Understanding Double Materiality: Why Korean firms can’t ignore it anymore
ESG materiality has evolved
As Korean companies begin to navigate international ESG regulations—especially under the EU’s Corporate Sustainability Reporting Directive (CSRD)—a new concept is gaining ground: double materiality. Unlike traditional financial materiality, this approach requires companies to assess not only how sustainability issues affect them, but also how their operations impact people and the planet.
For Korean firms with EU exposure or ambitious ESG strategies, understanding and applying double materiality is now essential.
What is Double Materiality?
Double materiality refers to two dimensions:
- Financial Materiality: How environmental and social issues pose risks or opportunities that affect the company’s enterprise value.
- Impact Materiality: How the company’s operations, products, or supply chain have positive or negative impacts on society and the environment—regardless of financial consequence.
Under ESRS, companies must report on both sides. This makes ESG reporting more complex, but also more meaningful.
Why it matters to Korean companies
Double materiality is mandatory for Korean companies in scope of the CSRD (e.g. those with significant EU revenue or subsidiaries), starting from FY2025. But even for companies not legally bound yet, there are growing expectations to disclose impact—especially from:
- Global investors and banks who require broader ESG transparency
- Multinational clients that rely on Korean suppliers for Scope 3 disclosures
- Sustainability ratings agencies and benchmarking platforms
- Stakeholders such as civil society, regulators, and employees
By adopting double materiality early, Korean firms can strengthen stakeholder trust, reduce ESG risks, and position themselves for future reporting readiness.
How to conduct a Double Materiality Assessment
A robust assessment involves:
- Mapping key sustainability topics (climate, labour, governance, etc.)
- Identifying internal and external stakeholders
- Engaging stakeholders through surveys, interviews, or workshops
- Evaluating both financial risk and impact significance
- Prioritising topics and validating with senior leadership
This assessment should be documented and updated periodically, especially if business models, markets, or stakeholder priorities shift.
Practical challenges—and how to overcome them
Many companies struggle with:
- Limited internal ESG capacity
- Unclear stakeholder engagement strategies
- Lack of structured tools to document and justify findings
This is where external ESG advisors and platform-based tools (like Speeki’s ESG management software) can provide structured, repeatable, and auditable support.
Double materiality isn’t just a European concept—it’s becoming the new standard in ESG reporting. For Korean companies with global ambitions or obligations, now is the time to embed this thinking into strategy and disclosure processes. Those who do will not only meet regulatory requirements, but also unlock stronger stakeholder trust and ESG leadership.
