Double Materiality and IT: The Often-Overlooked Link That Companies Can’t Afford to Miss
Today, Sustainability Reporting is more than a buzzword—it’s a fundamental business factor across industries. The Corporate Sustainability Reporting Directive (CSRD) compels companies to rethink how they measure and communicate their environmental and social impact.
Double materiality is the cornerstone of CSRD, defined as the necessity for businesses to assess their sustainability performance from two points of view:
Financial Materiality – The impact of sustainability factors on the financial health of the company.
The environmental & social materiality — The extent the company impacts the environment and society.
This dual perspective is intended to offer a comprehensive view of a company’s place in sustainability. But here’s the rub — IT is often not in the picture.
As companies closely monitor emissions generated from e.g. logistics and manufacturing, its IT infrastructure, that often is one of the most resource-intensive and overlooked elements of modern operations. Let’s go over why this is a huge oversight, and what companies can do to correct it.
The CSRD and the Double Materiality Concept
Historically, businesses have been focused only on financial materiality, which considers the risks and opportunities that are impact their profitability. Such risks include climate change, regulatory shifts and market disruptions. But CSRD widens that lens to take in environmental and social materiality — that is, how a Company’s actions influence the world around it.
The Practical Application of Double Materiality
As a case in point, consider a real-life example:
A fashion brand could assess the effects of climate regulations on its supply chain costs (that’s financial materiality) but it also must report on its carbon footprint from the production of textiles (environmental materiality).
A technology company might evaluate how cybersecurity threats pose a potential financial risk, but it also needs to report how its data centre’s energy use leads to carbon emissions.
But despite all these obvious connections, IT is often overlooked in materiality assessments, as if the digital infrastructure somehow lives in a separate, consequence-free reality. Spoiler alert: it doesn’t.
The Role of IT in Double Materiality
From a business standpoint, IT is mission critical as without IT, in our evermore digitalized world, nothing works. But IT brings financial risks and hidden sustainability costs too, including:
Energy Prices – Data Centres are massive electricity consumers, and rising energy prices could significantly increase operational expenses.
Regulatory Risks − Non-compliance for Reporting IT’s environmental impact may lead to compliance fines and/or reputational damage.
Cybersecurity & ESG Compliance – One of the key areas that need to be addressed is the management of ESG-related data since any mishandling of such data may wreak havoc on the financial and legal aspects of the organization.
Dismissing IT’s financial materiality is akin to pretending that servers don’t generate heat—you can ignore it for some time, but soon enough, all will be cooking (and not in the figurative sense).
IT Is Not Immune to Environmental & Social Challenges: IT Is Part of the Real World
Some believe that IT’s influence is small because it’s “only digital.” In reality, IT has a massive environmental footprint:
Data Centres = Energy Hogs: Data centres use 1-2% of global electricity, about the same as aviation.
The E-Waste Problem: The world produces over 50 million metric tons of electronic waste every year, much of which comes from old corporate equipment.
Cloud Services Aren’t Green by Default: Despite cloud providers doing their best to move to green energy, many still run fossil-fuel-powered data centres, so “cloud computing” isn’t as planet-friendly as it may sound.
IT Supply Chains & Social Responsibility: From minority rare earth mineral mining to potential poor labour conditions in electronics manufacturing, IT procurement choices have real-world consequences.
Put another way, IT is neither invisible nor impact-free — it just hasn’t been getting the shine it deserves in sustainability reporting.
IT: Why Your Business Needs to Include IT in CSRD Reporting
1. Information Technology Has A Too Large Of An Effect To Be Ignored
This is no longer just an “IT function.” It’s a key operational pillar, and its sustainability footprint needs to be recognized.”
2. Company-wide Effect Of IT
IT decisions drive everything from remote work policy to cybersecurity risk and how companies get things done. These include sustainable IT strategies that enhance overall business resilience.
3. Regulators And Investors Are Watching And Taking Note
The CSRD takes transparency to the next level, and failure to report on IT’s sustainability effects could lead to scrutiny from investors or regulatory pushback.
4. IT Solution — Can IT Be Part Of The Solution, Not Just The Problem
The good news? IT can help make companies more sustainable:
Decreasing energy use: The optimization of data centres and the transition to renewable-powered cloud providers.
Reduced e-waste: Adopting refurbishment and recycling programs.
Enhancing operational sustainability: Leverage AI-powered solutions and real-time monitoring to optimize energy and minimize paper consumption.
Thinking about IT as the problem as well as the solution can allow companies to link their digital strategy to their sustainability strategy — rather than addressing them as separate problems.
Final Thoughts: Now Is the Time to Focus on IT
Double Materiality encourages companies to consider sustainability from two perspectives, and IT is involved in both. IT’s footprint isn’t a figment of imagination — it’s an overlooked part of sustainability strategy.
And with the CSRD pushing for more transparency, the time is now. For businesses that have been including IT in its sustainability reporting will future-proof its operations, lower risks, and enhance its ESG credentials.
So next time someone tries to argue, “IT doesn’t belong in sustainability reporting,” just ask: “Are you absolutely sure about that?” Because if IT runs the company, chances are it’s also driving its sustainability footprint — and whether we like it or not.