bmad-plus 0.7.4 → 0.8.0

package/src/bmad-plus/packs/pack-shield/references/csrd/double-materiality.md

@@ -1,253 +1,253 @@
-# Double Materiality Assessment (DMA) — Methodology and Templates
-
-## Overview
-
-The Double Materiality Assessment is the mandatory first step in CSRD compliance (ESRS 1, paras. 19–56). Every in-scope company must complete a DMA before deciding which ESRS topical standards to report on. The DMA determines what is reported; it cannot be completed retrospectively.
-
----
-
-## Two Perspectives Explained
-
-### 1. Impact Materiality (Inside-Out)
-*Does the company have actual or potential impacts on people or the environment?*
-
-**Scope:** Own operations + upstream and downstream value chain
-
-**Actual impacts:** Currently occurring
-**Potential impacts:** Could occur in the future (assess likelihood)
-
-**Positive impacts:** Benefits to people or environment (e.g., jobs created, carbon sequestration)
-**Negative impacts:** Harm to people or environment (e.g., pollution, unsafe working conditions)
-
-**Significance assessment formula:**
-- *Negative actual impacts:* Scale × Scope × Irremediability
-- *Negative potential impacts:* Scale × Scope × Irremediability × Likelihood
-- *Positive actual impacts:* Scale × Scope
-- *Positive potential impacts:* Scale × Scope × Likelihood
-
-**Definitions:**
-| Criterion | Definition |
-|-----------|-----------|
-| Scale | Severity of the impact on people or environment |
-| Scope | How widespread (number of people affected / geographic area) |
-| Irremediability | Difficulty of restoring pre-impact state |
-| Likelihood | Probability of potential impact occurring |
-
-### 2. Financial Materiality (Outside-In)
-*Does the sustainability matter create risks or opportunities affecting the company's finances?*
-
-**Financial effects include:** Revenue, costs, assets, liabilities, cash flows, access to finance, cost of capital
-
-**Time horizons:** Short-term (<1 year), medium-term (1–5 years), long-term (>5 years)
-
-**Assessment criteria:**
-- Magnitude: How large could the financial effect be? (quantify where possible)
-- Likelihood: How probable is the financial effect?
-
-**Sources of financial risks and opportunities:**
-- Physical risks (acute: extreme weather; chronic: temperature, sea-level)
-- Transition risks (policy/regulation, technology, market, reputational)
-- Opportunities (energy efficiency, new markets, brand value, talent attraction)
-
-### The Materiality Threshold
-A topic is **material** if it meets EITHER the impact materiality threshold OR the financial materiality threshold (or both).
-
-There is no prescribed numerical threshold — companies set their own thresholds, which must be justified and disclosed (ESRS 2 IRO-1).
-
----
-
-## DMA Process — Step by Step
-
-### Step 1: Understand the Context (ESRS 1, para. 45)
-
-**Activities:**
-1. Map the business model: products/services, markets, geographies
-2. Map the value chain: key suppliers (tier 1 and beyond), distribution, customers, end-users
-3. Identify the company's key activities, assets, and relationships
-4. Identify sector-specific sustainability risks using industry references (ESRS sector standards when published, SASB, GRI sector standards)
-
-**Output:** Business context document / value chain map
-
----
-
-### Step 2: Identify Actual and Potential Impacts (ESRS 1, paras. 46–48)
-
-**Sources of impact identification:**
-- Internal: operations review, incident data, management interviews
-- External: stakeholder engagement, industry benchmarks, peer analysis, ESG ratings
-
-**Stakeholder engagement (ESRS 1, para. 22):**
-ESRS requires meaningful engagement with affected stakeholders and users of sustainability reporting. Stakeholders to engage:
-- Workers (own and value chain)
-- Local communities
-- Customers / consumers
-- NGOs and civil society
-- Investors and financial institutions
-- Regulators
-
-**Output:** Long list of potential impacts per ESRS topic area
-
----
-
-### Step 3: Assess Significance of Impacts
-
-Rate each identified impact on each criterion using a 1–5 scale (or equivalent):
-
-**Impact Scoring Matrix:**
-
-| Score | Scale | Scope | Irremediability | Likelihood |
-|-------|-------|-------|----------------|-----------|
-| 1 | Minimal | Very local / few individuals | Easily remediable | Very unlikely (<5%) |
-| 2 | Low | Local / small group | Mostly remediable | Unlikely (5–25%) |
-| 3 | Moderate | Regional / significant group | Partially remediable | Possible (25–50%) |
-| 4 | High | National / large group | Mostly irreversible | Likely (50–75%) |
-| 5 | Severe | International / systemic | Irreversible | Very likely (>75%) |
-
-**Severity score (negative actual):** Scale × Scope × Irremediability (max 125)
-**Severity score (negative potential):** Scale × Scope × Irremediability × Likelihood (max 625)
-
-**Materiality threshold:** Company-defined (example: severity ≥ 27 for actual impacts; ≥ 50 for potential impacts)
-
----
-
-### Step 4: Identify Financial Risks and Opportunities
-
-For each ESRS topic, assess whether there are associated financial risks or opportunities.
