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At Digit Mint, we understand that navigating the world of sustainability reporting can raise a lot of questions. That's why we're here to provide you with the answers you need to make informed decisions.

Which stakeholders are to be included in a Double Materiality Assessment?

Stakeholders are individuals or groups who can influence or be influenced by the decisions and actions of a project. There are two main groups of stakeholders: those who are directly impacted by the project's activities and value chain, and those with an interest in the project's sustainability reporting, such as public authorities, business partners, investors, and civil society organizations. The materiality assessment process should consider the impact on all affected stakeholders, not just the needs of the users.

How to define the topics to include in a Double Materiality assessment?

Defining the topics to include in a Double Materiality assessment is a crucial step to ensure that your organization's sustainability reporting is comprehensive and aligned with stakeholders' expectations.
Here's how Digit Mint can assist in this process:

  1. Automated Topic Analysis: Digit Mint's Double Materiality Assessment module offers an AI-generated analysis of all ESRS sub-topics in the context of your business activities. This involves assessing your company-specific data (both public and confidential) against these sub-topics, leveraging Digit Mint’s selection of industry reports, scientific insights, NGO reports, and social trends.
  2. Identify Relevant IROs: The system identifies the most relevant Indicators, Risks, and Opportunities (IROs) for each ESRS sub-topic. This is done through a comprehensive AI analysis that considers your business activities and the broader sustainability context.
  3. Map and Engage Stakeholder Groups: Once the IROs are identified, they are turned into questions via AI, which are then mapped with the stakeholder groups you want to engage with. This step ensures that the materiality assessment captures a wide range of perspectives, making the process more inclusive and comprehensive.
  4. Collect Stakeholder Input: Built-in surveys, interviews and focus groups optimized for both engagement and qualitative input are used to collect data. These method use stratified sampling techniques for statistical relevance and leverage various optimization techniques like forced ranking of topics, probing for expertise, and question selection based on the personal profile of the user and company data needs.
  5. Define Materiality: Finally, the system helps you obtain materiality scores across selected ESRS topics and sub-topics for the identified IROs, providing summary insights and enabling a deep dive into stakeholder insights. This helps in shaping your ESG strategy with a clear understanding of what matters most to your stakeholders and the business.By following these steps with Digit Mint's advanced AI-driven tools, your organization can efficiently and autonomously define the most pertinent topics for your Double Materiality assessment, ensuring that your sustainability reporting is both relevant and impactful.
Are stakeholder interviews needed in a Double Materiality assessment?

In a Double Materiality assessment, stakeholder interviews play a crucial role in gaining a comprehensive understanding of the material sustainability topics relevant to your organization. While Digit Mint's Double Materiality Assessment module emphasizes AI-driven analysis and surveys, the inclusion of stakeholder interviews adds depth and context to the assessment. Here's how they fit into the process:

  1. Complementing Automated Analysis and Surveys: Stakeholder interviews complement the data gathered from AI analyses and surveys. While surveys provide broad quantitative insights, interviews offer qualitative feedback and deeper insights into stakeholder perceptions and expectations regarding sustainability matters.
  2. Template-Based Interviews: To facilitate the interview process, Digit Mint provides template-based interviews. These templates help in standardizing the interview process and ensure that relevant and consistent information is gathered across different stakeholders.
  3. Filling in Gaps in Data Collection: Interviews can fill in gaps where survey responses may be limited or where more nuanced understanding is needed. They are particularly useful for engaging with specific stakeholder groups that might have detailed or specialized knowledge about certain sustainability issues.
  4. Re-Uploadable Formats: Once conducted, the filled-in interview and focus group templates can be re-uploaded to Digit Mint’s platform. This ensures that all stakeholder inputs, including those from interviews, are captured, processed, and considered in the Double Materiality assessment.
  5. Enhancing Stakeholder Engagement: Conducting interviews underscores a commitment to stakeholder engagement, showing that your organization values direct, in-depth conversations with its stakeholders. This can strengthen relationships and enhance the credibility of your sustainability initiatives.

While Digit Mint leverages technology for efficiency, the integration of stakeholder interviews into the Double Materiality assessment process ensures a more rounded and inclusive approach, capturing a diverse range of stakeholder perspectives and insights.

How will the Double Materiality assessment be audited?

The auditing of a Double Materiality assessment involves verifying the accuracy, completeness, and reliability of the assessment process and its outcomes. While Digit Mint's Double Materiality Assessment module streamlines and enhances the assessment process with advanced features, here's how the auditing aspect is generally addressed:

