IFRS Consultation Paper on Sustainability Reporting: Datamaran Response

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To the IFRS Foundation Trustees,

We welcome the initiative of the IFRS Foundation Trustees to explore broadening its current remit beyond the development of financial reporting standards and the opportunity to comment.

Our feedback letter addresses primarily the approach to materiality that could be taken by the Sustainability Standards Board (SSB). Datamaran is trusted by Fortune 500 companies to identify and monitor material and emerging issues, including environmental, social and corporate governance (ESG) risks and opportunities; it enables them to apply the materiality principle in a robust, dynamic and data-driven way thanks to our patented technology, and capture evidence-based insights to inform risk management, Board oversight and annual reporting.

In our experience, confirmed by significant academic and practitioner research, one of the greatest challenges for market participants relates to the application of the materiality principle, i.e. its translation into an operational process (typically called “materiality assessment”) that informs the identification of material risks and opportunities. In particular, the overabundance of high-level definitions and principles addressing materiality combined with the lack of standardized operational procedures hinders the creation of a consistent level playing field in the identification of material issues across different market participants (e.g.corporate, investors, regulators, auditors).

Our first recommendation to the IFRS Trustees is to address the operational gap in the application of the materiality principle so that market participants can rely on legitimate and clear standards to identify material issues. In particular, two aspects of the operational gap are in need of detailed guidance, data and governance.


Different sources of information can be leveraged to gather more robust evidence of materiality, ease potential biases in the stakeholders’ perspective, support decision-making with comprehensive and accurate data that can shed light on impacts and dependencies - as well as prove useful to different levels of management. Corporate filings, regulations, news, social media posts, academic papers, NGO activism are examples of the sources that should be analyzed when conducting a thorough materiality assessment.

A clarification of the nature and typology of the data that can constitute evidence of materiality (both environmental and social, or financial) in the SSB Standards would have the potential to dramatically improve the quality and reliability of materiality determination processes, promoting an auditable and data-driven approach, and providing actionable guidance on materiality to market participants.


There is general consensus that materiality judgements fall within the mandate of the Board of Directors. Yet, application of this foundational principle is dismally limited, siloing the identification and monitoring of sustainability related material risk and opportunities from the key decision makers.

This is due to the above mentioned overabundance of high-level definitions and principles and lack of standardized operational procedures. Organizations solve the application of the materiality principle with ad hoc and inconsistent processes - failing to connect materiality to strategy and risk management, adequately inform the Board and ensure senior Executives are prepared to make informed decisions on emerging risks and opportunities.

A rules-based approach (i.e. pre-determined lists of material issues) would not solve the governance challenge. While those approaches may be based on extensive and authoritative research, they take away from the Board the accountability of making materiality judgements. It provokes box-ticking.

The introduction of a standardized procedure, balancing between a principles-based and a rules-based approach, clarifying internal organizational bodies involved, prescribing the frequency of the analysis - at least annual, aligned with the reporting cycle - and third-party audit, would have a substantial impact on the integration of sustainability issues in the core decision making processes.

Our second and final recommendation concerns double materiality. Datamaran is in a unique position to track the evolution of issues from a broader stakeholder perspective of materiality to financial materiality. Research we conducted this year shows clear evidence of how issues like diversity, equity, and inclusion (DEI) are increasingly being addressed in financial reporting and mandatory regulatory requirements.

We also see differences across sectors. Early reporters in certain sectors, such as Consumer Goods, and Food & Beverage, are reporting a high proportion of specific risk mitigation activities.

IFRS Consultation Paper on Sustainability Reporting: Datamaran Response
IFRS Consultation Paper on Sustainability Reporting: Datamaran Response

It would be important, in order to ensure a proper reflection of the dynamic nature of materiality in the standards, to identify a timeline to address materiality from a broader stakeholder perspective beyond the financial one. Especially if it is not possible to include a double materiality approach from the outset. Alternatively, the SSB standards would risk to lag behind market participants’ current practices, and miss an opportunity to achieve their ambitious goal.

This consultation is a unique opportunity not only to foster transparency and promote better functioning markets, but also and, more importantly, to drive authentic change. We firmly believe, thanks to our experience of working every day with corporate leaders in the Datamaran community, including CFOs, CEOs and Non-Executive Directors, that our recommendations can advance corporate accounting, governance and reporting processes in order to make our society more balanced and companies better prepared to address systemic risks.

We look forward to seeing the outcome of your consultation and we hope that our contribution will help you with your ambitious mandate.

The Datamaran Team

María Deisy Muñoz Sepúlveda, Manager of Regulatory Affairs

Ian van der Vlugt, VP of Product & Research

Donato Calace, VP of Accounts and Innovation

Marjella Lecourt-Alma, CEO and Co-Founder

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