Double materiality assessment

Companies that are under an obligation to report based on the CSRD are required to perform a ‘double materiality assessment’ for that purpose. This is necessary in order to establish which sustainability topics are the most relevant to the company and its stakeholders. The double materiality assessment thus determines the scope of the company’s sustainability reporting. Over the past few years, our material topics were the foundation for the process of scope determination. In 2023, we carried out a broad topic-oriented double materiality assessment based on the Corporate Sustainability Reporting Directive (CSRD) for the first time. 

For the 2024 report, we brought our double materiality assessment further into line with the CSRD and the European Sustainability Reporting Standards (ESRS). In doing so, we gratefully drew on our experiences from last year, the dialogue on materiality with colleagues and experts, network meetings and a peer review. For a detailed description of the methodology and the DMA process, see the ‘The DMA process in steps’ paragraph. 

Inside out and outside in 

For the double materiality assessment for 2024, we assessed our impact on people, the environment and society with respect to all ESRS topics and subtopics (inside out), aligning the business-specific topics with and detailing them within the context of the relevant ESRS topics and subtopics. We identified and assessed our current and potential impact on people and the environment. Following on from that, we assessed what risks and/or opportunities each topic and subtopic may generate for Alliander’s operations. This analysis of risks and opportunities forms the basis for assessing the financial impact of ESRS topics on our company (outside in). If an ESRS topic was classed as material in at least one of the two perspectives, we designated that topic as material to Alliander.  

Impacts, risks and opportunities in the value chain 

We assessed impacts, risks and opportunities with respect to the relevant topics, not only for our own operations, but also for topics in our value chain. This value chain includes both upstream parties that supply to Alliander and downstream stakeholders to whom we supply. Based on internal knowledge and value chain analyses, the value chain assessments look primarily at our first-line suppliers, especially in assessing impacts, risks and opportunities with respect to Workers in the value chain (S2), Climate change (E1) and Circularity (E5).   

Stakeholder involvement in the DMA 

Stakeholders are parties that can influence Alliander or be influenced by Alliander. Alliander distinguishes three core stakeholder groups and a diverse field of social stakeholders around that.  

Our activities in stakeholder domains or in partnership with stakeholders provide a valid basis for assessing the impacts, risks and opportunities that are material for them and for us.  

Further development of the DMA 

We are confident that our double materiality assessment delivers a truthful picture of our material topics and their impacts, risks and opportunities. At the same time, the due diligence process we continue to run may give rise to possible adjustments due to new strategies, activities, modified processes and activities that are also relevant to stakeholders. Over the coming years, we will further fine-tune our DMA process and methodology, especially when prompted by new insights or implementation guidelines, such as industry-specific standards. This not only means that our double materiality is subject to change in the future, but also that our sustainability statement may not cover every impact, every risk and every opportunity that individual stakeholders or stakeholder groups may consider important. 

We have summarised the outcome of our double materiality assessment in the above materiality matrix. The ESRS to which each topic relates are stated in parenthesis. The topics of Climate change (E1), Resource use and circular economy (E5), Own workforce (S1), Workers in the value chain (S2), Consumers and end-users (S4) and Business conduct (G1) are material both from an impact and a financial perspective. This was to be expected, as standards are closely related to our strategic priorities of driving the energy transition, delivering a sustainable energy supply, ensuring security of energy supply for our customers and communicating with and providing information to our customers. The topics of Pollution (E2), Water and marine resources (E3), Biodiversity and ecosystems (E4) and Affected communities (S3) are not material, neither from an impact nor a financial perspective.

We have not screened our assets and business activities for actual and potential impact risks in our own operations and the value chain with respect to pollution, water and marine resources, and biodiversity and ecosystems. Neither have we engaged with affected communities on these topics. We discussed these topics with internal subject matter experts.

The DMA process in steps 

Step 1: identify, review and validate relevant aspects and topics 

In order to identify material topics, it is essential that we consider all possible aspects. To this end, we compared the list of ESRS topics and subtopics to the material topics from our 2023 annual report. We also consulted a wide range of sources, including:  

• a peer review of topics covered in annual reports of other Dutch network companies;

• the Alliander Trend Report for 2023;

• the Alliander strategy;

• Alliander’s risk assessment.

We also used more specific data that gives further insight into the potential scope of impact topics, such as source data in the form of our carbon footprint, value chain analyses and management reports. The assessment sought to establish the extent to which ESRS topics relate to our activities, in particular the distribution of electricity, gas and heat, our work on the infrastructure and support processes such as buildings management, procurement, material needs and energy management. Additionally, we looked at specific activities of subsidiaries such as Telecom and at Qirion’s high-voltage grid and engineering activities. These are also highly linked to Alliander’s impact.

Subject matter experts 

Discussions on each ESRS topic were held with internal subject matter experts. These subject matter experts work in the domain of corporate social responsibility or have expertise in relation to ESG topics. With them, we assessed the relevance of the listed topics, the choices and actions Alliander has developed for the specific topics and how Alliander is organised in respect of the specific topics.  

Step 2: determine the impacts, risks and opportunities  

In order to determine the degree of materiality, we identified current and potential impacts, risks and opportunities for all topics that are deemed to be material. In doing so, we specifically focused on factors that lead to a potential specific impact or a heightened risk of impact for Alliander as an energy network operator. One example of such a specific impact is the impact caused by the acceleration of the energy transition, as that will create a considerable need for more labour capacity and materials for the energy network and put additional pressure on the work. This potentially generates additional impact on safety during the work and a greater need for required resources.  

