Green Fix
Welcome to the Green Fix, the climate & sustainability podcast for Australian corporations and their ESG practitioners. We explore the top challenges and opportunities in the industry, how they are impacting your business and your work, so that you can keep your sanity.
Green Fix
S2 E3: Double Materiality: The Missing Piece in Your Business Strategy with Sydney Straver, &Bloom
Struggling to make sustainability strategically relevant to your business? Double materiality might be the missing piece you need.
Sydney Straver, Managing Director at &Bloom, joins us to unpack this powerful framework that's transforming how businesses approach sustainability. Drawing from her extensive European experience, Sydney explains how double materiality bridges the gap between sustainability efforts and financial performance – making it easier to get buy-in from even the most skeptical executives.
"Double materiality is effectively the cornerstone of a good sustainability strategy," Sydney explains. By examining both how your organisation impacts stakeholders (impact materiality) and how sustainability issues affect your enterprise value (financial materiality), companies can identify 5-6 key priorities that truly matter.
The beauty of this approach? It's not about creating additional work but providing a framework to organise what you're already doing.
Whether you're just starting your sustainability journey or looking to take your existing efforts to the next level, this episode provides the roadmap you need to move beyond compliance toward strategic value creation.
Ready to start embedding sustainability into your business strategy? Listen now and discover how double materiality can help you surf the green wave with confidence.
Your Hosts:
Dan Leverington
Loreto Gutierrez
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Three good news buckets about double materiality. One is that double materiality considers the financial implications of risks and opportunities. Two is that double materiality really provides a framework to organise and prioritise existing sustainability initiatives. And then, three, it really enables clearer internal alignment by linking sustainability topics to your business strategy and business outcomes.
Speaker 2:Welcome to the Green Fix, the climate and sustainability podcast for Australian corporations and their ESG practitioners. We explore the top challenges and opportunities in the industry and how it impacts your business and your work. So that you can keep your sanity. I'm your host, Dan Leverington.
Speaker 3:And I'm Loretta Gutierrez, and today we are in conversation with Sydney Straver, managing Director of Unbloom. Sydney is dedicated to moving the needle on ESG in the Pacific, from compliance to strategic value creation. With a proven track record of assisting European firms in advancing their ESG agendas, she aims to bring this expertise and best practices to the Pacific. Sydney supports investors and organizations of all sizes in designing and implementing effective ESG strategies, from setting the foundations to surfing the green wave. Unique to her approach is a strategic value creation lens, helping investors and businesses seize opportunities where sustainability meets value creation. Sydney, welcome to the Green Fix. We always like to start by understanding a little bit about our guests' personal connection to sustainability. So what was your climate moment that led you into the sustainability space?
Speaker 1:Good morning. That's such a great question because I feel like I've had multiple climate or sustainability moments in my life, so it's a bit hard to cherry pick the right one. But I guess I grew up across the globe which you know they sometimes were through it as a third culture kid and from a young age seeing the difference between concrete jungle and then the untouched nature here in the Pacific, but at the same time also going to international school and being surrounded by people with global perspectives. I guess I was always quite privileged to be in an environment where sustainability topics, purpose-driven conversations they were always there. But the truth is that I really didn't do much about it for a long time.
Speaker 1:It was only when I was living in Spain that my roommate encouraged me to think about switching to a plant-based diet. So she got me on those documentaries. I did some reading and then tried that out and as I went on that journey you know, vegetarian switching to vegan after a couple of years I thought why am I doing all of this in my personal life but at the same time not really doing that or aligning those values in my career? And it was at that time that I was actually just graduated from my master's in strategic management, where I wrote my master thesis on how climate change adaptation strategy drives employee commitment in an organisational setting, and I thought, wow, this is so interesting and cool and I want to do something related to this once I land a job, and I was fortunate enough that at the time that job was there, and so I did.
Speaker 2:That's amazing. And so coming into the present all of your experiences. It sounds like have fed into and bloomed. That's amazing. And so, coming into the present, all of your experiences that sound like have fed into Anbloom, can you give our listeners an overview of what Anbloom is and why you decided to start the business when you did?
