Questions & Answers
When assessing the materiality of a sustainability matter, is the focus on stakeholder opinions or on objective evidence?
- Materiality assessment
- stakeholder opinion
- objective evidence
Background
To better address the issue mentioned by the submitter, it was agreed to change the question that was received from ‘When evaluating sustainability matters, is the focus on stakeholder opinions or on objective evidence?’ to the question above.
ESRS 1 paragraph 24 states: ‘Engagement with affected stakeholders is central to the undertaking’s ongoing due diligence process … and sustainability materiality assessment.’
IG 1 Materiality assessment - FAQ 10 Should the assessment of IROs rely on quantitative information? (paragraphs 180 to 183) states:
‘180. Where possible, yes, as quantitative measures of IROs are objective evidence of their materiality. The emphasis on objective and quantitative information does not mean to imply that the information from affected stakeholders should be disregarded.
181. The level of comfort sought by the undertaking from quantitative information depends on whether there is scientific validated data and on consensus reached on the given impact. For example, global reports or industry information on a given topic, such as negative impacts on biodiversity loss, could provide the quantitative information needed without the need for the undertaking to incur in additional research or data collection costs.
182. Quantitative information is not always available or may result in additional costs. Whenever a qualitative analysis is sufficient for the undertaking to reasonably conclude that a matter is “not material” or is “material”, additional quantitative information would not add value to the materiality assessment. As the materiality assessment process evolves over time, the undertaking may redefine the balance between qualitative or quantitative information.
183. Quantitative information would, however, be of interest where a topic is on the edge of being material/non-material based on qualitative information and/or where there are diverse views. In that case, quantification could corroborate the conclusion.’
IG 1 Materiality assessment FAQ 15 Do the ESRS mandate to actively engage in dialogue with affected stakeholders for the materiality assessment process? states: ‘The ESRS require disclosure on the materiality assessment and its outcomes but do not mandate specific behaviour on stakeholder engagement or the due diligence process.’
IG 1 Materiality assessment FAQ 16 Can the undertaking prioritise some categories of stakeholders for the materiality assessment process? How? states: ‘Engagement with affected stakeholders helps the undertaking to understand which sustainability matters are sources of concern for the respective stakeholders and how they are affected. This information may be useful input for the assessment.’
Answer
When assessing the materiality of a sustainability matter, there is no conflict between consideration of views of affected stakeholders and objective evidence. The purpose of both is to get an understanding of the severity (and likelihood) of impacts to present them faithfully in the sustainability statement. Depending on the circumstances, this may or may not require engagement with affected stakeholders.
The materiality analysis should be driven as much as possible by objective data and evidence. Scientific evidence is the focus in some cases depending on the type of topic and availability of such evidence. Quantitative/scientific data on the impact may or may not also be available. Widespread/systemic impacts often tend to be well documented, and there is often a consensus on their severity.
In other cases, depending on the topic the views of affected stakeholders are a source of supporting evidence for impact materiality. However, not all stakeholder opinions are equally relevant for the materiality analysis. Relevance depends on how much the stakeholders are affected (severity – and likelihood – of impacts). Understanding entity-specific impacts and/or the manifestation of widespread/systemic impacts in particular contexts and situations requires more careful consideration of specific circumstances, including whether and how people or the environment are affected.
Elements useful to address this question can be found in IG 1 Materiality assessment chapters 3.5 Role and approach to stakeholders in the materiality assessment process and 5.4 FAQ on stakeholder engagement – impact materiality.
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