-
-**Financial Risk/Opportunity Identification Template:**
-
-| ESRS Topic | Risk/Opportunity Type | Description | Time Horizon | Potential Financial Effect |
-|-----------|----------------------|-------------|-------------|--------------------------|
-| Climate (E1) | Physical risk (acute) | Flooding of key manufacturing site | Short-term | Asset damage, business interruption |
-| Climate (E1) | Transition risk | Carbon pricing increases operating costs | Medium-term | Higher fuel/energy costs |
-| Water (E3) | Physical risk (chronic) | Water scarcity in production region | Long-term | Supply disruption, increased costs |
-| Workforce (S1) | Opportunity | Employer brand attracts talent | Short-term | Lower recruitment costs, retention |
-
----
-
-### Step 5: Assess Financial Significance
-
-Rate identified risks/opportunities:
-
-| Rating | Magnitude | Likelihood |
-|--------|-----------|-----------|
-| Low | <1% of EBITDA | <25% |
-| Medium | 1–5% of EBITDA | 25–75% |
-| High | >5% of EBITDA | >75% |
-
-**Financial materiality score:** Magnitude × Likelihood → topic is financially material if score exceeds threshold.
-
----
-
-### Step 6: Determine Materiality — Topic by Topic
-
-Apply the materiality determination matrix:
-
-| ESRS Topic | Impact Material? | Financially Material? | Overall Materiality | Report? |
-|-----------|-----------------|----------------------|-------------------|---------|
-| E1 Climate | Yes (Scope 3 GHG) | Yes (carbon pricing risk) | **MATERIAL** | Full ESRS E1 |
-| E2 Pollution | No | No | Non-material | Omit (brief statement) |
-| E3 Water | Yes (operations in water-stressed area) | No | **MATERIAL** | Full ESRS E3 |
-| S1 Own Workforce | Yes | No | **MATERIAL** | Full ESRS S1 |
-| G1 Business Conduct | No | Yes (compliance risk) | **MATERIAL** | Full ESRS G1 |
-
----
-
-### Step 7: Document the DMA (ESRS 2 SBM-3 + IRO-1)
-
-**Mandatory disclosures about the DMA process:**
-
-*ESRS 2 IRO-1 — Description of the process to identify and assess material IROs:*
-- Scope of assessment (own operations / value chain depth)
-- Methodology and criteria used
-- How stakeholders were engaged
-- Timeline and frequency of DMA
-- How the results inform strategy and reporting
-
-*ESRS 2 SBM-3 — Material impacts, risks and opportunities:*
-- Complete list of material topics identified
-- How material IROs interact with business model and strategy
-- Current and anticipated financial effects
-
-**Materiality Statement:** Brief explanation for each ESRS topic found non-material (why it was excluded).
