Double Materiality Assessment
for Energy & Utilities

Double materiality assessment for Energy & Utilities

Energy and utility companies face the broadest double materiality exposure of any sector under CSRD. A mid-sized European electricity generator with gas-fired and wind assets, 1,500 employees, and operations across two EU member states will find eight or nine ESRS topics material. This is not an artefact of conservative assessment. The sector's physical operations directly emit greenhouse gases, discharge pollutants, consume water, occupy land with ecological value, employ workers in hazardous conditions, and affect communities near generation and transmission infrastructure. EFRAG's sector-specific guidance for energy (under development) will formalise expectations, but the sector-agnostic framework in ESRS 1.20-33 already captures most of these.

E1 Climate change is the defining topic. Fossil fuel generators have Scope 1 emissions as their primary impact. Renewable energy companies have lower operational emissions but significant Scope 3 from equipment manufacturing (solar panels, wind turbines, batteries) and end-of-life disposal. Financial materiality under E1 is equally significant: the EU Emissions Trading System (EU ETS) carbon price directly affects operating costs for thermal generators, and stranded asset risk threatens the long-term value of fossil fuel infrastructure. E2 Pollution applies to thermal generators (SO2, NOx, particulate matter), nuclear operators (radioactive waste), and gas distributors (methane leakage). E3 Water and marine resources is material for thermal and nuclear generators that use water for cooling, and for hydropower operators that alter river flows. E4 Biodiversity applies to wind farm operators (bird and bat mortality), hydropower (fish migration barriers), solar farms (habitat loss), and transmission line operators (corridor management). E5 Resource use covers fuel consumption, equipment lifecycle management, and waste from decommissioning. S1 Own workforce addresses safety in an industry where fatal and serious injury rates remain above average (Eurostat data shows the electricity, gas, and water supply sector's fatal accident rate at 2.4 per 100,000 workers in 2021, above the all-sector average of 1.8). S2 Workers in the value chain applies to supply chain labour in equipment manufacturing, particularly for solar panels and batteries with documented forced labour risks in certain supply chains. S3 Affected communities covers land rights, noise, visual impact, air quality near facilities, and involuntary resettlement for new infrastructure. G1 Business conduct addresses lobbying activities, regulatory compliance, and political engagement on energy policy.

Assurance providers reviewing energy sector assessments find that entities with mixed portfolios (fossil and renewable) often assess the portfolio in aggregate rather than by asset type. This masks the different materiality profiles of different generation technologies. A gas plant and a wind farm generate different ESRS topics. The assessment should be granular enough to capture these differences, then aggregate the results to determine entity-level materiality. A second finding is underscoring E4 Biodiversity. Energy companies often treat biodiversity as a permitting issue rather than a material sustainability topic, despite documented impacts on protected species and habitats.

Energy companies should structure the assessment by asset type and lifecycle stage. For each generation technology (gas, wind, solar, hydro, nuclear), map the sustainability matters at construction, operation, and decommissioning stages. Score each using ESRS 1.45-50 severity criteria with evidence from environmental impact assessments, emissions monitoring data, safety records, and community engagement logs. Aggregate asset-level scores to the entity level, weighting by capacity or revenue contribution as appropriate.