Stakeholder Engagement and Materiality
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Stakeholder Engagement and Materiality

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Questions and Answers

What is the primary purpose of disclosures in IFRS S1 and IFRS S2?

  • To inform about the impact of risks and opportunities on financial prospects (correct)
  • To enhance competitive advantage
  • To provide detailed analysis of market trends
  • To comply with legal standards in all jurisdictions

    • Which aspect is NOT part of the familiar structure outlined in IFRS S1 and IFRS S2?

  • Market predictions (correct)
  • Risk management
  • Governance
  • Metrics and targets

    • What does the ESRS E1 standard specifically address?

  • Social responsibility metrics
  • Climate change mitigation planning (correct)
  • Employee engagement policies
  • Economic growth strategies

    • Which metric is not relevant to Chief Risk Officers (CROs) according to the provided content?

    <p>Customer satisfaction ratings</p> Signup and view all the answers

    Which of the following is a component of the ESRS regarding climate change requirements?

    <p>Policies related to climate change mitigation and adaptation</p> Signup and view all the answers

    What is considered material from an impact perspective?

    <p>The entity's actual or potential impacts on people or the environment</p> Signup and view all the answers

    How is materiality determined for actual negative impacts?

    <p>Based on the severity of the impact</p> Signup and view all the answers

    What additional factors determine the materiality of potential negative impacts?

    <p>Likelihood and severity of the impact</p> Signup and view all the answers

    On what basis is materiality assessed for actual positive impacts?

    <p>On scale and scope of the impact</p> Signup and view all the answers

    Which of the following is NOT a factor in determining financial materiality?

    <p>Entity's impact on climate change</p> Signup and view all the answers

    What does the entity's sustainability context refer to?

    <p>The sustainability issues and trends relevant to its operations</p> Signup and view all the answers

    What should material disclosures reflect about the entity?

    <p>The entity's activities and stakeholder relationships</p> Signup and view all the answers

    Which aspect is NOT considered when determining a materiality approach?

    <p>Entity's community relationships</p> Signup and view all the answers

    What is one of the key elements from the GRI Standards related to an entity’s strategy?

    <p>Statement from the highest governance body regarding sustainable development</p> Signup and view all the answers

    Which factor can influence the importance of sustainability in a business strategy?

    <p>The influence of external factors such as regulation</p> Signup and view all the answers

    How should an entity's governance structure relate to sustainability performance?

    <p>It should include compensation alignment with sustainability performance.</p> Signup and view all the answers

    What does competency in governance refer to concerning sustainability?

    <p>The skill set related to overseeing sustainability initiatives.</p> Signup and view all the answers

    Why is an entity's strategy considered an important element of sustainability reporting?

    <p>It reflects the entity's assessment of sustainability-related risks and opportunities.</p> Signup and view all the answers

    What is required to maintain stakeholder trust?

    <p>Effectively engaging with stakeholders and responding to their concerns</p> Signup and view all the answers

    Which entity focuses on stakeholder input to determine material topics from an impact perspective?

    <p>GRI</p> Signup and view all the answers

    What does ESRS expect from stakeholders regarding sustainability statements?

    <p>They should engage in determining the entity's impacts, risks, and opportunities</p> Signup and view all the answers

    What is the first step in the materiality process according to GRI?

    <p>Understand the organization’s context</p> Signup and view all the answers

    How does IFRS S1 recommend entities address their Sustainability Reporting Obligations (SROs)?

    <p>By ensuring disclosures are sufficient for primary users' understanding</p> Signup and view all the answers

    Which of the following statements is true about the materiality finder provided by SASB?

    <p>It allows searching by company name or industry for material subjects</p> Signup and view all the answers

    What aspect does ESRS adopt as the basis for reporting on sustainability matters?

    <p>Double materiality</p> Signup and view all the answers

    What should entities disclose to assess the quality and sufficiency of stakeholder engagement?

    <p>The criteria for determining stakeholder groups and engagement methods</p> Signup and view all the answers

    What must entities describe in their process for identifying and assessing climate-related impacts?

    <p>Their GHG emissions and climate-related risks</p> Signup and view all the answers

    Which scenario must entities consider when identifying climate-related hazards?

    <p>High emission climate scenarios</p> Signup and view all the answers

    What is a key element of governance structures to ensure accountability for entities?

    <p>Guidance and oversight on sustainability-related risks</p> Signup and view all the answers

    How must entities' reporting reflect their impacts according to governance requirements?

    <p>It must be transparent and accurate</p> Signup and view all the answers

    What is the primary purpose of disclosing material information according to the standards?

    <p>To align with stakeholder expectations</p> Signup and view all the answers

    What kind of risks must entities assess regarding their business activities?

