From Disclosure to Impact: Evaluating ESG Double Materiality and Efficiency in the Italian Banking Sector

Purpose: This study aims to assess the efficiency level of Italian banks in translating the quality of double materiality disclosure into economic-financial performance, by analyzing whether and to what extent the informational commitment on ESG aspects can actually generate competitive advantages and improvements in profitability. The research seeks to fill a gap in the literature, which has rarely examined the quality of double materiality disclosure and economic-financial performance in the banking sector jointly, especially by explicitly considering double materiality as an input in efficiency models. Methodology: The methodology combines content analysis of Italian banks’ sustainability reports and non-financial statements, assessed using a ten-criteria evaluation grid specifically designed to measure double materiality disclosure, with an output-oriented Data Envelopment Analysis (DEA). The double materiality score serves as the input, while economic–financial performance is operationalized through profitability indicators (ROA, ROE, NIM) used as outputs to assess the efficiency of transforming sustainability reporting quality into the performance. Findings: The analysis reveals significant variability in the quality of double materiality disclosure among Italian banks. Only a minority achieve high efficiency in translating disclosure into profitability, while most operate below best practice standards, with an average DEA efficiency score of 53%. Just a few banks reach excellent efficiency and 80% show below-average results, highlighting the need to integrate sustainability with business strategy better. Research limitations/implications: The main limitation of this research lies in the size and nature of the dataset, which consists exclusively of available sustainability reports and non-financial statements for 2023. The lack of a panel analysis limits the ability to observe changes in efficiency over time. Expanding the sample and extending the study on a spatial-temporal basis, with comparative analysis of other European banks, would allow for the identification of differences, evolving trends, and the actual impact of regulations across different banking contexts. Therefore, future research should focus on longitudinal analyses and cross-country comparisons to better understand the integration path of double materiality. Originality/Value: This study offers an original contribution by analyzing how Italian banks transform the quality of double materiality disclosure into economic-financial outcomes, applying Data Envelopment Analysis (DEA). The work is also distinctive in proposing Total Quality Management (TQM) as an approach to bridge the gap between formal disclosure and substantive integration into decision-making processes and organizational culture, providing new perspectives for both the literature and management and policy-making in the banking sector.