Double materiality– Why it matters

In the world of sustainability, ESG can sometimes seem overly broad and become a catch-all for everything a company does -- which can raise many questions, including: “What do I focus on first? Where do I distribute my company’s resources, whether human or financial? How do we best to allocate capital and when? What change management do I need to lead first?” 

Companies have to focus on what is material to their business and their stakeholders, including investors, employees, customers, suppliers and communities. This involves taking a deeper dive, including an outside-looking-in approach, to what really matters. 

That’s where a double materiality assessment comes in. Double materiality is a valuable resource that can help uncover biases related to the prioritization of sustainability initiatives. 

What is double materiality?  
Companies use materiality assessments to determine what sustainability topics are most relevant to their business. Double materiality expands this idea to consider financial materiality, which provides an “outside-in" measure on a topic’s potential to affect the business, as well as impact materiality, which is an “inside-out” look out how a company’s activities may impact society and the environment.

Double materiality, in short, is an approach that aims to better understand which key topics management should prioritize based on a wide perspective of stakeholders.

Stakeholder engagement 
A key pillar of double materiality is robust stakeholder engagement. This ensures both financial and non-financial material issues are identified, assessed and addressed by recognizing the interests and expectations of relevant stakeholders.  

Broad stakeholder engagement achieves the following:  

• Ensures inclusive decision making: By involving stakeholders, companies can make more informed decisions that align with stakeholder expectations and values.
• Promotes transparency and accountability: Regular communication can directly provide relevant information about the company’s performance and impact, allowing stakeholders to understand how these factors are integrated into business decisions and how they can impact financial performance.
• Improves risk management: Capturing the perspectives of varied stakeholders can help identify evolving market trends, potential roadblocks for business objectives, supply chain concerns and emerging regulatory developments.
• Builds relationships and trust: A company’s license to operate depends on goodwill of the communities where it operates. Positive working relationships, based on openness and transparency, are essential to fostering trust.

Darling Ingredients’ double materiality assessment
In 2023, Darling Ingredients conducted its first-ever double materiality assessment, detailed in our Sustainability Progress Report.

Our experience confirmed that external stakeholders provide valuable outside perspective that may not have been recognized. We learned, for instance, that sustainable supply chains are significantly more important to our stakeholders than we previously thought.  

Meanwhile, some areas that I expected to rank much higher in both impact and financial materiality – such as community engagement and investment or diversity, equity and inclusion – were not as top-of-mind for our stakeholders. That’s not to say these are not important areas or that we won’t continue to seek improvements.  Rather, only that it’s incredibly helpful to be aware of what our stakeholders feel are the most pressing issues to address.  

We came away from our fist double materiality assessment with a renewed focus on where to expand disclosure and focus business change. And we are more confident that double materiality can be a valuable tool in helping Darling Ingredients achieve our sustainability goals.