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“Inside Out” Versus “Outside In” Perspective Of The Corporate Sustainability Reporting Directive (CRD) – What’s The Difference?

July 15, 2022

Updates from the AGN EMEA Accounting, Auditing & Education Committee (AAEC): The Corporate Sustainability Reporting Directive (CSRD) contains an important clarification to the effect that both the “inside out” and the “outside in” perspectives are relevant with regard to the identification of potentially reportable matters.

These perspectives significantly expand the content of sustainability reporting compared to the previous non-financial statement under the Non-Financial Reporting Directive (NFRD) – at least if one follows the previously prevailing interpretation of the NFRD in this regard.

This content expansion is due to the clarification of the word “as well as” in the definition of sustainability reporting, in accordance with the CSRD. Accordingly, sustainability reporting is understood to mean the inclusion of information in the management report or group management report, which:

  • for understanding the sustainability-relevant impacts of the activities (so-called “inside-out perspective”), as well as,
  • for understanding the impact of sustainability aspects on the business performance, business results and the situation of the company or the Group (“outside-in perspective”) is required.

In the explanations on the part of the European Commission, the following clarification can be found:

Explanation on Article 1(3) of the CSRD: “The materiality principle is clarified; this is intended to remove any ambiguity about what kind of information companies should provide, namely information that is necessary to understand how sustainability aspects affect them (outside-in perspective) and information that is necessary to understand how they affect people and the environment (inside-out perspective).”

The consideration of both perspectives (“inside-out” and “outside-in”) is referred to as “double materiality” in common usage and predominantly also in the CSRD literature. We consider this term to be misleading. It is not a materiality assessment but a determination of potential reporting components (independent of materiality) that precedes the materiality assessment.

Should you ever lose track of the big picture, my colleagues and I from the AGN EMEA Accounting, Auditing & Education Committee (AAEC) will be happy to help and guide you safely through the IFRS and CSR jungle. As a member of AGN International, you can use the AGN AAEC Helpline at any time or contact me by email at or by mobile phone at +49 173 8710322.

Carsten Ernst
Managing Partner
Wirtschafts Treuhand Group
Stuttgart, Germany
– Expert in financial (IFRS) and sustainability (ESRS and GRI) reporting

– Audit of financial and sustainability reports in accordance with ISAs

– Member of the following AGN bodies:
– EMEA Board of Directors (Chairman)
– EMEA AAEC Accounting, Auditing and Education Committee (Member)