, ensuring your operations are not just compliant, but leading the way.
- Respond to stakeholder demands
Meet growing consumer and investor expectations by demonstrating your commitment to sustainability with data-driven insights.
Get started with a complimentary demonstration with our expert consultants today and discover how embracing double materiality can set your business apart.
By making double materiality a cornerstone of your strategy, your business can turn compliance into a competitive advantage, align with the future of responsible enterprise, and lead the change toward a more sustainable—and profitable—tomorrow.
