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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Sustainability Audit, ESG Rating and Emerging Mandates from Government and Regulators

Kaveri Chemicals Ltd reports on its impacts on water, communities and the economy for a wide group of stakeholders, including NGOs and regulators, and does not limit itself to what affects its own financial value. Which approach to materiality is it following?

Kaveri Chemicals follows impact materiality, the approach of the GRI standards. Under it, a company reports its significant effects on the economy, environment and people for a broad stakeholder audience, whereas financial materiality covers only matters that affect the company's own enterprise value.

  1. AFinancial materiality only, as in the investor-focused approach
  2. BImpact materiality, as emphasised by GRI standardsCorrect
  3. CStatutory materiality under the Companies Act, 2013 for audit
  4. DDouble discounting materiality for tax purposes

Explanation

GRI standards ask organisations to report on their most significant impacts on the economy, environment and people, which is impact materiality. Financial materiality looks only at matters affecting enterprise value. The other two options are not recognised materiality approaches in sustainability reporting.

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