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The materiality concept is one of the key elements during the implementation of the Corporate Sustainability Reporting Directive (CSRD). It plays a pivotal role in ensuring businesses’ compliance with the underlying European Sustainability Reporting Standards (ESRS). In this context, value analysis, i.e., identifying the most material ESG issues for the company, is a particular challenge.
The European Financial Advisory Group (EFRAG) now intends to maintain mandatory reporting on ESRS-1, ESRS-2, Climate and Own Workforce standards irrespective of the materiality assessment. The development of robust and comprehensive ESRS, based on the double materiality principle and covering environmental, social and governance matters, is strongly supported by EFRAG. These standards are key to solving the corporate sustainability data gaps as well as to improving the quality, reliability and comparability of these disclosures.
In contrast, the European Commission’s draft delegated act proposes to subject ALL ESRS standards, disclosure requirements, and data points to a materiality assessment. This, combined with the greater flexibility approved by the Commission in conducting these reviews, could result in companies excluding entire sections from their sustainability disclosures. However, this approach runs counter to EFRAG’s final technical advice, which acknowledges the significance of the disclosures as consistently material. The recognition of their materiality was reached through a consensus among representatives from companies (preparers), investors, other financial market participants, and civil society.
The overview below shows the delta between the EFRAG advice and the revised proposal on the reporting elements listed mandatory and subject to materiality.
Source 1: Draft delegated regulation – Ares(2023)4009405
The materiality study is the basis for implementing the cleversoft ESG reporting service.
We are able to assist and advise you on how to set up and perform the materiality study to define what items will be in scope for your CSRD reporting process.
With cleversoft, you can overcome the intricacies of materiality assessments and uphold the materiality of your sustainability disclosures, while reducing your compliance burdens.
If you want to find out how we can assist you, do no hesitate to contact our experts.