Speaker 1:We like to say that we're actually a strategy advisory that focuses on sustainability and ESG, because that strategy component is very core to what we do. I'll get back to that in a minute. But we effectively help organisations and investors at all stages of their sustainability journey and really focus on bridging that gap between sustainability efforts and value creation. The reason I started it is honestly because I was a little bit frustrated. I spent quite some years working in Europe in the sustainability space and at the time that was extremely fast-paced. Regulations were being introduced, like the EU Corporate Sustainability Reporting Directive, and on the investor side we had the EU Sustainable Finance Disclosure Regulation and being at the forefront of these new regulations being introduced. It was really good to see that shift from reporting to thinking about how organisations could leverage sustainability as a strategic lever to secure their licence to grow and maybe even a competitive advantage, and I loved doing that work.
Speaker 1:But this the Pacific.
Speaker 1:So I came back here two years ago and as I was navigating the market, having conversations with organisations working on the the sustainability journey, but also advisors and consultants, I was a little bit frustrated that the quality of the conversation or the pace of adoption here was different than what I was used to back in Europe and that frustration mostly came from that.
Speaker 1:You know, we love that clean green image here. We tend to think that we have that here in Australia and New Zealand but in reality I was having those discussions and I noticed that, yes, the companies were doing good but the governance and the strategy wasn't really there to support that clean green image. That's very much the core of why I started in Bloom and we really hope to move that needle to secure that organizations one have the building blocks and two have the capabilities but, more importantly, unlock that strategic and value creation element as they go on that journey. And in doing that we like to be a little bit playful in the way we go about it. So we like to say that we help them serve that green wave.
Speaker 3:That's amazing and to double click a little bit on that European experience and how it can be translated to Australia. You've talked a lot about the learnings relating to climate reporting, but also the power of double materiality. So, for the Australian audience, what exactly is double materiality and why is it such a critical concept for businesses that are grappling with that? Esg integration?
Speaker 1:Double materiality is effectively the cornerstone of a good sustainability strategy. Sustainability in itself is extremely broad. I'm sure most of the listeners are aware of environmental matters, the social matters and the governance matters that fall under that sustainability bucket. And double materiality is really a tool or an assessment that you do to help you understand how sustainability is relevant to your organisation. So what that looks like you effectively have two variables, so one is the organisation, so the entity itself, and the other variable is stakeholders, including the planet and society as well, and then there's effectively two flows and you affect those flows to really understand your impacts, risks and opportunities from that sustainability perspective.
Speaker 1:One flow is called impact materiality, which is a very tricky word for understanding how you as an organization impact your stakeholders. That can be positive or negative. So, for example, you might be a technology company contributing to climate change significantly through your data centre, energy usage and consumption. So energy and climate is a material topic for your business. So that's that impact flow.
Speaker 1:The other flow is called financial materiality, which is much more about how do stakeholders, including the planet and society again, impact our enterprise value. So, again in the context of a tech company, increasing climate regulations or the introduction of carbon pricing in key markets that might be increasing the cost of operating the data centers, for example, so that too becomes a material financial risk due to higher operating costs. And so ideally, in that double materiality assessment, you think about these two flows. So impact materiality, financial materiality, to identify five to six key priorities or key ESG themes across that ESG spectrum for you to strategically focus on. So that might be, you know, energy and climate. There might be health and safety, supply chain control effectively the five to six themes that inform all your sustainability related work. So not just your reporting, not just your policy, but also your strategy and how you prioritize anything you do on sustainability policy, but also your strategy and how you prioritize anything you do on sustainability.
Speaker 2:It is pretty amazing how the financial impact is really the one that seems to get businesses sitting up pretty quickly once they realize that their operations are significantly exposed from a risk perspective. Looking at the European experience, what were the key insights or challenges you observed while you were working over there regarding the implementation of climate reporting and double materiality that you think Australian and New Zealand companies should be aware of as they step into this more formal climate reporting regime?
