Unlocking the secrets of the double materiality assessment for CSRD compliance

The Double Materiality Assessment (DMA) is a cornerstone of the CSRD framework, pivotal in determining the sustainability-related information that organisations are compelled to disclose.

According to Greenomy, this intricate process serves a dual purpose: it not only underscores the sustainability impact on a company’s financial performance but also scrutinises the company’s influence on environmental and social realms.

Embarking on a DMA can be an intimidating endeavour for many organisations. Recognising this, Greenomy has developed an elaborate six-step guide to demystify the DMA process, offering a clear roadmap for companies commencing their CSRD reporting journey. This guide ensures that companies have a clear and well-defined approach for successful reporting and auditing.

The initial step in the CSRD compliance journey is an ESG (Environmental, Social, and Governance) Assessment. This preliminary stage involves a deep dive into the company’s operational environment, encompassing an analysis of its activities, business relationships, and presence across various geographies. Moreover, it assesses the company’s strategic, financial, and ESG policies, culminating in a detailed stakeholder map that lays the groundwork for effective communication and expectation setting.

Following the ESG Assessment, companies delve into defining their ESG universe, identifying all potential material sustainability matters. This phase leverages the European Sustainability Reporting Standards (ESRS) and industry benchmarks to tailor a unique ESG universe that captures all pertinent sustainability matters.

Subsequently, the process involves identifying the impacts, risks, and opportunities (IROs), followed by assessing their severity. This assessment employs a scoring mechanism to prioritise sustainability topics for reporting under the ESRS, necessitating cross-departmental collaboration for a comprehensive evaluation. The criteria for this assessment include scope, scale, remediability, and likelihood, providing a solid foundation for transparent and justifiable scoring, crucial for future audits.

Stakeholder engagement emerges as a strategic step, enhancing the DMA with diverse insights and fostering innovation through discussions with suppliers and employees. This engagement culminates in a refined set of findings, which are then presented to the board for strategic oversight and approval.

The penultimate step involves assessing the DMA results against CSRD disclosure obligations, creating a DMA matrix to communicate findings to stakeholders transparently. Finally, the ESRS scoping phase aligns identified material topics with specific reporting requirements, setting organisations on a path to successful CSRD reporting.

In our interview with CSRD expert Quentin Henneaux, it was emphasised that the DMA should not be seen merely as a procedural hurdle but as a strategic endeavour that integrates sustainability into the core of corporate decision-making. Greenomy’s six-step guide is meticulously designed to navigate companies through this comprehensive process, ensuring a robust foundation for transparent and effective sustainability reporting.

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