Management of impacts, risks and opportunities

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

In the 2023/2024 fiscal year, Energie AG for the first time conducted a materiality assessment in accordance with the requirements of the CSRD and the ESRS requirements as part of the externally supported “ESG management/CSRD implementation” project.

In accordance with the principle of double materiality, the impacts, risks and opportunities of Energie AG in the areas of environmental, social and governance matters were identified and their materiality was evaluated in order to identify the material sustainability matters for reporting.

In the double materiality concept, a sustainability matter is considered both in terms of its positive and negative impact on people and the environment (impact materiality) and its financial impact on the company, such as risks and opportunities (financial materiality).

The materiality assessment was based on the “longlist” from the current ESRS (ESRS 1 Appendix A), which is a list of potentially material sustainability matters.

The first step was to carry out a benchmark analysis. This involved analysing the sustainability reports of competitors from the energy, waste management and water sectors and Energie AG’s non-financial report 2022/2023 to determine how they address the ESRS sustainability matters. This made it possible to determine and document points of contact along the value chain and subsequently identify impacts, risks and opportunities.

A kick-off workshop introducing the materiality assessment was held to complete and concretise the points of contact, impacts, risks and opportunities for each sustainability matter of the “longlist”. Participants were environment, social and governance experts from a variety of areas within the Group.

Energie AG’s internal stakeholders, including the ESG team, ESG experts from the Group units, members of the ESG Lab and the ESG Steering Committee, were involved in the materiality assessment process as appropriate. The materiality assessment and its results were handled by the Management Board and Supervisory Board. Plans have been developed to further increase the involvement of internal and, in particular, external stakeholders and these will be implemented from the 2024/2025 fiscal year.

Negative and positive impacts on people and the environment may also have financial consequences for Energie AG (e.g. reputational damage due to negative impacts). These connections were recognised accordingly when determining risks and opportunities.

In the workshops, the positive and negative impacts were initially categorised as potential or actual. When evaluating the impact, the reason, location and time horizon were given before carrying out a quantitative evaluation of the scale and scope. For negative impacts, recoverability was also assessed and for potential impacts the likelihood of the impact was evaluated.

For the assessment of risks and opportunities, the time horizon was determined before a quantitative assessment was carried out based on the re-usability of resources and/or the reliability of business relationships and/or the impact on future EBIT. The likelihood of impact was also assessed.

Sustainability risks were evaluated by the experts as part of the materiality assessment process using the individual assessment categories. This evaluation produced a key figure that indicates the level of materiality of the individual matter.

A threshold value of 0.6 was established, which resulted from the quantitative assessment of the described criteria on a scale of 1 – 5. If the outcome of the assessment of the impact or the financial materiality of a sustainability matter is greater than or equal to the threshold value, it was classified as material for Energie AG.

The initial outcomes of the materiality assessment were reviewed and validated by the ESG Steering Committee and the Management Board, from which the Group’s material sustainability topics were determined. These constitute the framework for sustainability reporting in accordance with ESRS at Energie AG.

Group Risk Management was involved in the entire process of conducting the materiality assessment. Scales for assessing impact and financial materiality were created in collaboration with Group Risk Management. These evaluation scales were used as the basis for the evaluation workshops, which were held separately with environmental, social and governance experts.

The ESRS materiality assessment will be regularly reviewed.

In the past, Energie AG’s material sustainability topics were categorised on a materiality matrix from “important” to “highly important”. The quantitative and qualitative key performance indicators to be measured were set based on this matrix. The following material sustainability topics were reported on until the 2022/2023 fiscal year: partner for equity and debt investors, sustainable business models & innovation, climate change mitigation & resource conservation, security and quality of supply, customer focus and satisfaction, regional responsibility & social commitment, responsible employer, health and safety at work and legal compliance and corruption prevention.

IRO-2 – Disclosure requirements in ESRS covered by the company’s non-financial report

As a result of the materiality assessment, the following matters were identified as not material: E2 Pollution, E3 Water and marine resources and S3 Affected communities.

To define points of contact and assess the matters from E2 Pollution (subtopics: pollution to air and soil, substances of concern, substances of very high concern, pollution to water and living organisms and food resources and microplastics), the threshold values specified in EU legislation were used. Energie AG does not publish a report on the subject of E2 Pollution, as no value from the given list exceeds the threshold value. These thresholds were analysed in detail in the ESG implementation project.

Energie AG does not publish a report on the entire area of E3 Water and marine resources (sub-topics: water consumption, water withdrawal, discharge of water, discharge of water into the oceans and exploitation and use of marine resources) because no points of contact were identified in some cases (all items concerning marine resources), or because the matters of water consumption and withdrawal and discharge of water were not categorised as material based on the assessment of impacts, opportunities and risks. Water consumption by end users served by Energie AG was also included under S4 Consumers and end users.

Energie AG is not required to report on the entire area of S3 Affected communities (sub-topics: economic, social and cultural rights of communities such as adequate housing, adequate food, water and sanitation, land impacts, safety and security impacts and civil and political rights of communities such as freedom of expression, freedom of assembly, impacts on human rights defenders and indigenous peoples’ rights such as voluntary and prior informed consent, self-determination and cultural rights) as all sub-themes are not material based on the assessment of impacts, risks and opportunities. Some of the sub-topics were covered by other longlist items such as E4 Biodiversity and ecosystems and S4 Consumers and end users.

The following sub-topics were deemed not to be material:

E4 Biodiversity and ecosystems: Direct causes of biodiversity loss (climate change, invasive alien species, pollution, land-use change, changes in freshwater and ocean use, direct exploitation, other), impacts on the extent and condition of ecosystems (land degradation, desertification), impacts on the condition of species such as population size, extinction risk; E5 Circular economy: waste; S1 Own workforce: working conditions (adequate wages, social dialogue), equal treatment and equal opportunities for all (employment and inclusion of persons with disabilities), other work-related rights (child labour, forced labour, adequate housing, privacy); S2 Workers in the value chain: Working conditions (secure employment, working time, social dialogue, freedom of association, existence of works councils and workers’ rights to information, consultation and co-determination, collective bargaining, including the proportion of workers covered by collective agreements, work-life balance), equal treatment and equal opportunities for all (gender equality and equal pay for equal work, training and skills development, employment and inclusion of people with disabilities, action against violence and harassment in the workplace, diversity), other labour-related rights (adequate housing, water and sanitation, privacy); S4 Consumers and end users: Information-related impacts for consumers and/or end users (privacy, freedom of expression), personal safety of consumers and/or end-users (health and safety, personal security, protection of children), social inclusion of consumers and/or end-users (non-discrimination, responsible marketing practices); G1 Business conduct: Animal welfare, political engagement, management of relationships with suppliers, including payment practices, corruption and bribery (incidents).

The Energie AG Group’s first ESRS materiality assessment was carried out in the first quarter of the 2024 calendar year with the support of an external consultant. The CSRD requires that sustainability reporting be based on the principle of double materiality. This means that a company reporting on its business activities must consider both the impact of its business activities on the environment and society as well as the financial risks and opportunities arising from them when determining which matters are material. These factors provide the basis for determining which information to disclose.