Client Snapshot
Sustainability reporting is getting more complex for organizations. Organizations that are subject to European reporting requirements must look at sustainability topics from both an impact view and financial view. Performing a double materiality assessment is a crucial step to satisfy the requirements of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) adopted under it. The double materiality assessment helps companies spot and report the ESG issues that are deemed most material to their business and stakeholders.
This case study is about a manufacturing company that operates in different geographic regions with a complex value chain. The company wants to establish an effective and well justified double materiality assessment process that meets the requirements of CSRD and ESRS in preparation of its sustainability statement under the CSRD report and the determination of scope of the analysis. The project scope includes the evaluation, assessment, and prioritization of material ESG topics looking at both impact materiality and financial materiality.
The Challenge
- Getting a grasp of what double materiality really means and how to apply CSRD/ESRS rules throughout the organization.
- Identifying all ESG impacts, risks, and opportunities along the value chain and gather input from all internal stakeholders.
- Lack of accurate data to measure the severity and likelihood of potential negative impacts of ESG topics as well as their financial materiality.
- Maintaining the consistency of materiality assessment process and audibility versus corresponding regulatory and assurance requirements.
- Develop an assessment approach to translate given regulatory requirements into practical applications within different functions and business units.
Our Approach
- Conducted a double materiality assessment in accordance with the CSRD and ESRS 1 (General Requirements) considering impact and financial materiality.
- Conducted and facilitated the structured stakeholder meetings and internal workshops to identify, assess, and evaluate the ESG impacts, risks, and opportunities.
- Standard scoring criteria consistently applied to determine the degree of severity, likelihood, and financial materiality.
- Summarized all stakeholder feedback and results to identify material topics, for reporting and decision making.
- Developed the double materiality assessment process, including assumptions, methodologies and results to ensure transparency, audit readiness and future scalability.
Results Delivered
- Built a step-by-step double materiality assessment process compliant with CSRD and ESRS.
- Ranked the most important ESG topics based on impact materiality and financial materiality.
- Greater transparency and consistency in assessing ESG impacts, risks, and opportunities within the organization.
- Creation of a documented and auditable assessment trail to enable future assurance needs and regulatory compliance.
- Enhanced the company’s readiness for sustainability reporting aligned with the ESRS under the CSRD.
Impact
The engagement enabled the company to establish a comprehensive and defendable framework for double materiality assessment required by the CSRD and set out in the ESRS. Using the information gained from the stakeholders and the standardized criteria, the company can now define its critical ESG topics and address them effectively in the reports. Additionally, the company can now prepare its sustainability reports more efficiently, having developed a robust assessment model that will serve as the foundation for future reporting and improve its decision-making processes in terms of ESG topics.
