Examining the Reasons for Impact Materiality in EU Corporate Sustainability Reporting

European Business Law Review (Forthcoming)

32 Pages Posted: 30 Nov 2023 Last revised: 26 Mar 2024

Date Written: March 20, 2024


The Corporate Sustainability Reporting Directive and the European Sustainability Reporting Standards have adhered to the principle of double materiality. This principle has two dimensions, namely financial and impact materiality, the latter being associated with a company’s obligation to report material information on the impacts of corporate activity on people and the environment. Concentrating on the impact materiality principle, this article identifies and discusses key reasons that justified its adoption. The first reason aims to foster the alignment of corporate actions with sustainable development as framed by the European Green Deal and by the Global Reporting Initiative. The second justification is found in the promotion of corporate accountability through sound corporate due diligence processes and effective impact management. Developing markets and products for sustainable investments is the third reason for the disclosure of impact-related information. The article turns to identify constraints to the success of these policy tenets including (a) distrust in markets due to greenwashing risk, (b) challenges posed by the wide discretionary powers of corporate officers in the evaluation of impact materiality, and (c) poor quality of impact-related data.

Keywords: corporate sustainability reporting, double materiality, impact materiality, sustainable finance, sustainable development, information disclosure, impact management, sustainable investments, ESG

JEL Classification: G10, G18, G28, K10, K23, K32, K42, O16, Q01

Suggested Citation

Mezzanotte, Félix E., Examining the Reasons for Impact Materiality in EU Corporate Sustainability Reporting (March 20, 2024). European Business Law Review (Forthcoming), Available at SSRN: https://ssrn.com/abstract=4637172

Félix E. Mezzanotte (Contact Author)

Trinity College Dublin ( email )

School of Law, House 39, New Square
Trinity College Dublin, the University of Dublin
Dublin, D02 X376

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