Telefónica and Double Materiality: How to implement it in business

At Telefónica, we understand that integrating Double Materiality is not only a regulatory requirement, but also the basis of a company’s strategy with a long-term vision. We have therefore incorporated the results of this process to comprehensively address the impacts, risks and opportunities (IROs) related to sustainability across our value chain. This approach allows us to identify how our activities impact the environment and people while assessing how sustainability issues can affect the value of our company.  

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Find out more about our methodology and case studies in the Double Materiality Toolkit developed by Telefónica and DIRSE, the Spanish Association of Sustainability Managers. Here are some ideas on how it can be implemented. 

What is Double Materiality and why is it key for companies?  

Double Materiality integrates two fundamental perspectives:  

• Impact materiality: examines how the company’s activities, both positively and negatively, affect society and the environment.    

• Financial materiality: analyses how external environmental, social and governance factors affect the value, stability or financial performance of the company, from the point of view of risks and opportunities.   

Implementation of Double Materiality at Telefónica  

Double Materiality is more than just a concept; it is a process. At Telefónica, we have taken the requirements of the CSRD (Corporate Sustainability Reporting Directive) and the implementation guide published by EFRAG as a starting point to create our own methodology adapted to our reality as a company. The methodology consists of four fundamental steps: 

1. Context analysis 

It is necessary to understand the context of the company as a basis for information that will allow us to determine the sustainability issues that may be material. To do this, we recommend identifying which external and internal sources are essential to understand the company’s environment.  

Examples of basic internal sources to consider are the company’s business model, corporate strategy and value chain. In addition, all internal reports and analyses relevant to the issues being analysed, such as due diligence reports, climate change or risk analysis, must be compiled.  

In addition, a company’s external environment provides information on sustainability trends and stakeholder expectations. Some examples of external sources to consider are the analysis of standards or regulations, ESG trends or benchmarking of reference indices.  

As a result of this phase, we will obtain a list of issues that the company must consider when identifying and assessing its impacts, risks and opportunities. 

2. Identifying and assessing Impacts, Risks and Opportunities – IROs 

With the list resulting from the previous phase, a process of identification and assessment of IROs is established. In this step, it is crucial to involve all relevant areas of the company, identifying internal roles and responsibilities, and to take into account all the specific requirements detailed in the standard.  

 For the identification of impacts, all activities and actors involved in the company’s value chain should be incorporated, as well as the stakeholders that may be affected by those activities.   

For the identification of risks, the impacts previously identified and the company’s risk map should be used as a starting point. For opportunities, the Company’s strategic plan and previously identified positive impacts should be taken into account.  

In the case of assessments, the EFRAG standard and implementation guide itself specify the parameters to be taken into account, leaving companies some leeway to define different assessment criteria, as long as they are consistent and can be justified. 

3. Consolidation of results

After completing the previous phase, it is important to consolidate all assessments to make them comparable and to establish a materiality threshold. The standard does not establish a single method for determining the threshold, leaving it to companies to adopt qualitative or quantitative criteria appropriate to their case. This process makes it possible to prioritise and determine the material issues for a company. 

4. Validation and reporting of results 

This step consists of validating the results based on the governance model established by the company. External validation with key stakeholders can be included. This promotes organisation-wide engagement and transparency in the management of material issues.   

 The consolidated and validated results of materiality will serve as the basis for reporting sustainability information, strategy and decision-making. 

Double Materiality at Telefónica 

An example of the application of Double Materiality is our initiative to include sustainability as a decisive factor in decision-making. The case studies of companies presented in the toolkit we worked on with DIRSE were carried out using public information from 2023. Each year, Telefónica updates its Double Materiality analysis, focusing on identifying  Impacts, Risks and Opportunities (IROs) while considering stakeholder expectations.  

We encourage you to read the full document at the following link: