Leveraging double materiality to reduce the burden of CSRD

A thorough double materiality assessment reduces the cost, resources and time required for effective CSRD reporting.

Double materiality is a critical tool which can be used to determine where resources should be invested across an organisation and is a requirement under the emerging Corporate Sustainability Reporting Directive (CSRD). Double materiality assesses how environmental, social and governance (ESG) risks affect a company’s financial performance, and also how the organisation’s activities impact society and the environment. These assessments look at the bigger picture, and getting this process right can save significant time and costs for CSRD reporting.

Under CSRD, companies are required to significantly increase their disclosure of impacts, risks and opportunities relating to 12 environmental, social, and governance standards, known as the European Sustainability Reporting Standards (ESRS). With over 80 individual data metrics1 to report on, these requirements can seem overwhelming. CSRD requires companies to provide assurance for their disclosure statement but focuses on reporting only the most important topics: those that are central to the business and where the impact on ESG is the greatest.

Since every organisation has unique aims, strategic priorities and challenges, gathering and assuring data on non-material issues can be a waste of valuable time, money, and resources. This is where double materiality assessments come in: these assessments help organisations pinpoint their most material ESG issues by identifying key risks and opportunities relating to ESG impacts. This is achieved through an improved understanding of stakeholders’ perspectives and needs, and their understanding of the environmental and social impacts caused by the organisation’s activities.

As the scope of CSRD is vast, the financial implications of assuring every datapoint are significant. Using the Non-Financial Reporting Directive (NFRD) as a proxy, the total administrative costs for CSRD assurance can be expected to exceed EUR 100,000 for large companies, with costs highest in the first year of assurance and audit2. Investing upfront in a thorough double materiality assessment can streamline future reporting, data management, and help to control costs, particularly as ESRS evolves and sector-specific standards are introduced.

CSRD-aligned double materiality assessments offer valuable benefits to organisations and shouldn't be viewed as just another mandatory requirement. Engaging with stakeholders helps organisations better understand their needs, align internal priorities, identify new opportunities, and strengthen relationships. By investing in double materiality assessments now, organisations can see both short- and long-term benefits, creating a more sustainable business environment for years to come.

Preparing for CSRD is a complex, multi-year process, and many organizations need support to ensure they are ready.

DNV is uniquely positioned to help organizations with their double materiality assessment and CSRD reporting. With over 20 years’ experience in materiality assessments and extensive expertise in ESG assurance, DNV can guide companies through a double materiality assessment by determining the most material topics based on internal and external stakeholder engagement. Bringing in an independent third party, like DNV, not only enhances the efficiency of the assessment but also helps eliminate potential biases. DNV can also provide strategic advice on improving data collection and management, ensuring your business is prepared to excel in the era of CSRD compliance.

Get in touch to discuss how we can support you on your double materiality and CSRD reporting journey.

Discover more about CSRD

 

1 Engagement Strategies Media: Executive Brief: How to Create a World Class Corporate Sustainability Report for Your Organization (enterpriseengagement.org)

2 Ultimate Guide to the EU CSRD ESG Regulation for Businesses | Blog | OneTrust 

 

10/22/2024 6:33:00 PM