Double Materiality: A Cornerstone for Europe’s Competitive Edge, Says GRI

BRUSSELS, Belgium, 20 February 2025 – The Global Reporting Initiative (GRI) asked the European Commission to maintain the principle of double materiality in reporting on corporate sustainability, warning that any dilution of the approach could jeopardize Europe’s competitive position. This appeal was launched in an official letter from Robin Hodens, the new CEO of GRI, to the President of the EC Ursula von der Leyen and the principal commissioners.

GRI Advocates for Strength EU Leadership in Sustainability Reporting

GRI’s letter to key EU policy makers, including Vice-President Stéphane Séjourné, Commissioner for the Economy of Valdis Dombrovskis and Financial Services Commissioner Maria Luis Albuquerque, stresses that maintaining double materiality is essential to Europe’s leadership in sustainability reporting. This principle ensures that companies disclose not only how sustainability issues affect their financial performance, but also how their activities affect the environment and society.

Hodess stressed that the weakening or elimination of the double materiality of the Business Sustainability Directive (BSD) would represent a significant decline, which would reverse the progress made since the 2014 NDRD. “The growing double materiality would make Europe a decade of sustainability reporting. The CSDD was introduced to ensure reliable, comparable and comprehensive sustainability disclosures that support the objectives of the EU Green Pact,” said Mr Hodens.

Why Double Materiality Matters

Dual materiality is a key concept in sustainability reports, as it requires companies to assess financial materiality (how sustainability issues affect the enterprise) and impact on materiality (how business activities affect the environment and society). This dual perspective offers a more comprehensive view of corporate responsibility and risk management.

According to GRI, double materiality is essential to:

• Providing investors and policymakers with decision-useful data.
• Ensuring corporate accountability in addressing environmental and social impacts.
• Encouraging businesses to adopt long-term sustainability strategies aligned with global standards.
• Supporting informed capital allocation and risk management.

General implications of the EU decision

The European Union has been widely recognized as a global leader in corporate transparency, which has an impact on global sustainability reporting standards. GRI argues that maintaining this leadership is crucial to achieving global convergence of sustainability revelations. Other large economies, including Chinese stock exchanges, have begun to adopt dual materiality, demonstrating their growing international acceptance.

ERM and 11 other global partners recently called for the incorporation of dual-media information into national legislation at the Fourth International Conference on Financing for Development (FfD4). The coalition urged Governments to integrate interoperable corporate sustainability reporting systems based on established international frameworks, including European sustainability reporting standards.

The risks of weakening EU sustainability standards

In its letter, the GRI highlighted concerns that combating double materiality would not only reduce the quality of sustainability data, but also increase risks to investors and businesses. In the absence of full disclosure of impacts, financial markets may endeavour to assess long-term viability and exposure to business risks. In addition, regulatory inconsistencies could result in higher costs for multinational companies seeking to meet different standards.

“A robust and globally harmonised reporting framework strengthens Europe’s competitiveness by creating an interoperable system that provides reliable, cost-effective data,” GRI said. Dilution of these standards would undermine global comparability and make it difficult to allocate informed capital. “

Next steps for the European Commission

As the European Commission completes its approach to CSDD and ESRS, the ERM urged policy makers to maintain alignment with international sustainability frameworks, such as those of the International Council on Sustainability Standards (ISSB). The organization also called for continued collaboration between EU institutions and key governing bodies to ensure the quality and comparability of global sustainability reports.

The letter concludes by reaffirming GRI’s commitment to support the European Commission in strengthening corporate transparency and sustainable disclosure policies. “We are ready to work with EU leaders to ensure that CSRD remains a golden standard for corporate sustainability reporting,” he said.

With increasing pressure from sustainability advocates, investors and international partners, the next European Commission decision on double materiality will be a crucial moment for corporate transparency and sustainable financing in the EU and beyond.