As a business within the scope of Europe's new Corporate Sustainability reporting obligations from next year, have you determined yet if you will be required to measure and report your impact on biodiversity, or on local water systems? If not, it is time to take action!
Starting 2024, at least 50,000 companies operating in the EU will be expected to comply with the Corporate Sustainability Reporting Directive. The regulation extends companies reporting to Environmental, Social and Governance (ESG) topics that are deemed “material” to your business and your stakeholders. The identification of material topics to report on will be challenging for many businesses. It is of essence that you as a business know who your key stakeholders are and what they consider as material topics that you should address.
Under the CSRD, companies must significantly increase their disclosure on impacts, risks and opportunities (IROs) that are deemed material for the business or its value chain under 10 topical Environmental, Social and Governance standards and 2 cross-cutting standards of the European Sustainability Reporting Standards (ESRS) framework. The concept of materiality here refers to the significance or relevance of a sustainability issue for the company and its stakeholders (i.e. including environmental impact, social responsibility, employee welfare, transparency, ethics and more).
The ESRS requires companies to disclose how the materiality is assessed both from a company and a stakeholder perspective, which stakeholders are involved, and how the IRO’s are identified, and the material ones interact with a company’s strategy and business model. The remaining 10 topical ESG standards are subject to a double materiality assessment.
What is double materiality?
The process of identifying sustainability matters is known as a "double materiality assessment”. This is a dual-sided evaluation that considers both the impacts of the company's activities on society (impact materiality) and the effects of environmental and societal factors on the company (financial materiality).
The double materiality assessment plays a crucial role in optimising the allocation of resources necessary for achieving CSRD compliance, while also providing invaluable insights that shape the company's overall strategy.
Double materiality ensures that the companies’ sustainability reports focus on the most relevant topics for both them and their stakeholders, whose interests and views on ESG topics among businesses are increasing exponentially. Identifying and engaging with relevant stakeholders is therefore a first crucial step in a double materiality assessment, enabling a company to understand its impact on people and environment.
The major challenge for the companies is to identify and address material impacts in their materiality assessment taking into consideration all internal and external stakeholders.
Who are the stakeholders that are impacted by your company? And which stakeholders are relevant for your business? Each company will have a variety of different stakeholder groups such as investors, employees, NGO’s, customers, media, the public and silent stakeholders (stakeholders unable to represent their interests, such as nature or species). There are several challenges arising when identifying and engaging with stakeholders in the context of a double materiality assessment.
Conducting a double materiality assessment will support companies in gathering the different stakeholder views and further allow them to identify their key sustainability matters.
To navigate this complex endeavour and overcome the challenges outlined above, companies can harness the power of artificial intelligence (AI) to enhance their double materiality assessment journeys.
AI technologies can crunch massive amounts of data from multiple sources, uncover emerging sustainability risks and opportunities, and generate data-driven recommendations. By using advanced algorithms, companies can uncover hidden patterns, anticipate future trends, and prioritise key focus areas for action. To find out more about how AI can streamline the double materiality assessment, read the full article here.
We can help by providing a 360-degree materiality assessment that addresses stakeholder challenges
We have a market and stakeholder data driven assessment approach:
We address the challenges of identifying the interests and views of stakeholders on material sustainability matters.
We identify the relevant stakeholders and assess the interests (what topics are the most important) and the sentiment on their views (the opinion of a topic). We target the key stakeholder groups (such as investors and regulators) through questionnaires and expert interviews. Often the questions are tailored based on the already identified and qualified material sustainability matters and related impacts.
We address the silent stakeholder challenge through analysing ecological data and academic research.
We gather the views and interests of the wider stakeholder group (i.e. media, NGO’s, the public, employees, customers) through our digital intelligence service with access to over 150 million public data sources globally across 180 languages.
We help you quantify the material impacts for your stakeholder via the following key metrics:
We quantify and benchmark material impacts that stakeholders discuss;
We assess stakeholder views on material impacts, using topic modelling and sentiment analysis to report the degree of positivity or negativity of a topic; and
We benchmark metrics across peers to give a comparative result.
How can we support the scoring and prioritisation of sustainability matters based on the impacts identified?
For the stakeholder analysis we leverage a quantitative and qualitative assessment methodology using robust and diverse data sources of structured and unstructured data both from the company and from external sources.
We provide an indicator for each positive and negative material impact by ESRS topic visualised on an impact indicator index ranging from low (0) to high (5).
This allows companies to have a clear understanding on what ESRS to focus their efforts on and are the most relevant to their wider stakeholder group (the public, investors, customers, employees, media etc.).
The assessment insights provide also a valuable input beyond reporting activities as they help steer the direction for strategy development, market and product entry or stakeholder engagement and communications and support the Company to identify and scope their ESG disclosures requirements.
We help define an ESG and stakeholder-centric business strategy
Based on our market and stakeholder insights-driven approach, we co-create the strategy and adapt the business model with our clients. This ensures that the company’s strategy, business model and actions are responding to stakeholder expectations on material sustainability topics such as defining a decarbonisation strategy.
Once the strategy is in place, we help our clients by monitoring and identifying changing stakeholders’ interests and views towards material sustainability matters.
Contact us
Brand and Market intelligence strategy, Strategy& Luxembourg
Tel: +352 62133 61 02
