Corporate Sustainability Reporting Directive (CSRD) mandates that organizations assess and disclose their material Impacts, Risks, and Opportunities (IROs) as a key part of their sustainability reporting. The official definitions for Impacts and Risks and Opportunities are:
“Impacts” refers to positive and negative sustainability-related impacts that are connected with the undertaking’s business, as identified through an impact materiality assessment. It refers both to actual impacts and to potential future impacts.
“Risks and opportunities” refers to the undertaking’s sustainability-related financial risks and opportunities, including those deriving from dependencies on natural, human and social resources, as identified through a financial materiality assessment.
IROs are established through the Double Materiality assessment (DMA), which is conducted as Step 1 of the CSRD module on KEY ESG platform. For more guidance on how to identify, create and assess your IROs, and complete the DMA, click here.
IROs cover both material, actual or potential, positive and negative impacts on people or the environment over the short, medium, or long term, as well as financial risks and opportunities that could significantly affect the organization’s development, financial position, performance, cash flows, access to finance, or cost of capital. Within the CSRD framework, organisations are prompted to choose relevant material IROs, to ensure comprehensive and transparent reporting. This article explores how material IROs are integrated within the CSRD disclosure process.
Step 1: Defining and selecting IROs
Within the CSRD go to step 2 ‘Collect Data’, and press ‘Edit Setup’ and select your disclosure requirements.
After setting up the disclosure requirements for your organisation based on your double materiality assessment (DMA), proceed to set up the material IROs you intend to report on.
If you completed the DMA on the KEY ESG platform, you can import IROs from the DMA section. For guidance on identifying and assessing IROs in the DMA section, refer to this article.
Alternatively, you can add new IROs by selecting the ‘Add row’ function to input material IROs generated outside of the KEY ESG platform.
Step 2: Mapping IROs to CSRD Disclosure Areas
Selected material IROs serve as foundational data points for certain CSRD disclosure areas. Users are prompted to align these material IROs with reporting topics in SBM-3 under General Disclosures, Climate Change (E1), Biodiversity and Ecosystems (E4), Own Workforce (S1), Workers in the value chain (S2), helping to identify the material impacts, risks, and opportunities for the organisation. Disclosure areas for IRO integration:
General Disclosures: Disclosure of material IROs and their interaction with strategy and business model.
Climate Change (E1): Disclosure of climate-related material IROs and their interaction with strategy and business model.
Biodiversity and Ecosystems (E4): Disclosure of biodiversity-related material IROs and their interaction with strategy and business model.
Own Workforce (S1): Disclosure of workforce-related material IROs and their interaction with strategy and business model.
Workers in the value chain (S2): Disclosure of material IROs related to value chain workers and their interaction with strategy and business model.
Affected communities (S3): Disclosure of material IROs related to affected communities and their interaction with strategy and business model.
Consumers and/or end-users (S4): Disclosure of material IROs related to consumers and/or end-users and their interaction with strategy and business model.
The organisation should also map material IROs relevant for entity-specific disclosures within ‘General requirements’ ESRS-1 section.
Step 3: Applying IROs in CSRD Reporting
For each relevant disclosure topic, the organisation responds to questions on how each identified material IRO aligns with business strategy, stakeholder priorities, and risk management within corresponding SBM-3 section.
Additionally, the organisation will disclose details of policies, targets and action plans against relevant material IROs, across the disclosure topics.
Conclusion:
Integrating IROs within areas such as General Disclosures, Climate Change, Biodiversity, and Workforce enables organisations to align sustainability impacts, risks, and opportunities with their strategy, stakeholder priorities, and risk management practices. As business contexts and regulations evolve, regularly revisiting and refining material IROs will enhance the quality and impact of your reporting, reinforcing transparency and accountability.
If you have any questions about your IRO integration, reach out to KEY ESG using the in-platform chat function, or by contacting support@keyesg.com.