-
----
-
-### Step 8: Validate and Update
-
-- DMA must be updated at least annually
-- Trigger for mid-period review: significant business change, new regulation, emerging risk, stakeholder concern
-- Changes to materiality conclusions must be disclosed
-
----
-
-## Sector-Specific Guidance
-
-### High-Likelihood Material Topics by Sector
-
-| Sector | Typically Material |
-|--------|-------------------|
-| Energy / Utilities | E1 (Climate), E2 (Pollution), E3 (Water), G1 (Business Conduct) |
-| Financial Services | E1 (financed emissions), G1 (Business Conduct), S4 (Consumers) |
-| Manufacturing | E1 (GHG), E2 (Pollution), E5 (Circular Economy), S1 (Workforce), S2 (Value Chain) |
-| Retail / Consumer Goods | E1, E5 (packaging/waste), S2 (supply chain labour), S4 (consumers) |
-| Agriculture / Food | E3 (Water), E4 (Biodiversity), E2 (Pollution), S2 (Value Chain) |
-| Construction / Real Estate | E1 (building emissions), E5 (materials), E4 (land use), S3 (communities) |
-| Technology | S1 (Workforce), S4 (data protection/consumers), G1 (Business Conduct) |
-| Mining / Extractives | E1, E2, E3, E4, S3 (communities), G1 |
-| Healthcare / Pharma | S4 (consumers), S1 (workforce), G1 (business conduct), E1 |
-
----
-
-## DMA Documentation Templates
-
-### Impact Register Template
-
-| ID | ESRS Topic | Impact Description | Direction | Scope | Time Horizon | Scale (1-5) | Scope (1-5) | Irremediability (1-5) | Likelihood (1-5) | Severity Score | Material? |
-|----|-----------|-------------------|-----------|-------|-------------|------------|------------|----------------------|----------------|---------------|-----------|
-| I-001 | E1 | Scope 3 GHG emissions from product use | Negative | Downstream | Long-term | 5 | 5 | 4 | 5 | 500 | YES |
-| I-002 | S1 | Gender pay inequity among employees | Negative | Own ops | Short-term | 3 | 3 | 3 | 4 | 108 | YES |
-| I-003 | E4 | No operations near biodiversity areas | n/a | — | — | 1 | 1 | 1 | 1 | 1 | NO |
-
-### Financial Risk/Opportunity Register Template
-
-| ID | ESRS Topic | Type | Description | Time Horizon | Magnitude | Likelihood | Financial Score | Material? |
-|----|-----------|------|-------------|-------------|-----------|-----------|----------------|-----------|
-| F-001 | E1 | Transition risk | EU ETS carbon costs increase | Short-medium | High | High | HIGH | YES |
-| F-002 | E3 | Physical risk | Water scarcity affects key plant | Long-term | Medium | Medium | MEDIUM | YES |
-| F-003 | S1 | Opportunity | ESG leader attracts talent | Short-term | Low | Medium | LOW | NO |
-
-### DMA Summary Table
-
-| ESRS Standard | Topic | Impact Materiality | Financial Materiality | Overall Material | First Reporting Year |
-|--------------|-------|-------------------|----------------------|-----------------|---------------------|
-| E1 | Climate Change | ✓ | ✓ | ✓ | FY 2025 |
-| E2 | Pollution | ✗ | ✗ | ✗ | — |
-| E3 | Water & Marine | ✓ | ✓ | ✓ | FY 2025 |
-| E4 | Biodiversity | ✗ | ✗ | ✗ | — |
-| E5 | Circular Economy | ✓ | ✗ | ✓ | FY 2025 |
-| S1 | Own Workforce | ✓ | ✗ | ✓ | FY 2025 |
-| S2 | Value Chain Workers | ✓ | ✗ | ✓ | FY 2025 |
-| S3 | Communities | ✗ | ✗ | ✗ | — |
-| S4 | Consumers | ✗ | ✓ | ✓ | FY 2025 |
-| G1 | Business Conduct | ✓ | ✓ | ✓ | FY 2025 |
-
----
-
-## Common DMA Pitfalls
-
-**1. Scope too narrow:** Limiting the DMA to own operations only; ESRS requires value chain consideration where material.
-
-**2. Stakeholder engagement inadequate:** Consulting only investors; ESRS requires engagement with affected stakeholders (workers, communities).
-
-**3. Financial materiality neglected:** Conducting only impact assessment; financial risks/opportunities must be assessed separately.
-
-**4. Thresholds not justified:** Setting arbitrary thresholds without documenting the rationale; thresholds must be disclosed in IRO-1.
-
-**5. DMA done retrospectively:** Completing the DMA after deciding what to report; the DMA must drive reporting decisions.
-
-**6. Over-exclusion:** Excluding topics from reporting without adequate justification; ESRS requires a brief explanation for excluded topics.
-
-**7. Static DMA:** Treating DMA as a one-time exercise; it must be reviewed at least annually.