Speaker 1:Well, I guess we tend to forget the governance and the capability building side of things and too often and we see this a lot now with the new financial year starting and a lot of companies gearing up for the ASRS that the focus is really on these exercises as a project or maybe even a compliance exercise, rather than actually a tool to facilitate more strategic discussions internally and to position the business. My main challenge is really having these conversations with Australian businesses to actually unlock those value creation opportunities and that we need to have the building blocks in place from a government's perspective. So that's your ESG policy make sure your board and management team have buy-in and also understand and have the capability to make informed decisions around sustainability and climate, have sustainability as a broader gender item, things like that. So I guess it's just really key and it's really the challenge and the conversations that we're having to make sure businesses understand that that capability building, combined with the governance, is really key to thrive.
Speaker 3:And beyond the compliance piece, which is, of course, really important. One thing that we hear a lot from sustainability teams is that they're challenged to communicate in a way that resonates with the finance and the executive teams, even if their focus on the long-term continuation of the business operations is their priority. So how does this double materiality help bridge the gap between the language of a sustainability leader and the commercial financial language of a sustainability leader and the commercial financial language of a CFO or of an investor and what they need to hear?
Speaker 1:Yeah, this falls into three buckets, three good news buckets about double materiality. One is that double materiality considers the financial implications of risks and opportunities. Two is that double materiality really provides a framework to organise and prioritise existing sustainability initiatives things that you're already doing, but just creating a framework to have those conversations around. And then three, it really enables clearer internal alignment by linking sustainability topics to your business strategy and business outcomes. And all these three buckets, yeah, really help create a structured framework to identify and prioritize risks, many of which, if I manage, clearly carry financial consequences. And that's exactly, you know, the whole point of doing this double materiality exercise understanding where those heat maps are, and no CFO or investor likes the sound of those financial consequences. So there's only more you know well and evidence to do these double materiality assessments because they carry that significant component of understanding those key risks.
Speaker 2:And, I suppose, on the opportunity side, how are you seeing companies that have more robust double materiality assessments directly impacting their ability to access investment capital, qualify for green loans from banks or even reduce the insurance premiums that the company is having to pay each year?
Speaker 1:Yeah, that's a great question and we could have a full episode around that, because that is such an important topic.
Speaker 1:Banks, investors and insurance are increasingly looking for evidence that companies understand the sustainability issues that they face, and those that they contribute to as well, from that impact side of things.
Speaker 1:And these banks, investors and insurers don't want to put their money into organizations where there's any orange or red flags because they don't understand their climate risks or sustainability risks or, more specifically, you know, supply chain risks, which is very important in today's unstable geopolitical climate. Proofs that you understand this and even better, if you've got prioritized actions and processes and targets in place for these key material topics, come out of that double materiality assessment, and I would really love you know the listeners to take away that doing a double materiality exercise is not, you know, doing something completely new. Of course, the assessment itself might be new, but effectively you're creating a framework around things that you're doing already. So you'll already be working on talent management or attraction, working on supply chain control, if these are important to your business. So you're just formalising a framework around that and, yes, there is a good business case for it because it does, you know, increase that ability to access investment capital sustainability linked lines and reduce insurance premiums.
Speaker 2:One way that I've heard it described is it is actually the single function or activity that can pull together all the different pieces of an organisation into the jigsaw puzzle that gives the execs and the board the full overview of what's actually going on in their business.
Speaker 1:Yeah, exactly, and that's again how it links back to that access to capital, because if you don't have that in place, you're kind of showing a lack of ability to understand your key impacts, risks and opportunities. And again, no financial institution wants to put their money in organizations that don't have a coherent understanding of their risks, particularly organizations that don't have a coherent understanding of their risks particularly?
Speaker 3:Yeah, and speaking of that, it's a great framework for communication, of course. So do you think that this is a framework that allows you to navigate and get the buy-in from those internal stakeholders who are a little bit more resistant to embedding sustainability in their side of the business?
Speaker 1:Yeah, I guess that very much goes back to that capability building. We see that in our work. A lot Internal stakeholders everywhere that might challenge you might not yet understand that sustainability links back to things you're already doing in the business and potentially even their role themselves. So I guess when you do a double materiality assessment, make sure you engage the people in the process but, more importantly, actually educate them to understand that sustainability is not just that project or just that reporting exercise, or not just complying with the Australian sustainability reporting standards, but actually a strategic pillar to manage and seize those risks and opportunities that the person that you know might be a little bit challenging, that stakeholder that might be challenging you, might actually be very important to working on. So again, engage them in the process, build the capability internally to have those conversations and it will, you know, clear up that pathway to have these discussions.
