What is a longlist for CSRD?
In the context of the Corporate Sustainability Reporting Directive (CSRD), a “longlist” refers to an extensive, initial list of sustainability topics that a company identifies as potentially material to its operations and stakeholders.
This list is developed during the early stages of the materiality assessment process. The purpose of creating a longlist is to comprehensively capture a wide range of environmental, social, and governance (ESG) issues without immediately prioritizing or assessing their impact.
The topics on the longlist are derived from a broad examination of the company’s activities, industry standards, regulatory requirements, stakeholder concerns, and sustainability frameworks.
How to make a longlist for CSRD?
Through this structured approach, companies can systematically identify and prioritize sustainability themes that are most material to their operations and stakeholders. This can help facilitating strategic alignment with sustainability goals and regulatory requirements.
Understand business activities and strategies
This process begins with a thorough examination of the company’s value chain for CSRD to identify direct controls and influences, alongside an assessment of stakeholders and the business model.
Analyzing the value chain reveals where sustainability impacts, risks, and opportunities lie, from sourcing to disposal. Identifying stakeholders is an important part.
The review of the business model helps understand how the company creates, delivers, and captures value. They can also include the social and environmental costs and benefits and therefore identify relevant sustainability issues tied to business operations.
Developing the longlist
Moving on to the development of the longlist, companies should leverage the sustainability themes from the CSRD (e.g., climate change, water use, social inclusion, etc.) as a foundational step.
A broad range of environmental, social, and governance (ESG) topics that could potentially impact or be impacted by the business operations should be considered.
This list should be comprehensive, incorporating insights from the value chain, stakeholder interests, and business model analysis. This is to ensure it includes themes from both internal operations and external factors such as supply chain practices, product life-cycle impacts, and community engagement.
Stakeholder engagement and dialogue
Subsequently, stakeholder engagement and dialogue are critical for determining the important themes for stakeholders. This involves engaging with stakeholders through various means to gather their input on the CSRD longlist themes.
The process should be inclusive, considering diverse perspectives to understand the full range of stakeholder concerns and priorities. This engagement helps in refining the focus on sustainability issues, their impacts, and potential strategies for addressing them.
Double Materiality Consideration
Finally, the consideration of double materiality balances financial and sustainability impacts. This involves assessing how each theme on the longlist impacts the company’s financial risks and opportunity (financial materiality) and evaluating the significance of each theme’s impact on the environment and society (impact materiality).
Integrating findings from both assessments into the company’s strategy, operations, and reporting ensures that significant issues from both a financial and impact standpoint are addressed. This fulfills the requirements of the CSRD.
Themes on the longlist
Based on the thematic areas provided by the CSRD ESRS, companies might develop a longlist of sustainability themes that are highly material to their specific operations and strategic goals. The information below outlines examples of themes that could be prioritized on such a longlist.
Enviromental themes (ESRS E1 – E5)
A company might identify climate change mitigation and adaptation, alongside energy efficiency and renewable energy usage, as critical themes. This reflects a recognition of the risks posed by climate change to operations and the opportunity to contribute positively by reducing greenhouse gas emissions and implementing sustainable energy solutions.
Addressing pollution involves tackling air, water, and soil contamination, managing microplastics, and responsibly handling hazardous substances. For companies in manufacturing, chemical, or waste management sectors, these could be key areas of focus, reflecting their potential impacts on the environment and human health.
For businesses operating in water-intensive industries or regions facing water scarcity, sustainable water use, water withdrawal, and effluent management could be significant. This also extends to the sustainable management of marine resources for companies involved in fisheries, aquaculture, or coastal tourism.
Companies with significant land use, agricultural activities, or those impacting natural habitats might prioritize biodiversity conservation and ecosystem services. This can include efforts to mitigate direct exploitation, land use change, and pollution, ensuring the protection and sustainable management of natural environments.
Emphasizing material efficiency, waste reduction, and the circularity of resources could be crucial for companies aiming to transition towards more sustainable production and consumption patterns. This involves redesigning products and processes to extend the lifecycle of materials and minimize waste.
Social themes (ESRS S1-S4)
Social themes can encompass a wide range of issues from ensuring fair labor practices, safeguarding workers’ rights, and promoting diversity and inclusion within the workforce, to addressing the rights and well-being of communities affected by company operations. These might be material for companies with extensive supply chains, or those operating in sectors or regions where social issues are particularly pronounced.
For companies in the tech, consumer goods, or service industries, themes such as data privacy, consumer safety, and access to quality information could be vital. This reflects growing concerns over data security and the ethical considerations of product safety and marketing practices.
Governance themes (ESRS G1)
Corporate governance, including anti-corruption measures, ethical business conduct, and stakeholder engagement, is crucial across all sectors. Companies might prioritize transparency, integrity, and accountability as foundational to their sustainability strategy, ensuring they uphold high ethical standards and foster trust among stakeholders.
These examples demonstrate how a company could use the broad themes outlined by the ESRS to identify specific, material sustainability issues for further analysis and action. By focusing on these prioritized themes, companies can tailor their sustainability strategies to address the most significant impacts and opportunities related to their operations, stakeholders, and the broader environment.