Key ESG standards
Posted: Sun Dec 22, 2024 4:21 am
At the end of July 2023, the European Commission approved the European Sustainability Reporting Standards (ESRS) , resulting in an officially approved set of ESG reporting guidelines. The ESRS whatsapp number in australia unify reporting standards, which were previously diverse and inconsistent. The full document consists of 12 documents, including two cross-cutting documents discussing the fundamentals of ESG standards and 10 focusing on thematic standards.
The European ESG reporting standards contained in the ESRS link to the TCFD and ISSB through a similar regulatory structure, to ensure interoperability of global ESG standards. The requirements included in the ESRS cover areas:
governance (GOV),
(SBM),
impact, risks and opportunities (IRO),
indicators and objectives.
In addition, thematic standards will apply, but not all of them will be applicable to all companies, due to the specificities of the different industries. The materiality of the information disclosed by companies will be assessed. Only topics that are considered material should be included in sustainability reports. For topics that are not considered material, the company only needs to explain how it has reached this conclusion.
Double materiality
The principle of double materiality in the context of ESG (environmental, social and governance) reporting consists of identifying material ESG issues from two perspectives: financial and impact. Companies subject to the CSRD must describe these issues so that the results of the materiality assessment are translated into both the business strategy and the identification of ESG topics in sustainability reports. Financial materiality assesses the impact of ESG on a company’s financial results, such as revenues, costs, assets and liabilities. Impact materiality assesses the potential impact of the company’s activities on the environment and society, both directly and indirectly through the value chain. The principle of double materiality combines these two perspectives, considering that an ESG topic is material if it is financially relevant, influential or both, allowing for better risk management and long-term value creation.
The European ESG reporting standards contained in the ESRS link to the TCFD and ISSB through a similar regulatory structure, to ensure interoperability of global ESG standards. The requirements included in the ESRS cover areas:
governance (GOV),
(SBM),
impact, risks and opportunities (IRO),
indicators and objectives.
In addition, thematic standards will apply, but not all of them will be applicable to all companies, due to the specificities of the different industries. The materiality of the information disclosed by companies will be assessed. Only topics that are considered material should be included in sustainability reports. For topics that are not considered material, the company only needs to explain how it has reached this conclusion.
Double materiality
The principle of double materiality in the context of ESG (environmental, social and governance) reporting consists of identifying material ESG issues from two perspectives: financial and impact. Companies subject to the CSRD must describe these issues so that the results of the materiality assessment are translated into both the business strategy and the identification of ESG topics in sustainability reports. Financial materiality assesses the impact of ESG on a company’s financial results, such as revenues, costs, assets and liabilities. Impact materiality assesses the potential impact of the company’s activities on the environment and society, both directly and indirectly through the value chain. The principle of double materiality combines these two perspectives, considering that an ESG topic is material if it is financially relevant, influential or both, allowing for better risk management and long-term value creation.