Speaker 2:You highlighted the importance of building internal capability to translate insights from reporting into action. What are the key skills or departments within a company, particularly in Australia and New Zealand, that need to be upskilled or brought into the double materiality process to ensure that it's successful integration into the governance and strategy piece?
Speaker 1:The more the better, but of course that's not always feasible and prioritization is key.
Speaker 1:But regardless of prioritization and how that might look for your organization, management team and board are definitely keen to be in that prioritization bucket.
Speaker 1:If the board is not on board, it's not intended that you won't be able to unlock value creation opportunities and at the end of the day, the board and the management team need to be able to make those informed decisions around sustainability and the key material things that have been identified through your double materiality assessment.
Speaker 1:You know, and the key skills that come into that is really being able to understand what these sustainability reports say and what that implies to the board and how can they leverage these reports to actually work on the strategy for the next year, work on the business plan for the next year. There's different skills and capabilities that fall under that can range from even understanding what climate scenario analysis means to understanding how these double material or these key themes tie back into the business. And then, when it comes to departments, it's just the broader team that needs to be aware and involved as much as they can. We typically encourage businesses to do management team trainings and create champions across different departments that can then lead integration through that. I think the key is very much to move away from having sustainability as a project or a one-off exercise or a compliance exercise to more embedding it in the business. And that's again with that involvement, that buy-in, that capability building is so fundamental to be able to lift that off.
Speaker 3:And Sydney. We've talked a lot about the importance of double materiality and what it is. I'd love to hear more from you for the listeners that are just starting on their journey with double materiality. First of all, what does the process actually look like? So what are the practical steps that they need to take? And then, what are some steps that they can take already to initiate this process?
Speaker 1:Absolutely To double materiality. There's actually two approaches. One approach is top-down, the other one is bottom-up. So let's start with bottom-up and that's effectively where you engage with different stakeholders across the business internally and externally, gather their input on what they think to be the other key impacts, risks and opportunities and then you feed that into your double materiality assessment, provide some judgment over that and then fine tune that. That's the bottom-up approach. It can take weeks. It's a very long process. The top-down approach is very easy to get started and you can even get started today in the next hour and walk away with an initial double materiality assessment.
Speaker 1:And I'd just like to shed some light on three steps for the top down to get the listeners going. So one is map your value chain activities. Start thinking about you know what are the key trends and developments across the value chain from a sustainability perspective, what's happening upstream, what's happening in operations, what's happening downstream with our clients, and that really helps lay the foundations for where the material risks and opportunities could be, looking at the developments across the value chain. Step two leverage existing frameworks and databases to really guide your thinking. Step two leverage existing frameworks and databases to really guide your thinking. So there's a lot of free online tools and databases to get you going, like the MSCI materiality map or the SASB materiality map.
Speaker 1:If you go to these websites and we might be able to provide the links to the listeners you can just type in your industry and it will show you five to six key priority themes to focus on from your industry perspective.
Speaker 1:Of course it's always good to provide some judgment over that because that's industry specific and not company specific, but a very good starting point to kind of understanding where again, could those hot spots be for us? And that kind of goes into step three involve the right people early. So once you've got that baseline, you've mapped out your value chain, you've looked at existing databases in the research that suggests you know the five key five to six key priorities for you. Leverage that to engage teams, engage the management team, engage the board where you can, and make sure there's quite some diversity of thought there. So make sure there's someone from finance, make sure there's someone from HR, from the risk team, from operations, and use their insights to really ground the assessment in reality and ensure that it speaks the language of everyone, not just the language of the sustainability team.
Speaker 2:I've got to say Sydney. I've sat on so many webinars about double materiality and I've never heard someone describe it as succinctly as that, so thank you, that's unreal. Beyond double materiality, how do you see the overall ESG and sustainable finance landscape evolving in Australia over the next 12 to 24 months? What are some of the biggest opportunities and challenges that you see?
Speaker 1:yeah, um, so much opportunity. It's so much momentum in the industry right now, um, in Australia. So, um, you know, the introduction of the mandatory climate reporting is great. The good news is is that, you know, climate reporting is becoming as important as financial reporting. The bad news is, if you will, that it's still lacking the mandatory side of double materiality assessment, so there's no direct need to do it.
