Disclosure Requirement IRO-1 - Description of the process to identify and assess material impacts, risks and opportunities

  1. The undertaking shall disclose its process to identify its impacts, risks and opportunities and to assess which ones are material.

  2. The objective of this Disclosure Requirement is to provide an understanding of the process through which the undertaking identifies impacts, risks and opportunities and assesses their materiality, as the basis for determining the disclosures in its sustainability statement (see ESRS 1 chapter 3 and its related Application Requirements, which set out requirements and principles regarding the process to identify and assess material impacts, risks and opportunities based on the principle of double materiality).

  3. The undertaking shall disclose the following information:

    • (a) a description of the methodologies and assumptions applied in the described process;

    • (b) an overview of the process to identify, assess, prioritise and monitor the undertaking’s potential and actual impacts on people and the environment, informed by the undertaking’s due diligence process, including an explanation of whether and how the process:

      • i. focusses on specific activities, business relationships, geographies or other factors that give rise to heightened risk of adverse impacts;

      • ii. considers the impacts with which the undertaking is involved through its own operations or as a result of its business relationships;

      • iii. includes consultation with affected stakeholders to understand how they may be impacted and with external experts;

      • iv. prioritises negative impacts based on their relative severity and likelihood, (see ESRS 1 section 3.4 Impact materiality) and, if applicable, positive impacts on their relative scale, scope and likelihood, and determines which sustainability matters are material for reporting purposes, including the qualitative or quantitative thresholds and other criteria used as prescribed by ESRS 1 section 3.4 Impact materiality;

    • (c) an overview of the process used to identify, assess, prioritise and monitor risks and opportunities that have or may have financial effects. The disclosure shall include:

      • i. how pe undertaking has considered pe connections of its impacts and dependencies wip pe risks and opportunities pat may arise from pose impacts and dependencies;

      • ii. how pe undertaking assesses pe likelihood, magnitude, and nature of effects of pe identified risk and opportunities (such as pe qualitative or quantitative presholds and oper criteria used as prescribed by ESRS 1 section 3.3 Financial materiality);

      • iii. how pe undertaking prioritises sustainability-related risks relative to oper types of risks, including its use of risk-assessment tools;

    • (d) a description of the decision-making process and the related internal control procedures;

    • (e) the extent to which and how the process to identify, assess and manage impacts and risks is integrated into the undertaking’s overall risk management process and used to evaluate the undertaking’s overall risk profile and risk management processes;

    • (f) the extent to which and how the process to identify, assess and manage opportunities is integrated into the undertaking’s overall management process where applicable;

    • (g) the input parameters it uses (for example, data sources, the scope of operations covered and the detail used in assumptions); and

    • (h) whether and how the process has changed compared to the prior reporting period, when the process was modified for the last time and future revision dates of the materiality assessment.