  1. Traceability and Documentation: Digit Mint provides a full digital record of the Double Materiality assessment process. This includes detailed descriptions of the methodology, choices made, stakeholders engaged, and insights collected to define materiality. This level of documentation is crucial for audit purposes as it provides a clear and traceable record of how conclusions were reached.
  2. Comprehensive Data Collection: The module ensures a comprehensive collection of data through AI-driven analysis, surveys, interviews, and focus group inputs. This wide-ranging data collection method ensures that the assessment captures a broad spectrum of stakeholder views and material issues, which is essential for an audit.
  3. Consistency with Reporting Standards: The assessment is designed to be consistent with recognized standards and frameworks, such as the European Sustainability Reporting Standards (ESRS). This alignment with established guidelines supports the credibility and auditability of the assessment.
  4. AI-Assisted Analysis for Accuracy: The use of AI in analyzing and processing data contributes to the accuracy and consistency of the assessment. AI tools can handle large datasets with efficiency and precision, reducing the risk of human error.
  5. Engagement of External Auditors: For an independent audit, organizations might engage external auditors who specialize in sustainability reporting and assessments. These auditors will review the documentation, methodologies, and outcomes against established standards and best practices.
  6. Stakeholder Validation: Part of the audit process may involve validating the assessment's findings with the stakeholders involved. This could mean revisiting the stakeholders to ensure their inputs were correctly interpreted and represented.

In summary, the auditability of a Double Materiality assessment conducted using Digit Mint’s module is supported by comprehensive documentation, adherence to standards, accurate and extensive data collection, and the potential for independent external review. These features collectively ensure that the assessment can withstand the scrutiny of a rigorous audit process.

Which companies are in scope of CSRD?

Large public interest entities with >500 employees subject to NFRD companies in scope of NFRD will have to comply first. They will have to report on FY2024 with a first report on 2025

All large companies exceeding two of the three following criteria (in line with Accounting Directives: 2013/34/EU):

  • 250 employees during the financial year (average)
  • net turnover of €40 million
  • balance sheet total €20 million

These companies will have to report on FY2025 in 2026.

All listed companies on the EU regulated market (including listed SMEs, but no micro-enterprises) will have to report on FY2026 in 2027. Some exceptions can be made to extend for 1 year.

All non-EU companies generating a net turnover of more than €150 million and having a subsidiary in the EU that follow the criteria applicable to EU companies (i.e., being listed on the European market except micro or being within the large company threshold) or a branch in the EU generating more than €40 million net turnover in the region. These will have to report on FY2028 in 2029

Small and non-complex financial institutions as per the Regulation (EU) No 575/2013 Art 4(1), point (145) and captive insurance and reinsurance undertakings as per Directive 2009/138/EC (provided that they are large undertakings or listed SMEs except micro-enterprises as per the Accounting Directive)

Moreover, undertakings in the CSRD scope will also have to comply with Article 8 of the Taxonomy Regulation.

What if the company is a subsidiary of a large group?

A subsidiary does not need to publish it’s own ESG report (in line with CSRD) if the parent company produces a consolidated ESG (in line with CSRD). This subsidiary exemption also applies to subsidiaries that are public interest entities, unless they reach the large undertaking thresholds (which are listed public interest entities as per the Accounting Directive).

The exempted subsidiaries must still make note of their ESG reporting obligation in their management report with the following information:

  • the name and registered office of the parent undertaking that is reporting sustainability information at group level
  • the web links to the consolidated management report of the parent company.
  • a reference of this exemption in their own management report

However, if there are significant differences between the risks and impacts of the group vs the subsidiaries, the parent company needs to adapt its reporting so that the risks and impacts of their subsidiaries, including information on their due diligence processes where well distinguishable.

Subsidiary exemption should also apply when the parent undertaking is an undertaking established in a third country that produces reporting sustainability information in accordance with European or equivalent sustainability reporting standards. As the assessment of equivalence of sustainability reporting standards will take place at a later stage, transitional provisions have been put in place for seven years so that Member States shall permit EU subsidiaries to report under the European standards.

When will those rules start applying?

The reporting rules already apply as of Jan 1st, 2024. So the first batch of applicable companies in scope (those who already fall under the Non Financial Reporting Directive) will have to report on FY2024.

What is the scope of reporting requirements?

A company must report the information necessary to understand the company's impacts on sustainability matters and how they affect its development, performance, and position. The reporting must comply with EU standards as defined by EFRAG (see Question 6).

The full scope of a CSRD report will be about general disclosures and topical disclosures. The general disclosures are fully mandatory and include, amongst other topics:

  • A description of the business model and strategy, as well as opportunities and resilience to sustainability risks and transition plans.
  • A Double materiality assessment

The topical disclosure (across ESG topics) have mandatory and optional topics:

  • Mandatory topical disclosure are Own workforce when you’re over 250 employees in the company. Fewer employees in your company then the topic of Own workforce becomes optional.
  • The Optional topical disclosure will need to be reported on if they are material based on your Double materiality assessment. If a topical disclosure matters your stakeholders and/or your company, it needs to be reported on.

Across these topical disclosure you will asked to report on:

  • Targets and their progress status, indicators.
  • Company sustainability governance (administrative, management, and supervisory bodies and their expertise and skills to fulfill their role).
  • Sustainability policies.
  • Incentive schemes linked to sustainability matters.
  • Due diligence of sustainability matters and the process to conduct it.
  • The company's principal and adverse impacts and actions to prevent, mitigate and remediate.
  • Principle risks and their management.
  • Information on business operations, value chain, including products and services, business relationships, and its supply chain[2].
  • ...

