From 2024, the Corporate Sustainability Reporting Directive (CSRD) will apply to companies currently covered by the Non Financial Reporting Directive (NFRD). The CSRD replaces the NFRD and introduces stricter reporting requirements.
Your guide to successful ESG reporting
The aim of the CSRD is to increase transparency and accountability on Environmental, Social and Governance (ESG) issues. To fulfil the CSRD directive, companies can choose to use the ESG factors in their reporting. These three factors are central to measuring sustainability within a company. Flux Partners advises and supports companies in preparing their ESG reporting to comply with the CSRD Directive. In this article, you can read more about the steps to be taken to achieve an ESG policy.
Double materiality analysis
To prepare an ESG report according to the CSRD guideline, you need to start by determining the topics you need to report on. These are determined through a dual materiality analysis. Flux Partners follows the 6 steps below to perform a dual materiality analysis:
- Determine stakeholders.
- Determine value creation model.
- Draw up a longlist.
- Draw up a shortlist.
- Determine opportunities, risks and impacts.
- Determine strategy, implementation and performance.
To determine the stakeholders and establish the value creation model, we look at internal and external stakeholders. The ESG components come in handy when drawing up the longlist. A standard list is available that looks at the ‘topical standards’, Sustainable Development Goals and planetary boundaries. To this, organisation-specific topics are added to make the list complete and more specific.
In the next step, we look at the impact and financial materiality of all items on the longlist. For impact materiality, the topics are scored on two components. The first component is a combination of the magnitude of the impact, the size of the impact and the recoverability of the planet after the impact. Multiplying the average of these by the probability of impact gives the impact materiality score. For the financial materiality score, a score of ‘how bad are the financial costs/losses for impact’ is multiplied by the probability of impact. The shortlist includes both topics that are material for impact materiality and those that are material for financial materiality. In the next step, we return to the table to estimate the probabilities, risks and impact of the shortlisted topics.
ESG reporting
Once the dual materiality analysis is complete, we move on to the next step. To determine strategy, implementation and performance by topic, you must first establish where your company is now. The company’s baseline is established and a GAP analysis is carried out. Based on the information gathered during the dual materiality analysis and the GAP analysis, we can start determining the strategy per topic. We support companies in drafting their KPIs and advise on the measurability per drafted KPI. Next, the data points are measured. As a final step, Flux helps draw up an ESG report and action plan based on the outcomes. We have extensive experience in preparing reports and going through audits. Companies not yet required to audit their reports can engage Flux Partners for an initial assessment of their ESG reporting.