Like me, you may have noticed your morning coffee is starting to become increasingly more expensive.
The recent surge in coffee prices serves as a compelling case study for the importance of double materiality assessments (DMA) under the Corporate Sustainability Reporting Directive (CSRD).
This price increase, largely attributed to climate change-induced weather patterns affecting coffee production, illustrates how environmental factors can have significant financial implications for your business, and your supply chain.
Coffee, a commodity very sensitive to climate conditions, has seen production challenges due to unpredictable weather patterns, extreme temperatures, and irregular rainfall. These climate-related issues have led to lower yields and reduced supply, consequently driving up prices. For companies in the coffee industry, from producers to retailers, this situation presents a clear example of how environmental factors can materially impact their operations and financial performance.
The concept of double materiality, central to the CSRD, requires companies to consider both:
- The impact of sustainability issues on their business (financial materiality)
- The impact of their business on the environment and society (impact materiality)
In the context of rising coffee prices, a double materiality assessment would prompt companies to evaluate:
- How climate change and resulting supply shortages affect their business model, revenue, and costs (financial materiality)
- How their operations contribute to climate change, potentially exacerbating the very issues affecting their supply chain (environmental materiality)
This dual perspective enables a more comprehensive understanding of risks and opportunities. For instance, a coffee retailer might identify climate change as a material financial risk due to rising input costs. Simultaneously, they would need to assess their own carbon footprint and its contribution to climate change as part of their environmental materiality.
The CSRD's emphasis on double materiality encourages companies to develop more resilient and sustainable business strategies. In response to the coffee price situation, companies might:
- Invest in sustainable farming practices to secure their supply chain
- Implement energy efficiency measures to reduce their carbon footprint
- Develop innovative products or business models less reliant on climate-sensitive commodities
By conducting a thorough double materiality assessment, companies can better anticipate and mitigate risks while identifying opportunities for sustainable growth. This approach not only aids in compliance with CSRD requirements but also positions businesses to thrive in an increasingly complex and interconnected global economy.
The case of rising coffee prices underscores the relevance of double materiality assessments in today's business landscape. As environmental and social factors continue to influence market dynamics, the ability to understand and report on these dual impacts will become increasingly crucial for corporate strategy, risk management, and long-term value creation.
We might not be able to lower the price of your morning coffee, but if you’d like to find out more about how PortF can help you with double materiality assessments and CSRD compliance, click here to book a call with us today.
