Exploring double materiality in sustainability strategies and ESG reporting

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School of Business | Master's thesis

Date

2024

Major/Subject

Mcode

Degree programme

Business analytics

Language

en

Pages

68+5

Series

Abstract

Double materiality is a fundamental principle in ESG reporting under the CSRD, integral to sustainability strategy theories. It highlights the need to consider both how sustainability factors influence a company's financial performance (financial materiality) and how the company’s operations affect the environment and society (impact materiality). The topic is becoming increasingly important due to the rising demand for businesses to address ESG issues and the regulatory impact of the CSRD. The thesis aims to answer the question: How can a satellite manufacturing company align its sustainability initiatives with CSRD, adopt sustainability strategies, and become a sustainability leader? The empirical part focuses on a single case study of ICEYE (a microsatellite manufacturing company based in Finland), assessing and benchmarking sustainability strategies and ESG report in compliance with the ESRS. It is an important exercise for ICEYE as the company aspires to become a sustainability leader in Earth observation industry, while also fulfilling the mandatory ESG reporting obligations under CSRD. The case study of ICEYE can also serve as an example for other companies seeking to adopt sustainability strategies and comply with ESRS. Data sources include secondary data from ICEYE’s communication channels, a face-to-face interview with an expert working at ICEYE, and published reports from its peers. The first two sources will be used for qualitative analysis of ICEYE’s current sustainability practices and its compliance with ESRS. The third source will be used for a mixed qualitative and quantitative analysis, benchmarking ICEYE’s practices against industry best practices, offering recommendations for ICEYE. Findings suggest that very few companies are adopting sustainability practices, and the decision to that is largely driven by stakeholders such as investors, policymakers, and the public. Companies like ICEYE, Airbus, and KAI recognize the advantages of sustainability strategies and aim to achieve a competitive edge by investing in sustainability efforts. In terms of ESG reporting in compliance with ESRS, there is variation in the selection of material topics based on industry specifics, and challenges arise in quantifying the financial impact of sustainability issues. While the "Environment" pillar often relies on more science-based measurements, the "Social" and "Governance" pillars tend to have more flexible metric and target setting approaches.

Description

Thesis advisor

Kim, Seongtae

Keywords

ESRS, CSRD, ESG report, double materiality, impact materiality, financial materiality, competitive advantage, stakeholder

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