The CSRD is a new EU directive that will radically change the sustainability reporting of both large and small companies. This directive sets stricter reporting requirements, including a focus on double materiality. But what exactly is double materiality? In part 2 of our "Getting Started with CSRD" series, we tell you which sustainability topics your reporting should cover, and which reporting standards it should definitely meet.

Double materiality: the right sustainability themes for your business

The content of CSRD reports is not the same for every company, because not every sustainability theme is equally important for every company. This is because the relevance of each theme depends on your business activities, the sector you are in, the size of your organisation and your position in the value chain.

In principle, you should report on your 'material' sustainability themes, i.e. those that are really relevant and important to your business and where your company can make a difference (both positive and negative). To determine those themes for your company, you need to perform two in-depth analyses:

  1. First, you map which sustainability themes your company has an impact on, throughout the value chain. These can be actual impacts, but also risks and opportunities that are located in the future. We call this determining 'social materiality' (e.g. the burning of fossil fuels, which leads to greenhouse gas emissions and thus climate change).
  2.  Second, you consider what the impact of sustainability issues might be/is on your company and its financial performance. This approach is called the 'financial materiality analysis' (e.g. sustainability initiatives such as water savings leading to cost savings).

Both analyses rely on existing risk management systems, QHSE systems and feedback from key stakeholders, among others. This way, a whole range of sustainability topics are examined attentively that relate to the dimensions of environment, people and good governance.

What standards should the reporting meet?

In terms of content, the sustainability reports of large companies will have to meet certain criteria set by EFRAG in the European Sustainability Reporting Standards (ESRS). Those 12 standards describe for each theme what information and data points should be specifically collected. A simplified standard will be released for listed SMEs by the end of 2024.

As a company, you will have to share general information (contained in ESRS 2) about your organisation in any case. This could include a description of: 

  • Your company's business strategy, business model and value chain and what link they have to the sustainability themes
  • The material sustainability themes, risks and opportunities, and how your company has determined them
  • The internal risk management systems related to sustainability themes and how your company systematically anchors these
  • Policies and actions related to material topics, and who follows these up within your company
  • Set time-bound targets related to sustainability issues such as greenhouse gas emission reduction
  • Measurable KPIs relevant for the follow-up of your sustainability objectives

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