Abstract
In recent years, investors and lenders have increasingly paid attention to sustainability information, most particularly to sustainability efforts that affect financial performance. Many corporations fulfil these wishes only to a limited extent. Although they publish information, they only select the information that is useful to them (“greenwashing”) or publish so much information that investors cannot get a clear overview of the sustainability performance (“information overload”).
With the rise of reporting on sustainability standards, new standards for measurement of environmental, social and governance (ESG) information and reporting thereof have become necessary. Here the concept of materiality comes into play. Through streamlining reports, focusing on the most relevant factors and reducing information overload, it tries to increase the requested transparency and accountability.
The determination of which sustainability issues are material to companies, industries, investors and other stakeholders remains a lively area of discussion. Article 19a Directive 2014/95/EU (Non-Financial Reporting Directive, NFRD) as proposed by the Proposal for a Corporate Sustainability Reporting Directive (CSRD, COM/2021/189 final) aims to implement a so-called double materiality principle.
Altogether the new wording of Article 19a NFRD as proposed by the CSRD makes sense—it strongly tackles the main issues of non-financial reporting: information overload and greenwashing. The broader approach in regards to stakeholder engagement is beneficial for a comprehensive picture of material matters. However, there is still a need for clarification in order to get the maximum effect out of the materiality principle.
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Notes
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Jørgensen et al. (2022), p. 2.
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Jørgensen et al. (2022), p. 2.
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Baumüller and Schaffhauser-Linzatti (2018), p. 101.
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van Wensen et al. (2010), p. 104.
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Förster, P. (2022). The Double Materiality Principle (Article 19a NFRD) as Proposed by the Corporate Sustainability Reporting Directive: An Effective Concept to Tackle Green Washing?. In: Bäumler, J., et al. European Yearbook of International Economic Law 2022. European Yearbook of International Economic Law, vol 13. Springer, Cham. https://doi.org/10.1007/8165_2022_90
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