A Double Materiality Analysis in an SME helps make visible which sustainability topics are truly significant for the company’s operations. In theory the analysis often sounds complex, but in practice it is quite a straightforward process.
Consider, for example, an SME that manufactures metal products for industrial use. The company has around twenty employees, its own production facility and a few key customers. The company wants to better understand which sustainability topics it should focus on.
The analysis usually begins by identifying the key sustainability topics related to the company’s operations. In this case, the discussion raises issues such as:
- energy use in production
- material waste
- employee safety
- supply chain responsibility.
Next, impact materiality is examined. The company evaluates in which areas its activities have the most significant impact on people and the environment. In this example, energy use and material waste emerge as the key topics because they are directly connected to production and environmental impacts.
At the same time, financial materiality is assessed. At this stage the company considers which sustainability topics may affect the business: costs, risks or future opportunities. Energy use again becomes important because the price of energy directly affects costs. Employee safety also becomes prominent, since accidents can interrupt production and cause significant costs.
When these two perspectives are combined, the company can see more clearly which topics are truly material. In this example, the analysis identifies the following as the key development areas:
- reducing energy use
- reducing material waste
- improving occupational safety.
Not all sustainability topics therefore rise to the same level of importance. For example, some supply chain issues may at this stage be less central if the company has only a few long-term suppliers and the supply chain is well under control.
This is the key benefit of double materiality analysis for an SME: it helps narrow the focus. Instead of trying to do everything at the same time, the company can concentrate on the issues that have the greatest significance.
At the same time, the analysis helps the company justify its choices externally. When a customer or partner asks about sustainability, the company can explain which topics are material to it and why.
If you want to carry out a double materiality analysis in practice, download our practical guide for free: Double Materiality Analysis in SMEs (PDF, 280 kB, no registration required, in Finnish)
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