The first step is getting to grips with your sustainability priorities – undertaking a double materiality assessment to understand what impact your business has on the world, and what (financial) impact the sustainability world has back on your business.
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Whether regulation makes you tick, or feels like it’s breathing down your neck, the CSRD is here to stay and companies around Europe and beyond are getting ready to report.
There are numerous materiality assessment guidelines and publications issued by the European Financial Reporting Advisory Group or EFRAG for short.
The first step is getting to grips with your sustainability priorities – undertaking a double materiality assessment to understand what impact your business has on the world, and what (financial) impact the sustainability world has back on your business.
Here at Ever we’ve been working with companies across the listed space on double materiality assessments (DMA) over the last few years and are excited to see it come into the mainstream. But whilst the philosophy is the same, some key ingredients and methodologies have developed to make up today’s materiality approach:
Here’s our take on the key components of a DMA in 2024:
1.
Comprehensive value chain mapping
By focusing on their entire value chain, these companies identify material topics and important risks and opportunities (IROs) with greater accuracy. This approach ensures that all significant impacts and dependencies are considered, resulting in more robust and relevant sustainability reporting.
Companies like ING, Ingka Group, OVS Group, and Stora Enso map their value chains comprehensively – upstream, downstream, and within operations – to determine IROs.
2.
Targeted and meaningful stakeholder engagement
Stakeholder engagement remains one of the crucial parts of the double materiality process, but trendy surveys are on their way out. We’re seeing calls for traditional methods of engagement through surveys to be replaced where possible with more inclusive methods like workshops and interviews on specific topics.
“Subject matter experts” are key to CSRD and taking a more targeted and high-touch approach means the input is directly relevant and actionable. This both enhances the quality of the assessment and really allows you to get to grips with your sustainability priorities across your value chain.
3.
Get all your internal teams onside
CSRD is a whole-family affair. We need risk and innovation, finance and marketing, supply chains and sustainability teams. A thorough internal assessment involves the sustainability team and knowledgeable stakeholders evaluating the scale and scope of identified impacts. In particular, getting your Finance and Risk teams onside from the outset is essential as they play a critical role in assessing financial materiality and associated risks and opportunities.
4.
Getting to know your external assurance providers
Best practices suggest engaging external assurance providers early in the reporting process, and as we move to the next stage of assured sustainability reporting this will become even more vital.
This proactive approach helps prevent redundant work and ensures that the sustainability statement is CSRD-compliant. Building internal knowledge to justify specific disclosures and reporting methods is also crucial, given the varying interpretations of standards by different auditors.
5.
Gaining strategic value add
DMA is a deep-dive process which throws up fascinating insights into your business. Now is the time to think not from a regulatory perspective but an engagement point of view.
How will you use the stakeholder engagement and cross-business collaboration to create long-term buy in for your material issues?
Is there a role for internal engagement and getting your employees stuck into the process from research through to reporting?
The best processes we are seeing are those which take a holistic and strategic approach, getting the best value from this high-impact process.