Speaker 1:But if we talk about opportunities, there's a really growing momentum to think about how do we go from reporting, which everyone will be doing, to securing our license to grow and thinking about our competitive advantage from a sustainability perspective. So I think that's definitely the biggest opportunity lies in thinking about that and, of course, at this time, most of the work around sustainability in Australian businesses is driven by mandatory climate reporting but also think about the inherent risks and opportunities of not going beyond that, and also think about the changing stakeholder demands in the game at the moment. So there's that. And then I think the biggest challenge that comes with that is capability, again, which I think I've touched upon a lot, but we need to build that in organizations. You know they need to be able to seize these strategic opportunities and be able to identify them, be able to use the reports, but go beyond that by creating champions in the organizations, have a board that's equipped with the know-how and that's capable to make strategic decisions. So I think that's the main challenge.
Speaker 3:Sydney. I was wondering for our listeners are there some really good case studies of companies that are doing it right or, equally, companies that are not doing it right and that have had issues because they haven't applied the principles correctly?
Speaker 1:Maybe it's good to brutally touch upon single materiality without naming organizations because I don't want to name shame in this episode. So double materiality actually has grown from single materiality, which was actually adopted around 20 years ago by the accountants thinking about how do we account for climate risks? And then they came with this idea of single materiality, which only looked at that financial lens. So for a long time and if you look back at sustainability reports from even two, three years ago, the majority of them and I think the majority of those still today will be looking at materiality or the key sustainability risks and opportunities for them from that financial lens. Opportunities for them from that financial lens. I think the crux there is it doesn't consider that impact lens where, if you do consider that lens, there's also the biggest opportunity to secure that license to operate, secure your access to capital, secure your license to grow and perhaps even gain that competitive advantage. So that's where you want to be looking from that perspective.
Speaker 2:It's a really interesting point because, particularly companies that are in Group 2 or Group 3 from a reporting perspective so general rule of thumb, outside financial services, I would say companies that have 500 employees or less they are generally hearing about this for the first time from their customers, in terms of their b2b customers who sit within that group one, and I can tell you from the conversations that I have pretty regularly, when you find out from your customer that your future revenue is dependent on you getting started on this, it's a it's a pretty fast way to light a fire under the executive team's seats. It's fascinating that we are still in a point where there's a large cohort of executives and boards that are still trying to hold on to this idea that anything outside their P&L is not anything that they have control over, so to speak, even though we know that their P&L is directly impacted in both directions, both from a financial and an impact perspective, as you've pointed out.
Speaker 1:Yeah, and to that I also just briefly want to add of course we're talking in the context of Australian business, but bear in mind that if you're associated in your value chain which I'm sure most of the companies will be with players that are operating in Europe or have significant presence there, they need to do this by law in Europe. You know, a double materiality assessment is the bare minimum for sustainability reporting in Europe. You can expect, if you have a party or a stakeholder that has that exposure, they might be asking you the questions that can then inform their double materiality assessment as well. So there's really this push across the value chain to do this. So, yeah, look abroad as well, because there's heaps going on when it comes to sustainability reporting and legislation.
Speaker 2:And looking abroad, how much do you think that can help our listener who is looking for examples or roadmaps or templates, so that they don't feel like they have to reinvent the wheel on their own?
Speaker 1:yeah, um, definitely very useful and I would say some words of encouragement to look at europe, um, not just because I started my career there, but because I know that, um, the brussels effect is a term for a reason and what? What happened in europe five years ago is happening now in australia and new zealand and reports there. You know they're very much built on the foundation of double materiality. Organizational strategies are built on that foundation. Here in australia and new zealand we still have a miles to go on that. So look at what they're doing there, look at the publicly available reports and see what you can do and that I think the level of transparency in the market is far larger in Europe than it is here in Australia. So if you have any peers or competitors in your space operating in Europe, just have a look at their website and I'm sure you'll come across some good inspiration to get going. And if not within your industry, beyond your industry, it can sometimes be even better to get that source of inspiration.