-
-**8. Climate auto-excluded:** Climate change (E1) is presumed material for most companies; requires robust justification and strong evidence to exclude.
+# Double Materiality Assessment (DMA) — Methodology and Templates
+
+## Overview
+
+The Double Materiality Assessment is the mandatory first step in CSRD compliance (ESRS 1, paras. 19–56). Every in-scope company must complete a DMA before deciding which ESRS topical standards to report on. The DMA determines what is reported; it cannot be completed retrospectively.
+
+---
+
+## Two Perspectives Explained
+
+### 1. Impact Materiality (Inside-Out)
+*Does the company have actual or potential impacts on people or the environment?*
+
+**Scope:** Own operations + upstream and downstream value chain
+
+**Actual impacts:** Currently occurring
+**Potential impacts:** Could occur in the future (assess likelihood)
+
+**Positive impacts:** Benefits to people or environment (e.g., jobs created, carbon sequestration)
+**Negative impacts:** Harm to people or environment (e.g., pollution, unsafe working conditions)
+
+**Significance assessment formula:**
+- *Negative actual impacts:* Scale × Scope × Irremediability
+- *Negative potential impacts:* Scale × Scope × Irremediability × Likelihood
+- *Positive actual impacts:* Scale × Scope
+- *Positive potential impacts:* Scale × Scope × Likelihood
+
+**Definitions:**
+| Criterion | Definition |
+|-----------|-----------|
+| Scale | Severity of the impact on people or environment |
+| Scope | How widespread (number of people affected / geographic area) |
+| Irremediability | Difficulty of restoring pre-impact state |
+| Likelihood | Probability of potential impact occurring |
+
+### 2. Financial Materiality (Outside-In)
+*Does the sustainability matter create risks or opportunities affecting the company's finances?*
+
+**Financial effects include:** Revenue, costs, assets, liabilities, cash flows, access to finance, cost of capital
+
+**Time horizons:** Short-term (<1 year), medium-term (1–5 years), long-term (>5 years)
+
+**Assessment criteria:**
+- Magnitude: How large could the financial effect be? (quantify where possible)
+- Likelihood: How probable is the financial effect?
+
+**Sources of financial risks and opportunities:**
+- Physical risks (acute: extreme weather; chronic: temperature, sea-level)
+- Transition risks (policy/regulation, technology, market, reputational)
+- Opportunities (energy efficiency, new markets, brand value, talent attraction)
+
+### The Materiality Threshold
+A topic is **material** if it meets EITHER the impact materiality threshold OR the financial materiality threshold (or both).
+
+There is no prescribed numerical threshold — companies set their own thresholds, which must be justified and disclosed (ESRS 2 IRO-1).
+
+---
+
+## DMA Process — Step by Step
+
+### Step 1: Understand the Context (ESRS 1, para. 45)
+
+**Activities:**
+1. Map the business model: products/services, markets, geographies
+2. Map the value chain: key suppliers (tier 1 and beyond), distribution, customers, end-users
+3. Identify the company's key activities, assets, and relationships
+4. Identify sector-specific sustainability risks using industry references (ESRS sector standards when published, SASB, GRI sector standards)
+
+**Output:** Business context document / value chain map
+
+---
+
+### Step 2: Identify Actual and Potential Impacts (ESRS 1, paras. 46–48)
+
+**Sources of impact identification:**
+- Internal: operations review, incident data, management interviews
+- External: stakeholder engagement, industry benchmarks, peer analysis, ESG ratings
+
+**Stakeholder engagement (ESRS 1, para. 22):**
+ESRS requires meaningful engagement with affected stakeholders and users of sustainability reporting. Stakeholders to engage:
+- Workers (own and value chain)
+- Local communities
+- Customers / consumers
+- NGOs and civil society
+- Investors and financial institutions
+- Regulators
+
+**Output:** Long list of potential impacts per ESRS topic area
+
+---
+
+### Step 3: Assess Significance of Impacts
+
+Rate each identified impact on each criterion using a 1–5 scale (or equivalent):
+
+**Impact Scoring Matrix:**
+
+| Score | Scale | Scope | Irremediability | Likelihood |
+|-------|-------|-------|----------------|-----------|
+| 1 | Minimal | Very local / few individuals | Easily remediable | Very unlikely (<5%) |
+| 2 | Low | Local / small group | Mostly remediable | Unlikely (5–25%) |
+| 3 | Moderate | Regional / significant group | Partially remediable | Possible (25–50%) |
+| 4 | High | National / large group | Mostly irreversible | Likely (50–75%) |
+| 5 | Severe | International / systemic | Irreversible | Very likely (>75%) |
+
+**Severity score (negative actual):** Scale × Scope × Irremediability (max 125)
+**Severity score (negative potential):** Scale × Scope × Irremediability × Likelihood (max 625)
+
+**Materiality threshold:** Company-defined (example: severity ≥ 27 for actual impacts; ≥ 50 for potential impacts)
+
+---
+
+### Step 4: Identify Financial Risks and Opportunities
+
+For each ESRS topic, assess whether there are associated financial risks or opportunities.