    <p>Climate-related transition risks and opportunities</p> Signup and view all the answers

    Which frameworks are considered more prescriptive in their requirements for disclosures relating to governance?

    <p>GRI and ESRS</p> Signup and view all the answers

    What type of climate scenario must be considered for assessing transition events?

    <p>Scenarios aligned with limiting warming to 1.5°C</p> Signup and view all the answers

    Study Notes

    Stakeholder Engagement

    • Entities must know their stakeholders and engage with them to understand their views and expectations.
    • Maintaining stakeholder trust requires engaging with them, responding to their concerns, and providing balanced disclosures.
    • To assess the quality of stakeholder engagement, entities should disclose:.
      • The criteria for determining stakeholder groups and who those groups are
      • The method and frequency of engagement
      • Stakeholder views and concerns
      • How stakeholder feedback influenced the selection, review and updating of material topics

    ### Materiality

    • GRI focuses on stakeholder input to determine material topics from an impact perspective along the value chain.
    • IFRS S1 requires disclosures to be sufficient for primary users to understand how the entity addresses its SROs along the value chain.
    • ESRS expects stakeholders to be engaged in determining the entity's impacts, risks, and opportunities from an impact and financial materiality perspective

    Materiality Process GRI

    • Step 1: Understand the organization's context
    • Step 2: Identify actual and potential impacts
    • Step 3: Assess the significance of the impacts
    • Step 4: Prioritize the most significant impacts for reporting

    Materiality Process IFRS S1

    • IFRS S1 refers to SASB standards for industry-specific issues.
    • SASB provides a materiality finder which allows reporting entities and users to search for material subjects.

    Materiality Process ESRS

    • ESRS adopts double materiality as the basis for reporting on sustainability matters.
    • This approach considers both impact materiality and financial materiality
    • Impact Materiality: Materiality for negative impacts is based on the severity of the impact (actual) or the severity and likelihood of the impact (potential).
    • Impact Materiality: Materiality for positive impacts is based on the scale and scope of the impact (actual) or the scale, scope, and likelihood of the impact (potential).
    • Financial Materiality: Determines if information is material for primary users in making decisions relating to providing resources to the entity.

    Assessing Materiality

    • To assess whether an entity has met the requirements for defining, determining, and disclosing material topics, consider the following:
      • What does the entity do?
      • What are the relevant requirements?
      • What is the entity's sustainability context?
      • What materiality approach has been taken?
      • What do stakeholders think?
      • What are the priority impacts, risks, and opportunities?

    IFRS Sustainability Disclosure Standards

    • The structure of both IFRS S1 and IFRS S2 aligns around disclosures that provide information about the impact of risks and opportunities on financial performance
    • Key areas include:
      • Governance
      • Strategy
      • Risk Management
      • Metrics and Targets
    • Industries should refer to and consider the applicability of SASB standards.
    • CRO Metrics include:
      • GHG emissions
      • Energy Management
      • Climate Change Adaptation

    ESRS Standards

    • Contain ten topical standards for reporting on key ESG matters, including one specifically on climate change.
    • ESRS E1 Climate Change requires disclosures about:
      • Transition plan for climate change mitigation
      • Policies related to climate change mitigation and adaptation
      • Process for identifying and assessing climate-related impacts, risks, and opportunities, including:
        • Impacts on climate change, including GHG emissions
        • Climate-related physical risks
        • Climate-related transition risks and opportunities

    Governance

    • Robust governance policies and systems are essential accountability mechanisms for:
      • Providing guidance, oversight, review, and recommendations
      • Ensuring transparent reporting
      • Disclosing material information

    Governance Disclosure Requirements

    • All three reporting frameworks have a similar intent, GRI and ESRS are more prescriptive.
    • Key considerations include:
      • Governance Structure
      • Competency
      • Active Oversight
      • Integration of sustainability considerations
      • Alignment of compensation to sustainability performance

    Strategy

    • An entity’s strategy will reflect its assessment of sustainability-related risks and opportunities and its commitment to sustainability
    • The importance of sustainability in business strategy will depend on:
      • The attitude towards sustainability of investors and directors
      • The nature of the business
      • The influence of external factors such as regulation

    Strategy Disclosure Requirements

    • GRI has specific and detailed disclosure requirements related to an entity's strategy for managing its impacts on the economy, environment, and people.
    • Key elements include:
      • Statement on sustainable development strategy outlining the relevance of sustainable development to the organization

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    Related Documents

    ARP Module 8 - Non-Financial Reporting PDF

    Description

    This quiz focuses on the importance of stakeholder engagement and its impact on materiality within organizations. It explores how entities can assess their engagement quality and ensure stakeholder concerns are addressed in the decision-making process. Additionally, it covers the guidelines set by GRI, IFRS S1, and ESRS regarding the evaluation of material topics.

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