Lecture 13 - Reporting, materiality and corporate sustainability

Question 2

What are they main drivers of sustainability reporting and what is shadow reporting?

Answer 2

1. Legal regulation - mostly by the EU
2. Increased demand from investors and stock exchanges

*Collects evidence from external sources

Question 3

What 2 perspectives does double materiality consist of?

Answer 3

1. Financial risk materiality perspective
   -How ESG issues impact the company
   -Internal view
2. Impact materiality perspective
   -The company’s impact on ESG issues
   -External view

Question 4

Which 2 factors are used to measure materiality?

Answer 4

1. Importance of issue to stakeholders
2. Potential impact of issue on business

Question 5

Mention the 4 parts of the legal infrastructure in the EU for reporting

Answer 5

1. CRSD - corporate sustainability reporting directive
2. EU environmental Taxonomy regulation
3. SFDR sustainable finance disclosure regulation
4. CS3D - Corporate sustainability due diligence directive

Question 6

What is the EU taxonomy?

Answer 6

It is a common European classification system for environmentally sustainable economic activities

Question 7

What are the 6 environmental objectives underlying the taxonomy?

Answer 7

1. Climate change mitigation
2. Climate change adaptation
3. Sustainable use of water and marine resources
4. Circular economy
5. Pollution prevention

Question 8

What are the 2 steps when using the taxonomy?

Answer 8

1. See if the economic activity is eligible
2. See if the economic activity is aligned:
   -Does it make a substancial contribution to one of the 6 objectives?
   -Does it cause harm to any other of the objectives?
   -Does it meet the minimum social safeguards

Question 9

What is limited assurance and reasonable assurance?

Answer 9

Limited:
-We did not find anything incorrect = cheaper

Reasonable
-You will need both data from the company and the value chain especially upstream and suppliers

Question 10

Mention the 5 main challenges of assurance

Answer 10

1. Insufficient IT infrastructure / digital solutions
2. High costs and unclear benefits
3. Difficulty in obtaining and verifying value chain information
4. Maintaining supporting documentation for audit trails
5. Unclear regulatory demands outside of EU

Question 11

What does the CSRD and the ESRS (new European sustainability standards) define?

Answer 11

CSRD:
-Which firms need to report and where and when
-The level of assurance

ESRS:
-Defines ESG indicators that the firm needs report on, covering double materiality

Question 12

Mention the 3 reporting layers under ESRS

Answer 12

1. Sector-agnostic disclosures ESRS 1 - general requirements
   -Relevant to all companies
2. Sector-specific disclosures
   -Under development
3. Company specific disclosures ESRS 2
   -Additonal disclosures for material not covered elsewhere

Question 13

Mention the 4 reporting areas under ESRS

Answer 13

All companies, all topics:
1. Governance
2. Strategy

Only for material topics
3. Impact, risk and opportunity
4. Metrics and targets

Question 14

Mention the 3 topics and 5,4,1 subtopics under ESRS

Answer 14

1. Environmental
   -Climate change
   -Pollution
   -Water and marine resources
   -Biodiversity
   -Resource use and circular economy
2. Social
   -Own workforce
   -Workers in the value chain
   -Affected communities
   -Consumers/end-users
3. Governance
   -Business conduct