Introduction
Understanding how the data points and sub- and sub-sub-topics of the Double Materiality Assessment (DMA) relate to disclosure requirements is critical for organisations reporting under the European Sustainability Reporting Standards (ESRS). This article provides clarity on these relationships and addresses common questions, such as whether an immaterial sub-sub-topic exempts an organisation from reporting connected data points.
Leveraging insights from the EFRAG DMA to DR Bridge Guidance, we explore how these rules are applied in practice, ensuring organisations align their reporting effectively.
The Relationship Between Sub-Sub-Topics and Data Points
The DMA categorises sustainability issues into topics, sub-topics, and sub-sub-topics, connecting them to Disclosure Requirements (DRs) through a structured framework. Here’s how the relationships work:
Interconnection of Topics and Data Points
Each sub-sub-topic is linked to one or more data points under a specific disclosure.
The treatment of immaterial sub-sub-topics depends on the structure and requirements of the related disclosure.
Topic-Specific Rules
For S1 (Own Workforce): If at least one sub-sub-topic (e.g., child labour or health and safety) within a disclosure is material, all sub-sub-topics under that disclosure must be addressed.
For E1 (Climate Change) or G1 (Business Conduct): These disclosures are more granular, often allowing organisations to exclude data points tied to immaterial sub-sub-topics.
Addressing Immaterial Sub-Sub-Topics in Reporting
A common question arises: if a sub-sub-topic is deemed immaterial (e.g., S1.3.1 Child Labour), does the data point connected to it fall out of the reporting scope?
Key Answer:
It depends on the disclosure structure:
S1 Disclosures: Materiality assessments apply collectively. If one sub-sub-topic is material, all related sub-sub-topics must be disclosed. For example, if S1.3.2 Adequate Wages is material, reporting on S1.3.1 Child Labour is still required, even if deemed immaterial. For further information about how material topics map over to disclosure requirements in S1 disclosures, refer to 'S1 Own workforce' table in the official EFRAG guidance.
G1 or E1 Disclosures: These are often structured with a one-to-one relationship between data points and sub-sub-topics. If a sub-sub-topic is immaterial, its related data point can typically be excluded from reporting. For further information about how material topics map over to disclosure requirements in S1 disclosures, refer to 'G1 Business Conduct' table in the official EFRAG guidance.
This nuanced approach ensures materiality is both comprehensive and flexible, catering to the specifics of the organisation’s impacts.
Leveraging the EFRAG Guidance
The DMA to DR Bridge Guidance offers structured tools and methodologies to navigate these complexities:
Flowchart for Determining Reporting Requirements
Use the provided flowchart to assess whether a sub-sub-topic and its data points fall within your reporting scope based on materiality.
Mapping Tables for Clarity
The guidance includes detailed tables mapping sustainability topics, sub-topics, and sub-sub-topics to their corresponding DRs. These help organisations pinpoint which disclosures apply.
Judgment and Entity-Specific Disclosures
The guidance encourages judgment in determining materiality. For unique sub-sub-topics not covered by standard disclosures, organisations must provide entity-specific reporting as required under ESRS.
Policies, Actions and Targets
When a sustainability matter is identified as material, you must include information required by the corresponding disclosure requirements in topical standards and comply with ESRS 2 Minimum Disclosure Requirements.
Practical Application for Organisations
To ensure compliant and efficient reporting:
Start with a Materiality Assessment
Identify impacts, risks, and opportunities related to sub-sub-topics using the mapping tools in the EFRAG guidance.Apply Disclosure-Specific Rules
For S1, prepare to disclose all sub-sub-topics if any are deemed material.
For other disclosures like E1 or G1, exclude data points tied to immaterial sub-sub-topics where allowed.
Utilise Digital Tools for Streamlined Reporting
The KEY ESG platform can assist in tailoring the reporting process based on the EFRAG framework. The platform flags which sub-sub-topics require disclosure and allow organisations to opt out where exclusions are permissible.
Conclusion
Reporting under the ESRS framework requires a detailed understanding of the relationships between sub-sub-topics, data points, and disclosures. While some disclosures require comprehensive reporting across related sub-sub-topics, others provide flexibility to exclude immaterial elements. The EFRAG DMA to DR Bridge Guidance serves as a vital resource in navigating these intricacies, ensuring transparency and compliance.
Further guidance
Need help navigating your CSRD reporting? Contact our team via support@keyesg.com or via the in-platform chat function to explore the tools available on the KEY ESG platform to simplify your materiality assessment and reporting process. Let us help you align with EFRAG standards seamlessly.