+
+**Financial Risk/Opportunity Identification Template:**
+
+| ESRS Topic | Risk/Opportunity Type | Description | Time Horizon | Potential Financial Effect |
+|-----------|----------------------|-------------|-------------|--------------------------|
+| Climate (E1) | Physical risk (acute) | Flooding of key manufacturing site | Short-term | Asset damage, business interruption |
+| Climate (E1) | Transition risk | Carbon pricing increases operating costs | Medium-term | Higher fuel/energy costs |
+| Water (E3) | Physical risk (chronic) | Water scarcity in production region | Long-term | Supply disruption, increased costs |
+| Workforce (S1) | Opportunity | Employer brand attracts talent | Short-term | Lower recruitment costs, retention |
+
+---
+
+### Step 5: Assess Financial Significance
+
+Rate identified risks/opportunities:
+
+| Rating | Magnitude | Likelihood |
+|--------|-----------|-----------|
+| Low | <1% of EBITDA | <25% |
+| Medium | 1–5% of EBITDA | 25–75% |
+| High | >5% of EBITDA | >75% |
+
+**Financial materiality score:** Magnitude × Likelihood → topic is financially material if score exceeds threshold.
+
+---
+
+### Step 6: Determine Materiality — Topic by Topic
+
+Apply the materiality determination matrix:
+
+| ESRS Topic | Impact Material? | Financially Material? | Overall Materiality | Report? |
+|-----------|-----------------|----------------------|-------------------|---------|
+| E1 Climate | Yes (Scope 3 GHG) | Yes (carbon pricing risk) | **MATERIAL** | Full ESRS E1 |
+| E2 Pollution | No | No | Non-material | Omit (brief statement) |
+| E3 Water | Yes (operations in water-stressed area) | No | **MATERIAL** | Full ESRS E3 |
+| S1 Own Workforce | Yes | No | **MATERIAL** | Full ESRS S1 |
+| G1 Business Conduct | No | Yes (compliance risk) | **MATERIAL** | Full ESRS G1 |
+
+---
+
+### Step 7: Document the DMA (ESRS 2 SBM-3 + IRO-1)
+
+**Mandatory disclosures about the DMA process:**
+
+*ESRS 2 IRO-1 — Description of the process to identify and assess material IROs:*
+- Scope of assessment (own operations / value chain depth)
+- Methodology and criteria used
+- How stakeholders were engaged
+- Timeline and frequency of DMA
+- How the results inform strategy and reporting
+
+*ESRS 2 SBM-3 — Material impacts, risks and opportunities:*
+- Complete list of material topics identified
+- How material IROs interact with business model and strategy
+- Current and anticipated financial effects
+
+**Materiality Statement:** Brief explanation for each ESRS topic found non-material (why it was excluded).
