The definition of your value chain makes it immediately clear: there are countless actors involved in your value chain. Asking them all about their ESG policies and data is nigh on an impossible task. That is why EFRAG makes it explicit that your sustainability statement should provide information on the material IROs of your value chain.
So you find that the materiality analysis recurs again and again as a cornerstone of your ESG strategy, and therefore for everything related to your value chain. In your materiality analysis, you identify where the IROs are that are likely to be material. You do this geographically, according to your activities and sector, in your own business operations and with obvious business partners,such as your suppliers, customers or other groups.
You could already read about the exact steps you follow in the materiality analysis to determine your IROs in this insight. Today we take a closer look at the stakeholders (value chain actors) with whom you determine that materiality. Here, EFRAG puts forward two major groups that you can realistically expect to be associated with material IROs:
- Actors most likely to have impacts on people and/or environment from detected hot spots
- Actors on which your own business model depends, e.g. in relation to products or services
Some special cases among stakeholders
The standards in the S pillar ESRS S2 Employees in the value chain, ESRS S3 Affected communities and ESRS S4 Consumers and end-users provide a specific reporting framework on material IROs related to these groups in your value chain. These standards do not specify default metrics, although the ESRS does require you to establish entity-specific metrics where necessary.
When associates or joint ventures are part of your value chain, for example as suppliers, you include information on them in the same way as on other business relationships. When calculating specific metrics, data on these types of actors are therefore not limited to the equity share. Indeed, they are taken into account based on the impacts associated with your products and services through business relationships.
Regarding investments, there is a table (p. 11-12) that clarifies how impacts arising from investments should be included in both financial reporting and the sustainability report.
Do you have additional questions on how specific groups should or should not be included in your value chain approach? Feel free to contact us at mail@pantarein.be.