Listed SMEs, as well as small and non-complex financial institutions listed in Article 19a (5), will have proportionate requirements using proportionate SMEs reporting standards. We can expect more details on this end of June 2024.

Where or to whom should companies report to?

Companies will include their ESG report, in line with CSRD, in the management report through a dedicated section. The sustainability report forward will then be published along with numbers from the annual report and will be made available on the website of the company.
The companies will not report to any specific authority but rather to the general public about their impact, exposure, opportunities, strategy, performance, …

What are the reporting standards to be used?

Companies must report in accordance with the European sustainability reporting standards adopted by the European Commission via delegated acts after technical advice from EFRAG.

The European Commission will adopt the European sustainability reporting standards (ESRS) via delegated acts as follows:

  • By June 30, 2023 – cross-cutting standards and standards for all sustainability topics, including environment, social and human rights, and governance. They should also meet the needs of financial market participants under the scope of the Sustainable Finance Disclosure Regulation (SFDR) (add link).

By June 30, 2024:

  • sector-specific standards
  • proportionate standards for listed SMEs
  • standards for non-EU companies exceeding EU turnover thresholds

EFRAG has been mandated to develop technical advice on ESRS. The EC shall take this into consideration when adopting delegated acts.

The European Commission will review the standards at least every three years, taking into account relevant developments, including developments in international standards.

The ESRS shall specify the information that an undertaking needs to report and, where relevant, the structure for reporting that information.

In what format should companies report?

Companies are expected to prepare their management report in the electronic reporting format and mark-up their sustainability reporting to upload them to the upcoming European Single Access Point (ESAP) (as per Delegated Regulation (EU) 2019/815 on single electronic reporting format). As of when? What is this link and what are the requirements?

Is independent third-party assurance mandatory?

Yes, independent third-party assurance is mandatory. So typically your auditor will be in charge of providing assurance of also your ESG reporting.

What assurance level is required and how does it work?

The sustainability reporting assure needs to be on a limited assurance level.

The CSRD foresees moving to reasonable assurance after assessing whether reasonable assurance is feasible for both statutory auditors and the companies.

The assurance is thus given on:

  • compliance with the CSRD reporting rules in Article 19a, including with the reporting standards adopted according to Article 29b or Article 29c What does this mean in business language?
  • the process carried out by the company to identify the information reported according to those reporting standards What does this mean in business language?
  • compliance with the requirement to mark-up sustainability reporting in accordance with Article 29d (digitalisation) What does this mean in business language?
  • compliance with the reporting requirements of Regulation (EU) 2020/852 Article 8 (this articles sets out the requirements for Member States to establish national policies and measures, as well as to set binding targets for the reduction of greenhouse gas emissions in sectors outside the scope of the EU Emissions Trading System.)
What assurance standards are expected to be used?

Member States may apply national assurance standards, procedures, or requirements as long as the European Commission has not adopted an assurance standard covering the same subject matter.
The European Commission is empowered to adopt limited assurance standards before 1 October 2026 by means of delegated acts.
By 1 October 2028, the European Commission shall adopt assurance standards for reasonable assurance, after assessing the feasibility for both the auditors and the undertakings. The European Commission should also specify when reasonable assurance would be required.

Who the CSRD mandates to provide assurance of sustainability reporting?

Under the CSRD, the statutory auditor must express an opinion on the sustainability reporting to ensure the connectivity and consistency of financial and sustainability information.
Shareholders who own more than 5% voting rights or 5% capital of a company can ask for an accredited third party to prepare a report on certain elements of the sustainability reporting. This third party cannot belong to the same audit firm or network as the auditor performing the statutory audit.
Member States can allow another statutory auditor or an independent assurance services provider (IASP) to express an opinion on sustainability reporting, provided they follow the standards adopted by the European Commission. If an IASP is allowed to express an opinion on sustainability reporting, another statutory auditor must also be allowed to do so.
IASPs are required to follow the same requirements as those included in the Audit Directive 2006/43/EC, especially regarding professional education, quality assurance, ethical requirements, and independence.
IASPs can benefit from a passporting regime to provide their services across borders if another Member State has allowed an IASP to provide assurance services on its territory. The passporting regime is an arrangement within the European Union that allows financial institutions in one member state to offer their services and products across the EU without having to obtain additional authorization in each country.

How is our ESG calculator different from the GHG protocol?

Both our ESG calculator & the GHG follow a widely accepted method of measuring impact. Our ESG calculator is more advanced since the reference data to measure impact is more extensive and holistic. With the same effort you can measure, next to greenhouse gas impact, also impact on human health, or bio-diversity.

Our ESG calculator clearly seems the better deal! Why isn’t everyone using our method?

Well, up until today this method has been applied mainly by researchers, scientists and engineers. It has not been adopted by the wider public since it’s considered more complex. This was mainly due to the lack of having a interface to work with. This has now been unlocked thanks to our ESG calculator.

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