These impacts reverberate to partners in the value chains to which we are connected, such as business partners, including suppliers, and outsourcing partners. At the same time, the energy transition creates risks and opportunities for Alliander, such as effects on our reputation and the opportunity to organise our work in a more sustainable and efficient way, including together with value chain partners. As per the ESRS guidelines, we assessed the topics using different dimensions:  

• Scale - the extent of the (potential) impact, both negative and positive, after mitigating measures.

• Scope - how widely the impact manifests itself, based on parameters such as the percentage of locations, percentage of group employees or financial expenditures.

• Recoverability - whether it is possible to recover after a negative impact, i.e. if this is physically possible and what the costs and time frame for this would be.

• Probability - the chance of the (potential) impact, both negative and positive, actually occurring.

Financial materiality  

Based on Alliander’s risk framework, the risks and opportunities were weighed in the light of the financial consequences topics may have for the organisation. This weighing of risks and opportunities is a qualitative assessment. While based on the best available insights, there are no absolute certainties. Along the lines of the risk model, the topics were classified based on their financial effect, including recoverability from that impact and the probability of the risk or opportunity materialising. Estimation and assessment of the topics delivers a financial impact classification that ranges from – potentially – (very) low and medium to (very) high. The financial impact was assessed for the short (up to 1 year), medium (1-5 years) and long term (over 5 years).  

• Probability - the chance of the impact, risk or opportunities occurring.

• Financial effect - the extent of the (potential) financial costs and revenue.

See the end of this section for a run-down of all our defined impacts, risks and opportunities for each ESRS topic.

It must be noted that the defined risks and opportunities may have a material effect on Alliander’s financial position, net profit and cash flows. There is always an inherent risk of a material adjustment to the carrying amount of assets and liabilities in the next reporting period,

Step 3: determine materiality  

After consulting with internal subject matter experts, the CSRD working group determined the materiality of the impacts, risks and opportunities. This was done in a qualitative sense by the members of the CSRD working group, taking into account all available knowledge and Alliander’s sustainability track record. Wherever impact is classed as material, it is disclosed for the topic in question.

We assessed the probability and financial effect of risks and opportunities based on Alliander’s risk framework. Based on the scores for the two above dimensions, we plotted the topics in the materiality matrix shown above.   

Step 4: validate relevance to stakeholders 

As part of the materiality assessment, we reached out to stakeholders on various occasions to get their views, both through individual interviews and in a group (stakeholder panel). We used the outcomes in the final assessment of the topics.

• In preparing the annual report, we consulted with internal subject matter experts from the business units and expert support functions. Their frequent contact with the main stakeholders gives them a good understanding of stakeholder interests and views on social topics.

• In a meeting attended by the members of the Management Board, we discuss the topics and Alliander’s challenges, and how these are incorporated in the draft annual report, with a panel of social actors in December every year. In preparation for this session, we asked the panel members for their views on the topics that we classified as material topics.

• We discussed social topics in interviews with representatives for the main stakeholder groups. Stakeholder input and views were taken into consideration in Alliander’s ultimate determination of materiality.

While the stakeholders confirmed the overall picture of the material topics, they sometimes also specifically pointed to or asked about topics and urged us to look at the distinction between topics of low and high materiality. The outcome of the materiality assessment and the scores were brought together in a draft materiality matrix. No impacts, risks or opportunities were specifically suggested by the Works Council or Supervisory Board. 

The outcomes of the assessment and the materiality matrix were discussed internally and made available to the Management Board and the Supervisory Board. The list of key topics and subtopics was discussed and approved by the Management Board. One of the conclusions was that the topics where Alliander has or could have the most impact are largely aligned with the most important strategic challenges Alliander is addressing. 

Step 5: place topics in the materiality matrix

The combination of the inside-out and outside-in impact shows how topics affect Alliander’s social performance, thus determining their materiality in the annual report. The materiality matrix shown earlier in this section lists the material and non-material topics for Alliander’s sustainability statement.  

Topics  

These are the topics in the materiality matrix that stand out in the eyes of stakeholders and have double materiality, because they have an impact on both society and on Alliander. Listed in the left-hand column, these topics are discussed in detail in the sustainability statement. Other topics are listed in the right-hand column of the matrix and are not material, meaning that they have little to barely any impact.  

(Sub-)subtopics 

Based on the ESRS, topics can be broken down into several subtopics and sub-subtopics. The table below gives an overall view of material topics and (sub-)subtopics.

Other related topics 

Some of the topics the double impact assessment based on the ESRS system did not class as material are still relevant to the annual report given developments and/or Alliander’s responsibility. It may also be necessary to include disclosures on these topics based on statutory obligations or because of a specific stakeholder interest. While these non-material topics are not included in the sustainability statement, they can still feature in other sections of the annual report or be mentioned in an explanatory appendix.  

Step 6: implementation 

An assessment was made for each European Sustainability Reporting Standard of what information is deemed material for the sustainability statement. This was a topic-by-topic assessment process, during which we did not have all the information or data points instantly available. Whenever information was missing, we estimated what actions would be needed to meet the disclosure requirements under the ESRS. Where possible, these will be incorporated in a future report. Additionally, Alliander uses business-related indicators that we include in the sustainability statement if they are relevant to the accountability process. The materiality of topics decided by the Management Board provides the basis for the organisation of content and for the overall management of the reporting process. Based on the double materiality assessment, we decided how to work out the details of the topics and where to address them in the report, while coordinating with the Management Board. Next, we obtained the required information for each topic from internal content suppliers. Organisational units prepared the reporting process in conjunction with the responsible departments and recorded agreements reached on the verification and validation of data.