Integrating Dual Materiality in Project-Intensive Organizations to Meet ISSB Disclosure Requirements

GPM is active as part of the IFRS Consultant Content Program and constantly monitors changes in reporting requirements to ensure what we are sharing is both correct and up to date. Today, I want to talk about something that is very important as organizations start working on 2024 disclosures.

The ISSB (International Sustainability Standards Board) provides a framework through its IFRS S2 Climate-related Disclosures, emphasizing the need for dual materiality—considering both the financial impacts of sustainability on the business and the business’s impacts on the environment and society. Here’s how project-intensive organizations can integrate dual materiality to meet ISSB disclosures effectively.

Understanding Dual Materiality

Financial Materiality: Focuses on how sustainability issues impact the company’s financial performance. This includes risks and opportunities affecting revenues, costs, and overall financial health.

Environmental and Social Materiality: Addresses how the company’s operations impact the environment and society. This includes emissions, resource use, community impacts, and regulatory compliance. From a reporting standpoint, projects are an aspect of operations.

Where the Problem Exists

In every organization we’ve worked with and talked to, only a couple had included project related data in their reporting before hand and after we spent time consulting with them we helped unlock the how and what using our PSM3 assessment.  The key is that it had to be based on their actual practice.

Those who do use project output related data, such as for GHG emissions, only include it once the project is closed and the asset is operational. This is a flawed approach. It’s as if the emissions during a three-year project lifecycle are somehow non-existent and don’t count?

The figure below, from the GPM P5 Standard V3 (available for free), illustrates that ESG disclosures and sustainability reporting should be driven by both operational data and project data. Imagine an investor group requesting an ESG disclosure from a company producing large-scale widgets, and the company omits every detail about the widgets’ impacts. This is precisely what’s happening. When greenwashing claims arise, they often point to these omissions.

Importance of Dual Materiality for Project-Intensive Organizations

Project-intensive organizations, such as those in construction, energy, and manufacturing, have significant environmental and social footprints. Aligning projects with dual materiality principles can enhance compliance, performance, and stakeholder trust.  Material climate-related information enables investors to:

  • Determine the effects of climate-related risks and opportunities on the company’s performance and prospects as well as their projects as 53% of projects worldwide are affected by extreme weather events exacerbated by climate change.
  • Evaluate the ability of the company to adapt its planning, business model and operations to climate-related risks and opportunities.
  • Understand the company’s response to, and strategy for, managing its climate-related risks and opportunities, including its climate-related transition planning and project port
  • Understand climate-related risks and opportunities in a company’s value chain

Steps to Integrate Dual Materiality in Project Management

Context setter: sustainability does not exist separate from projects and project management.  Projects are affected by and affect sustainability and therefore projects and project management must address it in all its forms.  That is for another post though.

Step 1. Conduct Comprehensive Assessments using the P5 Impact Analysis (download it for free here)

Use tools like the P5 Impact Assessment to evaluate projects against sustainability criteria. This assessment should cover environmental, social, and economic impacts, providing a holistic view of each project’s sustainability performance. It will provide you with the impacts, their severity and what needs to be done.

Assessment Focus Areas:

  • Environmental: Measure carbon emissions, water usage, and resource consumption.
  • Social: Evaluate community impact, worker safety, and fair labor practices.
  • Economic: Assess cost efficiency, return on investment, and resource utilization.

Step 2. Establish a Sustainability Management Plan in your Project Plan Suite (SMP) (download it for free here)

An SMP serves as a framework for integrating sustainability into project management. This plan should outline the approach, roles, responsibilities, and key performance indicators (KPIs) related to sustainability. The GPM Sustainability Management Plan template can be a starting point, ensuring a structured and comprehensive approach.

Key Components of an SMP:

  • Purpose: Define the project’s sustainability goals.
  • Approach: Outline how sustainability will be integrated throughout the project lifecycle.
  • Roles and Responsibilities: Assign specific sustainability-related tasks to team members.
  • Budget: Allocate resources for sustainability initiatives.
  • KPIs: Establish metrics to measure sustainability performance.
  • Impact Analysis: Conduct P5 Impact Assessments to evaluate potential sustainability impacts.

Step 3. Do the work

Aspects of the project may change based on the assessment however this is materiality that can be shared in sustainability reports.  Assign the work to action owners and track progress.

Step 4. Reporting and Transparency

Align project reporting with ISSB’s IFRS S2 disclosure requirements. Ensure transparency in how sustainability goals are set, measured, and achieved.

Key Reporting Elements:

  • Greenhouse Gas Emissions: Disaggregate Scope 1, 2, and 3 emissions as per IFRS S2 guidance.
  • Climate-Related Risks and Opportunities: Identify and disclose risks and opportunities that could affect the organization’s prospects.
  • Metrics and Targets: Report on progress towards climate-related targets, using standardized metrics.

Other Considerations

While the ISSB’s IFRS S2 Climate-related Disclosures set a solid foundation for sustainability reporting, they don’t encompass the full spectrum of sustainability criteria assessed by the GPM P5 Standard. The P5 Standard evaluates projects across a broader array of sustainability dimensions, including people, planet, prosperity, and more nuanced social and environmental impacts.

For investors, comprehensive and transparent sustainability reporting is increasingly valuable. Detailed disclosures build trust and demonstrate a company’s commitment to long-term sustainability, which can enhance investor confidence and attract more capital. By leveraging the P5 Standard, organizations can provide a richer, more detailed picture of their sustainability efforts, exceeding basic compliance and showcasing leadership in sustainable business practices.

To further support this journey, keep an eye out for our upcoming P5 for Business Practice standard! This new tool will offer even more comprehensive guidelines for integrating sustainability into every aspect of your business operations. By adopting these advanced standards and practices, your organization can lead the way in sustainable project management and drive meaningful progress toward a more sustainable future.


Dr. Joel Carboni

Dr. Joel Carboni is a highly respected expert in sustainable project management. He is a graduate of Ball State University and holds a Ph.D. in Sustainable Development and Environment. He has over 25 years of experience in project management, including government, finance, consulting, manufacturing, and education. He is a frequent speaker at conferences and events related to project management and sustainability and has worked in more than 50 countries. In addition to serving as President Emeritus of the International Project Management Association (IPMA) in the United States and being a member of the Global advisory board, Dr. Carboni is also the founder of GPM (Green Project Management) and a visiting professor at Skema Business School. He is also the GPM representative to the United Nations Global Compact, where he was a founding signatory of the Business for Peace Initiative and the Anti-Corruption call to action and a contributor to the development of the UN 2030 Agenda for Sustainable Development (SDGs). Dr. Carboni is the creator of the PRiSM™ project delivery methodology and the P5 Standard for Sustainability in Project Management and has written training programs on Green and Sustainable Project Management that are offered in more than 145 countries through professional training providers, business associations, and universities. He is the lead author of the book "Sustainable Project Management."

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