Let’s talk about Sector Sustainability Matters!
CSRD and ESRS will require many new companies to report on sustainability. We introduce reporting topics and comment on how companies can comply and generate value out of those. Today, let’s talk about Sector Sustainability Matters.
ESRS brings a major change from the previous reporting. Before, companies could self-select the topics they want to report based on their materiality analysis. ESRS now prescribes certain sustainability matters companies need to report depending on their sector.
1️⃣ 𝗪𝗵𝗮𝘁 𝗮𝗿𝗲 𝘀𝗲𝗰𝘁𝗼𝗿 𝘀𝘂𝘀𝘁𝗮𝗶𝗻𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗺𝗮𝘁𝘁𝗲𝗿𝘀
Sustainability matters define sustainability reporting requirements dependent on the company sector. Basis is the sector classification. Each company belongs to a sector.
2️⃣ 𝗛𝗼𝘄 𝗮𝗿𝗲 𝘀𝗲𝗰𝘁𝗼𝗿𝘀 𝗱𝗲𝗳𝗶𝗻𝗲𝗱 𝗮𝗻𝗱 𝗰𝗹𝗮𝘀𝘀𝗶𝗳𝗶𝗲𝗱
The European Union uses the NACE industry classification standard. The ESRS draft clustered the NACE industries into 14 sector groups and 40 sectors depending on similar sustainability matters.
3️⃣ 𝗪𝗵𝗮𝘁 𝗮𝗿𝗲 𝘀𝗲𝗰𝘁𝗼𝗿-𝘀𝗽𝗲𝗰𝗶𝗳𝗶𝗰 𝗿𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁𝘀
In ESRS, sector definitions have two implications: sector determines sustainability matters a company must report depending on its sector. And ESRS plans further sector-specific reporting requirements, e.g. sector-specific indicators or actions to be disclosed, which are currently under development.
4️⃣ 𝗛𝗼𝘄 𝘁𝗼 𝗱𝗼 𝗶𝘁
In your strategy and materiality analysis, you must include the sustainability matters predefined for your sector and evaluate their financial and impact materiality for the company. You must comment in your reporting if sector matters are material or not and transparently justify if certain topics are not material in your case. To be on the safe side, however, consider by default to report (and take action in your strategy) on sector sustainability matters, given that investors and stakeholders will expect those.
👉 For mid-sized companies, the predefined topics by sector are a help, since they don’t have to start the materiality analysis with a blank piece of paper. Use those as a nucleus for your sustainability action and reporting, and add further company-specific material topics.