+
+---
+
+### Step 8: Validate and Update
+
+- DMA must be updated at least annually
+- Trigger for mid-period review: significant business change, new regulation, emerging risk, stakeholder concern
+- Changes to materiality conclusions must be disclosed
+
+---
+
+## Sector-Specific Guidance
+
+### High-Likelihood Material Topics by Sector
+
+| Sector | Typically Material |
+|--------|-------------------|
+| Energy / Utilities | E1 (Climate), E2 (Pollution), E3 (Water), G1 (Business Conduct) |
+| Financial Services | E1 (financed emissions), G1 (Business Conduct), S4 (Consumers) |
+| Manufacturing | E1 (GHG), E2 (Pollution), E5 (Circular Economy), S1 (Workforce), S2 (Value Chain) |
+| Retail / Consumer Goods | E1, E5 (packaging/waste), S2 (supply chain labour), S4 (consumers) |
+| Agriculture / Food | E3 (Water), E4 (Biodiversity), E2 (Pollution), S2 (Value Chain) |
+| Construction / Real Estate | E1 (building emissions), E5 (materials), E4 (land use), S3 (communities) |
+| Technology | S1 (Workforce), S4 (data protection/consumers), G1 (Business Conduct) |
+| Mining / Extractives | E1, E2, E3, E4, S3 (communities), G1 |
+| Healthcare / Pharma | S4 (consumers), S1 (workforce), G1 (business conduct), E1 |
+
+---
+
+## DMA Documentation Templates
+
+### Impact Register Template
+
+| ID | ESRS Topic | Impact Description | Direction | Scope | Time Horizon | Scale (1-5) | Scope (1-5) | Irremediability (1-5) | Likelihood (1-5) | Severity Score | Material? |
+|----|-----------|-------------------|-----------|-------|-------------|------------|------------|----------------------|----------------|---------------|-----------|
+| I-001 | E1 | Scope 3 GHG emissions from product use | Negative | Downstream | Long-term | 5 | 5 | 4 | 5 | 500 | YES |
+| I-002 | S1 | Gender pay inequity among employees | Negative | Own ops | Short-term | 3 | 3 | 3 | 4 | 108 | YES |
+| I-003 | E4 | No operations near biodiversity areas | n/a | — | — | 1 | 1 | 1 | 1 | 1 | NO |
+
+### Financial Risk/Opportunity Register Template
+
+| ID | ESRS Topic | Type | Description | Time Horizon | Magnitude | Likelihood | Financial Score | Material? |
+|----|-----------|------|-------------|-------------|-----------|-----------|----------------|-----------|
+| F-001 | E1 | Transition risk | EU ETS carbon costs increase | Short-medium | High | High | HIGH | YES |
+| F-002 | E3 | Physical risk | Water scarcity affects key plant | Long-term | Medium | Medium | MEDIUM | YES |
+| F-003 | S1 | Opportunity | ESG leader attracts talent | Short-term | Low | Medium | LOW | NO |
+
+### DMA Summary Table
+
+| ESRS Standard | Topic | Impact Materiality | Financial Materiality | Overall Material | First Reporting Year |
+|--------------|-------|-------------------|----------------------|-----------------|---------------------|
+| E1 | Climate Change | ✓ | ✓ | ✓ | FY 2025 |
+| E2 | Pollution | ✗ | ✗ | ✗ | — |
+| E3 | Water & Marine | ✓ | ✓ | ✓ | FY 2025 |
+| E4 | Biodiversity | ✗ | ✗ | ✗ | — |
+| E5 | Circular Economy | ✓ | ✗ | ✓ | FY 2025 |
+| S1 | Own Workforce | ✓ | ✗ | ✓ | FY 2025 |
+| S2 | Value Chain Workers | ✓ | ✗ | ✓ | FY 2025 |
+| S3 | Communities | ✗ | ✗ | ✗ | — |
+| S4 | Consumers | ✗ | ✓ | ✓ | FY 2025 |
+| G1 | Business Conduct | ✓ | ✓ | ✓ | FY 2025 |
+
+---
+
+## Common DMA Pitfalls
+
+**1. Scope too narrow:** Limiting the DMA to own operations only; ESRS requires value chain consideration where material.
+
+**2. Stakeholder engagement inadequate:** Consulting only investors; ESRS requires engagement with affected stakeholders (workers, communities).
+
+**3. Financial materiality neglected:** Conducting only impact assessment; financial risks/opportunities must be assessed separately.
+
+**4. Thresholds not justified:** Setting arbitrary thresholds without documenting the rationale; thresholds must be disclosed in IRO-1.
+
+**5. DMA done retrospectively:** Completing the DMA after deciding what to report; the DMA must drive reporting decisions.
+
+**6. Over-exclusion:** Excluding topics from reporting without adequate justification; ESRS requires a brief explanation for excluded topics.
+
+**7. Static DMA:** Treating DMA as a one-time exercise; it must be reviewed at least annually.
+
+**8. Climate auto-excluded:** Climate change (E1) is presumed material for most companies; requires robust justification and strong evidence to exclude.