Facilitated by the double materiality assessment, companies will be better equipped to understand their impact on the climate and vice versa. Michael Wagemans of KPMG in Belgium and Catherine Bals of Proximus explain the EU’s new Corporate Sustainability Reporting Directive.

Companies play a crucial role in the fight against climate change: they can deliver impact on a large scale. The European Commission's plan to become a climate-neutral continent therefore focuses a lot of attention on how companies should do their part. For example, the Corporate Sustainability Reporting Directive (CSRD) requires companies to report on the sustainability themes relevant to them and discover where to focus their efforts by conducting a double materiality assessment.

“There have always been frameworks and ways of assessing what impact companies have on the environment, but until now they were applied at your own discretion. For example, sustainability questionnaires were commonly sent to stakeholders to select relevant themes and then they reported on them in a sustainability report. The underlying philosophies could also differ. The Anglo-American method looks mainly at the financial impact, while the Global Reporting Initiative focuses on a company's impact on people, the environment, and society,” says Michael Wagemans, Head of Sustainability at KPMG in Belgium.

Through double materiality analysis, the European Commission now combines these two views. “In plain English: what is the impact of a company on its environment and society, and vice versa? The CSRD includes ten theme-oriented standards that flesh out Environmental, Social, and Governance (ESG) considerations, and there will also be sector-specific standards,” explains Wagemans.

Proximus' double materiality analysis

Every company is different, so it is important to first determine which themes to report on. For one organization, biodiversity is a priority, while for others the focus is on the circular economy. Wagemans: "In a double materiality assessment, you survey internal and external stakeholders to determine what is relevant. There are guidelines that clarify how to do that, and the process is more in-depth than what companies have done previously. It provides a structured way to ask suppliers, customers, or employees how they view sustainability in relation to the company.”

One of the companies that has already commissioned a double materiality assessment is Proximus. “Because we believe that a neutral point of view is important, we decided to use KPMG's consultants for this,” says Catherine Bals, Sustainability Department Lead at Proximus. “Together, we determined which of our stakeholders to approach and the best way to do so. With some it was through quantitative analysis, with others we had one-on-one conversations.”

The result of this exercise was an overview of potential sustainability impacts, risks, or opportunities. “The analysis showed that nine of the standards are relevant to us, because what Proximus does is very broad. Circularity, for example, is a top priority, as are digital inclusion and cybersecurity," Bals said.

Where it was not already the case, the next step is for Proximus to draw up concrete action plans with corresponding targets. “Floods like the one in Wallonia in 2021 could have a major impact on our infrastructure. We absolutely include this in the risk analysis to guarantee our business continuity. We also identified opportunities, such as the emergence of smart buildings that we can provide with technology,” says Bals.

Not to be underestimated

Wagemans emphasizes that transparency is essential. “You have to have what you do validated by the Executive Committee and the Board of Directors.” Proximus already reported extensively on sustainability, but at the same time they acknowledge the complexity of the CSRD. They are not alone in that, because I notice at numerous Belgian companies that there’s a lot of internal work to do to bring such a project to a successful conclusion. It is extremely important because it is about making Europe more sustainable. That will happen through companies, or it will not happen.”