Step-by-Step: How to Create an Impact and Evaluate it's Materiality

At Daato, the double materiality analysis begins with the "Long List" of all sustainability topics, sub-topics, and sub-sub-topics from the ESRS (AR 16). Before creating an impact, you first need to determine which sustainability topics are relevant to your company because you expect impacts, risks, or opportunities in those areas.

Step 1: Mark the Sustainability Topic where the Impact will be Classified as Relevant

For example, if you expect one or more impacts in the area of climate change, such as your company emitting CO2 and thereby contributing to climate change, you begin by marking the "Climate Protection" sustainability topic as relevant in Step 1 of the materiality analysis on Daato. By doing this, you ensure that you can record impacts, risks, and opportunities in this topic area in the next step.

Step 2: Create and Describe the Impact

In the second step, you can now record the relevant impact. To do this, go to Step 2 "Identifying IROs" and select one of the sustainability topics. Daato already suggests various IROs (Impacts, Risks, Opportunities) that may be relevant to you. If so, adjust them to fit your company's context, especially in terms of naming and description. If not, you can delete these IROs. Now, you can also record the impact you wanted to document in the area of climate change. Be as specific as possible in describing the impact, such as not just "CO2 emissions" but, for example, "CO2 emissions resulting from steel production at our factories." Further details can be added in the description field.

Step 3: Classify and Evaluate the Impact

After documenting the impact, move on to Step 3 of the materiality analysis: evaluating the IROs. To continue with our example, open the sustainability topic "Climate Change" again and click on "Evaluate" next to the impact "CO2 emissions resulting from steel production at our factories." This opens a form with various questions to first classify the impact correctly and then evaluate it. You'll need to specify whether the impact is positive or negative, actual or potential. Based on these choices, you'll be asked questions to assess the impact, such as about the scale, scope, irreversibility, and likelihood.

Our chosen impact, "CO2 emissions resulting from steel production at our factories," would be classified as an actual, negative impact. Additionally, we'd indicate that it applies to the entire organization, not just a subsidiary or supply chain. Next, we'd evaluate the severity of the impact, calculated as: (Scale + Scope + Irreversibility) / 3.

• The scale of the impact reflects the severity of the negative impact. Since CO2 emissions contribute to global warming, we'd rate the scale as high.
• The scope of the impact refers to its reach. As our company only operates two factories with limited production, the CO2 emissions are limited in scale, so we'd rate the scope as moderate.
• The irreversibility would be rated as "very hard to remedy," as although there are possibilities for reversing CO2 emissions, these solutions are still in their early stages.