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ACCA Strategic Professional · Advanced Performance Management · Sustainability

Harbour Pharma reports under a framework that requires disclosure of both how sustainability issues affect the company's enterprise value and how the company impacts society and the environment. A director argues that only the first perspective is relevant to investors. Which statement most accurately reflects the concept of double materiality that the director is rejecting?

Double materiality means a sustainability matter is reportable if it is significant either for its financial effect on the entity or for the entity's impact on people and the environment. It is not a requirement to satisfy both tests together, so the director's investor-only view is too narrow.

  1. AA matter is material if it is significant either because of its financial effect on the entity or because of the entity's impact on people and the environmentCorrect
  2. BA matter is material only if it is significant on both financial and impact measures simultaneously
  3. CA matter is material if it is reported by at least two competitors
  4. DA matter is material only if it has already been recognised in the financial statements

Explanation

Double materiality combines financial materiality (outside-in effect on enterprise value) and impact materiality (inside-out effect on society and environment); meeting either lens makes a topic material. Option B misreads 'double' as requiring both tests to be met jointly. The director's view reflects financial materiality only.

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