IFCO, Euro Pool, and Logifruit assess the sustainability of their activities and their impact both financially and on people and the environment.
Double Materiality has become a central issue for companies. The concept of Double Materiality was formally introduced by the European Commission in its 2019 Climate-Related Non-Financial Reporting Guidelines.
The Corporate Sustainability Reporting Directive (CSRD) also incorporates the concept of “double materiality.” This means that companies must report not only on how sustainability issues can impact people and the environment (impact materiality) but also on the financial risks to the company (financial materiality) (Waghela, 2024).
Investors are increasingly interested in both dimensions. On one hand, they want to understand the risks affecting their investments, and in this regard, sustainability reporting requirements enhance investor protection. But, on the other hand, many investors also want to know how their investments impact people and the environment. This is partly due to the growing market for sustainable investment products and partly because investors themselves are required to report on these impacts, especially under the EU’s Sustainable Finance Disclosure Regulation (European Commission, 2024).
Since September 2022, the European Financial Reporting Advisory Group (EFRAG) has been leading the process of creating the EU’s European Sustainability Reporting Standards (ESRS) linked to this regulation. The first global ESRS standards appeared in March 2023. In 2024, EFRAG is expected to resume work to develop sector-specific ESRS (EFRAG, 2024).
The practical implementation of Double Materiality in sustainability reporting can strengthen stakeholder engagement through broader and more direct participation. This greater involvement helps establish diverse and mutual accountability relationships between organizations, their stakeholders, and society at large. Various studies have shown that identifying and disclosing relevant sustainability issues from different stakeholder perspectives improves analysts’ forecast accuracy and financial performance (Solidflow, 2024).
The companies that are part of Areco (IFCO Systems, Euro Pool System, and Logifruit) work daily with an increasing focus on sustainability and environmental care. In this context, each company is evaluating its sustainability efforts from a double materiality perspective.
Euro Pool Group, for example, has been measuring its Scope 3 emissions and reporting its CO2 footprint annually since 2017. In 2023, it began developing long-term goals for 2030 and 2040 by conducting a first Double Materiality Assessment (DMA). With the results, they took the first successful step in preparing for the new CSRD requirements. A total of 16 material subtopics were identified. These were categorized according to ESRS themes. The results of the analysis are shown in their Double Materiality Matrix, aggregated by ESRS theme levels (Euro Pool Group, 2023).
Logifruit, a member of the United Nations Global Compact since 2016, has also begun analyzing double materiality with the aim of identifying and assessing the environmental, social, and governance (ESG) factors that may represent both risks and opportunities for improvement for the company. This analysis will allow Logifruit to integrate sustainability into its strategy, ensuring long-term business growth and stability, strengthening its reputation and commitment to ESG principles, building greater trust among its stakeholders, and anticipating possible regulatory changes to avoid risks related to sanctions.
With the same goal, IFCO Systems, during 2024, completed a Double Materiality Assessment for the entire group, with the help of a team of experts from various areas. The material topics were classified into impacts, risks, and opportunities, covering both the value chain and internal operations. Unlike previous assessments, which primarily focused on how ESG issues affected the company and its stakeholders (internal perspective), the new DMA introduces an external perspective (financial materiality). The results of the study will serve to prioritize material issues for the future and will form the basis for reports in compliance with the CSRD.
These actions will allow ARECO partners to remain positioned as models of sustainable companies and maintain their competitiveness in the market. Additionally, the analysis of double materiality highlights the commitment of its members to the Sustainable Development Goals (SDGs). By adopting this dual perspective, Areco’s partners aim not only to meet regulatory requirements and market expectations but also to generate a positive and sustainable impact on their environments and communities.
By Sahar Azarkamand, researcher of the ARECO Fellowship of the UNESCO Chair of Life Cycle of ESCI-UPF.
References:
Comisión Europea. (2024). Sustainable finance. https://ec.europa.eu/newsroom/fisma/items/754701/en
EFRAG (2024). https://www.efrag.org/en/sustainability-reporting/esrs-workstreams/sectorspecific-esrs. Consultation: 27/09/2024.
EUROPOOL Group. (2023). Sustainability report. https://www.europoolgroup.com/app/uploads/2024/07/Euro-Pool-Group-Sustainability-Report-2023-1.pdf
Solidflow. (2024). Double materiality assessment. https://solidflow.io/blog/double-materiality-assessment/
Waghela, Hardik. (2024). Optimizing ESG Practices through Materiality and Double Materiality Perspectives, SIPL.
