Building on the ESRS Periodic Table, this post explore the Double Materiality Output Space, or what Shikhar Singh Harnwal aptly called the Maze.
During a Double Materiality Assessment (DMA), a key question may arise that can lead to differing perspectives within the sustainability team:
What constitutes a Negative and Positive Impact?
The goal of the DMA, is to identify, prevent, and mitigate actual negative impacts. In my view, identification of an impact occurs at a specific point in time during the DMA, while prevention and mitigation are actions, we can execute over time in response to a negative impact.
While actions, like prevention and mitigation, help reduce impacts, they are distinct terms. Impacts and actions should be seen as connected yet distinct concepts, both are crucial but serve different purposes.
In the illustration, we differentiate between impacts and the actions (mitigations) that influence them, highlighting their distinct roles.
The Trap
Why do we often view mitigations as positive impacts? While actions can lead to both a negative and positive impact, the term “mitigation” implies “making something less severe.” While mitigation has a positive influence, it still results in a “less severe” negative impact.
When identifying negative impacts, we might identify corresponding mitigating actions that have yet to be executed and mistakenly classify them as positive impacts. This can create confusion, making it seem like both negative and positive impacts stem from the same source.
At this point, the room may feel a bit tense as the team tries to navigate the negative/positive dilemma. If you’ve experienced a similar situation, click [Support] on this post.
But the team is making progress by identifying both negative impacts and mitigating actions – next is to distinguish between the two for accurate classification.
Negative Impacts
Should be considered the result of the company’s combined actions – business operations and mitigation efforts – during the reporting year. This snapshot of the current negative impact forms the basis for developing appropriate actions and tracking progress.
Positive Impacts
EFRAG states that positive impacts should only be considered once related negative impacts have been identified and mitigated.
For example, when an energy producer lowers the cost of renewable energy, it contributes to mitigating climate change beyond its own operations, which carries a contributing notion.
Actions Classified as Positive Impacts
Mitigating actions, yet to be executed, should be viewed as eligible initiatives in your action plan – not classified as positive impacts.
Keep your team and clients aligned
Aligning everyone on DMA not only saves time but also helps your clients feel more comfortable with the process, positioning you as a confident and capable facilitator. Key illustrations from my recent posts have been transformed into a convenient playing card format. You can download and start using these cards today.