Introduction
Defining which material datapoints are applicable to your company is a vital step in ESG (Environmental, Social, and Governance) reporting. The Corporate Sustainability Reporting Directive (CSRD) requires companies to disclose relevant sustainability information, but not all datapoints are universally applicable. This article will guide you through the difference between materiality and applicability, helping you identify the most relevant datapoints for your company's sustainability reporting.
Understanding Materiality
Materiality refers to the importance of an ESG topic to be addressed and disclosed by a company. It helps in identifying the datapoints that significantly impact stakeholders' decisions. However, among the material datapoints defined by the CSRD, some may not be applicable or relevant to your specific context.
Difference Between Materiality and Applicability
While materiality is a broad definition of importance, applicability is about relevance to your company. Here are the main reasons why a material datapoint might not be applicable:
Sector-Specific Data: Some datapoints are specific to certain sectors and might not be relevant to all companies.
Data Production Challenges: Sometimes, the required information cannot be produced by the company, regardless of how mature or appropriate the company's processes and activities are. This can be due to limitations in IT systems, lack of survey data, or insufficient desk research.
It's crucial not to confuse non-applicability with the unavailability of data. If data can be theoretically measured, it should not be defined as non-applicable simply because it is currently unavailable.
How to step a question as Non Applicable
Get into the corresponding form
Click on “I cannot answer this question”
Choose the “Not Applicable” option
Explain why you chose that option in the “Explanation” field (optional but recommended for audit purpose)
Avoiding Misclassification
Be careful to ensure that the datapoints you tag as non-applicable are genuinely irrelevant. In some cases, there might be more datapoints than those initially tagged in the platform that are not applicable to your company. If unsure, consult Greenly’s support team through the platform chatbot to verify.
How to determine which forms or questions are applicable or not for my company ?
Assign first all material forms to the relevant stakeholders (Owners, Validators)
You must decide if you cover only mandatory forms, or also optional ones
Make people check the applicability of the required data (depending on its sector, on knowledge about required material to produce it, etc)
Make sure that people don’t confuse non-applicability with non-availability of the data (read and share this article that explains the topic in more details)Have the identified questions as non-applicable reviewed by the ESG Reporting Project Manager
If the project manager agrees about the non applicability of the identified question, then for each identified question:
Choose the “Not Applicable” option
If possible, provide a justification of it using the “Explanation field”