Speaker 2:And in terms of the opportunities, the ability to pair your company's offering with your customer's sustainability strategy is only going to become more and more important from a tendering and renewal of contract perspective as well.
Speaker 3:So one final question before we get into the rapid fire section of the podcast. What advice would you give to an Australian sustainability professional who feels overwhelmed by the complexity and rapid pace of change in the corporate sustainability space?
Speaker 1:Unfortunately, the state of sustainability teams today is that it's nine out of ten times one individual, and that one individual is either full-time on sustainability or is juggling another role, whether that's health and safety or quality, and doing this as a side project. So definitely encourage you to just network and go to events, because it can sometimes just be a lonely island if that's just you by yourself. At the end of the day, you know you're not alone in the sustainability race and there's heaps of people out there to help you on your journey and leverage them. And I'm not saying that because we're a sustainability advisory, but there's actually some huge amount of resources out there just to build some community and some knowledge sharing on that. So even just going to a sustainability meet, working coffee each month can already be such a breather. And specifically in Australia, I know there's a climate career that's across all the large cities in Australia. So sign up to that, it's free. Get together with all these amazing professionals working in this space and just open up the conversations around your challenges and opportunities.
Speaker 2:Definitely there is an enormous sense of goodwill amongst the sustainability professional group. So yeah, tap into it. I love it. Generally, those sustainability professionals love finding new materials to read, listen to or view. Would you share with us a thought-provoking book, podcast or article that you believe would be beneficial for our listeners to check out?
Speaker 1:Yeah, so we've talked a lot about the importance of embedding sustainability and the role of double materiality and allowing for that, and I think a really great article for that would be the path to embedded sustainability by IBM, which is actually a year old article, but it's such a key read to any listener. It really talks about the business case for sustainability, why you need to embed it rather than approaching it as that compliance or project or reporting exercise or reporting exercise, and it really speaks to that return on investment as well, which can be extremely useful for those tricky internal stakeholders that might not be on board. So definitely a must read from my end.
Speaker 2:Awesome.
Speaker 3:Sydney, if we gave you a magic wand to change one thing in the world in the next five years, what would you do with it?
Speaker 1:Yeah those will probably sound a little bit ironic coming from me, as this is what we do with emblem but that that foundational kind of capacity building wouldn't be necessary anymore so effectively that we could get going on what we actually need to do, rather than sitting in in rooms to equip the board, the management team, broader teams, with the capabilities and the skills that they need to get going on that. So actually moving away from these hygiene things to more actually working on those impactful and strategic side of things.
Speaker 2:And continuing that trend of future looking and positive state. Can you share a piece of positive new climate news that you've heard recently?
Speaker 1:Yeah, so this is a recent study done by the World Resource Institute. The study analysed over 300 adaptation and resilience investments across, I think, 12 countries, and they found that every $1 invested in adaptation and resilience generates more than $10 in benefit over 10 years. So this translates to a potential average return of like more than 25%. So, yes, climate adaptation does have a return on investment, and so does sustainability, so there's really some positive climate news from that angle.
Speaker 3:Amazing news, Sydney. One final question for you who is an inspiring leader that you think that we should interview in?
Speaker 1:this podcast. I would actually love to hear from you both, because you're both very much you know in the day to day of space and you're doing a phenomenal work by sharing, putting people on spotlight. But you both speak to sustainability practitioners in the day-to-day. You know the challenges that they've got about. So I'd just love to hear the conversation between you two for a change.
Speaker 2:Wow, it is an idea that we've been kicking around for a while, so I think you might have just prompted us to actually put that into action. Thanks, alrighty, that was very, very fun. I just wanted to say thank you for coming on and, like I said, really making it so straightforward and simple to understand how this all fits together and how sustainability can work with their execs and boards to ensure that the companies are genuinely sustainable for the long term, which I'm sure is in all of their charters. So, sydney, thank you very much for being with us today.
Speaker 1:Thanks for having me.
Speaker 3:This was Green Fix with your hosts Loretta Gutierrez and Dan Levington. We hope you enjoyed the episode. You can send us your questions or tell us who you'd like us to interview next at info at greenfixpodcastcom. You can get your Green Fix every two weeks on Apple Podcasts, spotify, youtube and Pocket Casts.
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