The effect of the implementation of the double materiality assessment
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School of Business |
Master's thesis
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Date
2024
Department
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Mcode
Degree programme
Accounting
Language
en
Pages
70+5
Series
Abstract
Sustainability reporting has been on the rise in recent years around the world. The European Union has, however, been one of the sustainability reporting forerunners by having had mandatory sustainability reporting requirements in place for roughly a decade already. The requirements have recently become stricter as the Corporate Sustainability Reporting Directive (2022/246/EU) (“CSRD”) and the European Sustainability Reporting Standards (2023/2772/EU) (“ESRS”) have entered into force. A key element in the regulation, as in any reporting, is materiality. Under the new regulation, companies must use double materiality as the basis for their sustainability reporting. This means reporting both on impacts on people and environment and on financial risks and opportunities arising from different sustainability matters. In order for reporting companies to do this, they must conduct a double materiality assessment – a practice for which there is no established market practice or clear guidance. The purpose of this study has been to explore the implementation of the double materiality assessment and to contribute to academic literature by providing some of the earliest notions on the assessment through answering the following research question – how companies under sustainability reporting obligations by the CSRD and the ESRS are implementing the double materiality assessment and how the implementation is changing any pre-existing materiality assessment practices for sustainability reporting purposes. For this purpose, five semi-structured interviews with case companies within the first wave of the new regulation were held. From the data gathered from the interviews, four recurring changes were found: enhanced role of financial materiality, stricter and new requirements on precision of data, scoring and threshold setting, ever-evolving role of stakeholders, and issues in the implementation and constant development. This study contributes to academic literature by providing some of the earliest notions on the double materiality assessment, which will soon be practiced by 50,000 companies, as there is scarce research on double materiality in general and even less research on the double materiality assessment. Also, there is no published information on the practice by reporting companies either as the first disclosures on the assessment will be published in early 2025, further highlighting the importance of this study.Description
Thesis advisor
Huikku, JariKeywords
double materiality assessment, sustainability reporting, CSRD, ESRS