Dynamic, Nested and Core Materialities – Materiality Madness?

In February 2022, the Global Reporting Initiative (GRI) published a paper titled “The materiality madness: why definitions matter”. GRI’s corporate sustainability reporting standards, based on the concept of double materiality, are the most widely used worldwide. GRI’s key message in the paper was simple – don’t complicate the idea of materiality.

As GRI put it, there has been a wild growth of terms like dynamic, nested, extended and core materiality. While the intent behind introducing such new terms might be good, it is only adding to the materiality madness and making the concept of materiality unnecessarily complicated. According to GRI, the only relevant types of materiality are financial and impact materialities together under the umbrella of double materiality.

So, what are these terms and are they leading to “Materiality Madness”? Read on, and decide for yourself.

  1. Materiality (Single): Materiality is an accounting principle according to any information that can help a shareholder understand factors that affect the financial performance of the investee company. The same idea, if extended to a stakeholder perspective, can mean any information that helps understand the impact of a firm’s operations on the stakeholders. The former represents an “outside-in” view for the company, while the latter provides an “inside-out” view.  
  2. Double Materiality: The concept of “double materiality” considers the “outside-in” (Financial Materiality) and “inside-out” (Impact Materiality) together.

 Regarding sustainability reporting, the proposed European Union’s Corporate Sustainability Reporting Directive (CSRD) considers the concept of “double materiality” as its core element. Read more here. Our how-to article on conducting a double-materiality assessment can be found here.

  1. Dynamic materiality: This term, along with the term Core materiality, was introduced by Truvalue Labs(now part of Fact Set), an ESG data provider, in a research paper published in January 2020. According to Truevalue Labs, the “concept of what is material is becoming more changeable, more fluid”. In other words, it is not static. The term was also extensively used in a White Paper by World Economic Forum (WEF) published in collaboration with the Boston Consulting Group in March 2020.

The GRI paper counters this argument by saying that one cannot interpret something as material based on whether its impact is in the here and now or it might be in the medium or long term. 

  1. Core materiality: This term, also introduced in the paper mentioned above, refers to the three most common issues that are material across industries – Greenhouse Gas Emissions, Labor Practices and Business Ethics.

 The paper on Dynamic and Core materialities can be downloaded here.

  1. Nested materiality: This term was mentioned in the paper “Reporting on enterprise value Illustrated with a prototype climate-related financial disclosure standard “, published in December 2020 jointly by CDP, CDSB, GRI, IIRC and SASB. The idea of nesting is that different users of a sustainability report would require different levels of granularity of material information, which is described as nested materiality. Interestingly, GRI also contributed to this paper that contains the concepts of nested and dynamic materiality, which GRI criticized a year later as causing confusion.

The GRI paper “The materiality madness: why definitions matter” can be downloaded here.


In our view, the concept of double materiality is powerful enough for sustainability reporting, and the rest of the terms are helpful but not critically important when reporting on non-financial performance.