What Is Double Materiality Assessment
Double materiality assessment evaluates a company's ESG issues along two axes at once: financial materiality and impact materiality. Financial materiality captures how issues like climate change or human rights risks affect a company's revenue, costs, and asset value. Impact materiality, conversely, measures how the company's own activities affect the environment and society.
This concept has become a core disclosure principle jointly adopted by Korea's Sustainability Standards Board (KSSB), the EU's Corporate Sustainability Reporting Directive (CSRD), and the International Sustainability Standards Board (ISSB). Companies can no longer ask only "is this financially material to us?" — they must also ask "does our impact on society and the environment matter?"
Why SMEs Need to Prepare Now
In Korea, the first wave of mandatory sustainability disclosure has been finalized for KOSPI-listed companies with assets over KRW 2 trillion. The problem is that these large companies have already started requesting ESG data across their entire value chain. Suppliers and subcontractors — including many SMEs — are now being asked for greenhouse gas emissions data, human rights due diligence results, and supply chain management records.
For export-oriented manufacturing SMEs in particular, this is no longer optional. Between the EU's Carbon Border Adjustment Mechanism (CBAM) and global buyers' ESG due diligence requirements, the ability to respond to double materiality assessment is increasingly what determines whether a company stays in the supply chain.
7 Practical Steps for Double Materiality Assessment
Common Challenges for SMEs
In practice, SMEs run into three recurring obstacles. First, most lack dedicated ESG staff, so the task falls to an employee juggling it alongside their core job. Second, there's no clear standard for how to score financial and impact materiality, making it hard to ensure the credibility of results. Third, many companies simply don't yet have systems in place to collect and verify quantitative data, such as greenhouse gas emissions or supplier human rights records.
How KITIM Consulting Can Help
KITIM supports the entire double materiality assessment process — from initial design through stakeholder interviews, scoring workshops, and matrix development. The results feed directly into sustainability report drafting, so there's no duplicate effort between assessment and disclosure. We tailor our approach to each company's size and situation, from applying industry-specific GRI/SASB standards to preparing due diligence materials for supply chain requests.
If you're not sure where to start with double materiality assessment, contact KITIM. We'll begin with a diagnosis tailored to your company's situation and help you build a practical response roadmap together.