In 2024, Sustenuto conducted three sector-wide Double Materiality Assessments (DMA) for industry associations Fedustria (representing textiles, wood, and furniture) and AWDC (diamonds). The primary goals of these assessments were to reduce the workload for individual companies, to enhance predictability within the sector, and to foster sector-wide dialogue on material sustainability topics.
The challenge
CSRD compliance challenges: Companies in scope of the CSRD must start their reporting process with a Double Materiality Assessment (DMA) to identify the sustainability topics that should be included in their reports. A DMA involves analyzing a wide range of sustainability issues across the entire value chain. This process requires substantial time and effort.
Sectoral duplication risks: Within a given sector, companies share similarities in terms of their raw materials, suppliers, activities, regulatory environments, etc. These similarities create risks for duplication when each company starts a DMA from scratch.
The approach
Our approach follows guidance developed by EFRAG, the main advisory body to the European Commission on financial and sustainability reporting.
Longlist: A first step involved compiling a comprehensive longlist of sustainability issues linked with activities throughout each sector’s value chains.
Materiality assessment: Next, each of these issues was evaluated based on two criteria: severity/magnitude and likelihood of occurrence. This evaluation drew from extensive desk research. In total, we consulted over 80 sources, including databases, academic studies, government and industry reports, civil society publications, and news articles.
Stakeholder consultation: Alongside this assessment, we carried out a targeted stakeholder consultation. This consultation involved semi-structured interviews and focus groups with key stakeholders, including industry bodies, trade unions (representing workers), financial stakeholders, auditors, and knowledge institutes. Objectives were to Identify and address gaps in the longlist, and to understand stakeholder priorities.
The results
We made a distinction between three levels of sustainability topics:
Level-1 topics: material for all companies within the sector.
Level-2 Topics: exhibit strong materiality potential, but whose materiality depends on a company’s specific operating context.
Level-3 Topics: May be material under specific circumstances but are less significant for the sector as a whole
Efficiency gains for companies
The sector DMA allows companies to save valuable time and resources. They can quickly identify topics that are obviously material and require no further assessment, and can focus their efforts on evaluating the less obvious topics.
Sector-wide insights
Despite sector-specific variations, two topics emerged as critical across all three sectors:
Climate change due to its global and far-reaching impacts, and due to the importance assigned to it by all stakeholders.
Business Conduct because it is a necessary precondition for an effective sustainability strategy
