This blog post is part of the webinar series “The Ultimate ESRS Guide: From Zero to the Final Report” and serves as a step-by-step guide through the entire process. Watch the recording here or first get an overview of the process in the previous webinar or Blog.

1. perform a double materiality analysis

The double materiality assessment is the starting point for effective sustainability reporting. It is crucial to understand what exactly needs to be reported according to the European Sustainability Reporting Standards (ESRS). The ESRS provide specific guidance on materiality, which includes understanding and assessing impacts, risks and opportunities (IROs).

The most important steps

When identifying IROs, it is first important to consider the environmental and social impacts that your organization causes. In addition, you should carefully assess the financial risks associated with sustainability for your company. The financial opportunities that arise from acting sustainably must also be identified here.

In the next step, you should define and explain clear thresholds. These determine when an IRO is to be considered material. The assessment of the identified IROs must be carried out on this basis. It makes sense to involve your stakeholders in this process in order to assess specific criteria when determining the materiality of IROs.

The methodology of Code Gaia

Code Gaia offers a comprehensive methodological approach to materiality that has been tested both in theory and in practice. Our approach involves working with internal teams beyond your core reporting team, including financial control departments. Furthermore, our methodology treats materiality processes as ongoing activities, even though many organizations initially perceive them as a separate and one-off task.

2. from materiality to defining the scope of the report

After completing the double materiality analysis, the next step is to determine the scope of your sustainability statement. This is based on the sustainability aspects associated with the identified material IROs.

Simplified definition of the scope with Code Gaia

Our software automatically prepares the scope of your report based on the results of the materiality assessment. This ensures that your report content is tailored to your specific material topics right from the start. In addition, you can change this pre-set scope to include any new materiality information discovered later in the process.

Determine ESRS reporting scope at an early stage

To ensure that your sustainability statement is both relevant and concise, it is crucial to identify non-relevant information and define the scope early on. This includes, on the one hand, determining which data points are really necessary for reporting, including within the topics that fall within the scope. On the other hand, you must justify any exclusions.
The ESRS allow the exclusion of individual disclosure requirements or even data points,
if these do not relate to material IROs.

Better understand the relevance of information

The EFRAG guidance document “ID-177 – Links between AR16 and disclosure requirements” can be used to identify non-relevant disclosure requirements and data points. To help users understand what information may or may not be relevant to their specific IROs, the Code Gaia software includes guidance directly from ID-177. Our internal expertise and other guidance documents complement this support.

Justify exclusions transparently

It is important that you justify all exclusions clearly, as these decisions could be questioned by auditors and stakeholders. Clear documentation of the reasons
reasons for excluding certain data points helps to ensure the credibility and focus of your sustainability
the focus of your sustainability statement.

3. early development of ESRS-2 content

An effective approach for starting to develop content at an early stage is the
ESRS 2 – General Disclosures. This standard is mandatory for all reporters, regardless of the outcome of the materiality test. It covers company-wide and strategic content that forms the basis of the sustainability statement. As this section of the report does not generally require extensive data collection, it provides an ideal starting point.

Understanding the role of materiality assessment

Reading the disclosure requirements of ESRS 2 will help you to better understand the role of materiality assessment right from the start. It contains reporting requirements
related to the dual materiality process, which should already be well advanced at this stage. With Code Gaia, descriptive content can be exported directly from our materiality module to the corresponding disclosure requirements of ESRS 2.

Working in parallel on the dual materiality analysis process

With this materiality information, much of the ESRS 2 content can be prepared early, even while the data for other topic-based standards is still being collected. In this way, you can work on ESRS 2 in parallel with the dual materiality process and finalize large parts before you start drafting the topic-related standard disclosures.

ESRS 2 as a strategic framework

Early engagement with ESRS 2 also helps to create the strategic context for your report.
your report. This sets the broader, company-wide framework,
which will later support the more detailed disclosures and provide a solid framework for preparing the rest of the report. However, you should note that some ESRS 2 disclosure requirements can only be fulfilled after the rest of the report content has been finalized.
can be fulfilled. You should therefore review this on an ongoing basis, including shortly before finalizing
your declaration.

4. optional: transmission of the materiality results to an auditor

The involvement of an external auditor to review the materiality results and the process
and the process is not a mandatory part of the ESRS process. However, it is considered best practice and ensures that your reporting is complete, consistent and objective.

Simplified communication with auditing through Code Gaia

Code Gaia’s software facilitates seamless communication between your team
and the auditor. It enables you to document and justify all materiality-related decisions within the WebApp. This eliminates the need for multiple communication channels and streamlines the audit process.
streamlined.

5 Conclusion: Efficient materiality assessment and credible sustainability reporting

As a report preparer, your role in sustainability reporting is of central importance. By following the steps described and using the methods and tools of Code Gaia, you can efficiently design the double materiality assessment
and effectively define the ESRS reporting scope. The involvement of an auditor
can further increase the credibility of your report. You can rely on
that Code Gaia will support you every step of the way to ensure that
Your sustainability reporting is thorough, accurate and effective.