LEVERAGING MATERIALITY AS BASIS FOR SUSTAINABILITY STRATEGY
BUILDING OUR SUSTAINABILITY STRATEGY UPON MATERIALITY
For us at Munich Electrification, sustainability is one core value that determines our products, our decisions and our workforce. We believe that sustainability is not just a commitment - it is a strategic imperative. To bring sustainability to the next level, we conducted a first double materiality assessment. This effort provided us with valuable insights into the environmental, social, and governance matters most relevant to our stakeholders and our long-term business success. The findings from this assessment have directly informed our first sustainability strategy, which sets clear priorities and actionable goals for this year.
by Christina Rechtsteiner
DOUBLE MATERIALITY ASSESSMENT (DMA) AND SUSTAINABILITY STRATEGY
The double materiality assessment considers two dimensions of materiality: financial materiality, which focuses on how sustainability matters affect the company’s financial performance; and impact materiality, which examines the company activities’ impact on the environment, society, and stakeholders. By adopting this dual perspective, companies can better understand the risks and opportunities they face, ensuring they contribute positively to both people and the planet.
The double materiality assessment encourages transparency and accountability, helping businesses align with regulatory requirements and build long-term value in a sustainable manner.
DOUBLE MATERIALITY ASSESSMENT (DMA)
Inspired by the proposed process of the Implementation Guidance for the Materiality Assessment from the European Financial Reporting Advisory Group (EFRAG), the following process was carried out:
The first step includes a comprehensive research on contextual information of the organization and its surroundings. Besides a competitive analysis and a status quo analysis to understand the business environment ME operates in and what has happened so far in terms of sustainability, a stakeholder analysis was also performed. This is a crucial step since the inclusion of affected stakeholders’ perspectives is a cornerstone of the DMA. Aside from the identification of stakeholders, the topics, sub-topics and sub-sub-topics from AR16 in ESRS1 Appendix A have been consolidated resulting in 14 sustainability matters.
These are the main input for step two - the identification of impacts, risks and opportunities (IRO). It has been decided to proceed with internal stakeholders as proxies for external stakeholders due to practicability reasons. In this group of nine people, potential and actual negative and positive impacts that ME has on the outside have been analyzed. For the financial materiality perspective, potential and actual risks and opportunities were gathered during the work as well.
In the third step of the DMA process, the defined IROs were quantified.
Impact materiality is based on:
the scale: how grave the impact is,
the scope: how widespread the impact is,
the irremediability: can the impact be reversed (in case of negative impacts),
the likelihood of occurrence (in case of potential impacts).
Financial materiality is based on a combination of:
the risk’s or opportunity’s likelihood of occurrence, and
the potential magnitude of its financial effects.
The final step of our DMA process is the conclusion of the material topics. That contains the discussion and validation of the evaluation results within the project group and potentially reasonable modifications.
In total, we received six material topics whose adequate management is prioritized in our future business making:
MATERIAL TOPICS
Material from both perspectives:
Climate change and energy (E1)
Resource use and circular economy (E5)
Workers in value chain (S2)
Material from impact perspective:
Pollution (E2)
Material from financial perspective:
Own workforce - working conditions (S1.1)
Consumers and end-users (S4)
For a better understanding of the big picture, the concrete (negative) impacts and risks associated with the material sustainability matters are matched with its respective location across ME’s full value chain:
VALUE CHAIN
The outcomes of the DMA determine what data points must be disclosed when reporting according to the CSRD. However, since this directive will not be applicable to ME for the following years, the focus is not laid upon reporting when it comes to the DMA results at the moment. In order to structure the measures to adequately address the material IROs, a company-wide sustainability strategy consisting of the following four fields of action for the year 2025 has been derived from the six material matters:
FIELDS OF ACTION
For each field of action, several goals and subsequent measures were elaborated. Within the climate protection area, a decarbonization strategy including setting science-based targets is planned. Regarding the supply chain field of action, the goal is to integrate sustainability criteria to both the sourcing processes and into the supply chain management at Munich Electrification. Improving material selection and therefore product-related sustainability and also integrating particular criteria into component selection are goals as part of the sustainable product development field. When looking at ME’s employee attraction and retention, training to improve our leadership culture is set for this year.
Various departments like the Purchasing, Hardware Engineering, Industrialization or the People department with support from the Sustainability team contribute to the fulfillment of the tasks, as sustainability is considered to be an interdisciplinary collaborative topic at Munich Electrification. On a quarterly basis, the status quo of the projects and the progress towards achieving the goals and measures are being reviewed with the respective managers.
INSIGHTS INTO THE SUSTAINABILITY REPORT 2024
As the saying goes, what gets measured gets managed. The results of the DMA give clear guidance on where transparency, progress and accountability is expected by stakeholders.
Despite the postponement of the EU regulation on non-financial reporting - the “Omnibus proposal” -, we continue to report voluntarily taking disclosures and data points included in the ESRS and VSME as our major guidance. Some insights into ME’s ESG performance in 2024 are following.
The overall corporate carbon footprint for 2024 amounted to 7,961 tons CO2e. This is a decrease of around 12 % compared to 9,083 tons CO2e in the previous reporting period.
ENERGY AND GREENHOUSE GAS EMISSIONS
Analyzing emission intensities, helps to understand the changes in emissions in relation to changes in company growth. The overall employee intensity shrank by 47 % to 41 tons CO2e per employee (FTE) and the revenue intensity value also declined by 40 % to 173 tons CO2e per 1m revenue compared to 2023. Achieving substantial growth in both revenues and team size while maintaining a clear decoupling from GHG emissions represents a significant success for ME. For a deeper understanding of the corporate carbon footprint and also an example of a product carbon footprint, check out the sustainability report 2024.
Besides environmental information, the report also contains several social indicators regarding ME’s workforce. One outstanding value is the growth of the team of approximately 43% during 2024. Thus, ME continues to grow the team significantly in order to provide sufficient resources especially for the customer projects. Also, Munich Electrification employs a diverse workforce comprising individuals from 49 distinct nationalities. This rich multicultural composition fosters a vibrant and inclusive work environment, bringing together a wide array of perspectives, experiences, and skills. Several more indicators on diversity or employee satisfaction for example can be found in the report linked above.
The S of ESG not only includes the own workforce, but also workers in the value chain. Regarding this stakeholder group, we are aware of the risks associated with the electronics industry with its highly complex and globally distributed supply chain. Given these risks, we recognize the need for increased due diligence and responsibility in our procurement and supply chain management. Although we are a small and medium-sized enterprise (SME), we have voluntarily taken significant first steps to fulfill our due diligence obligations and enhance our supply chain transparency:
Strategic alignment and policy development
Execution of a risk assessment
Establishment of a grievance mechanism
Implementation of initial measures.
By taking these steps, we recognize that achieving a fully responsible and transparent supply chain is an ongoing challenge. We remain committed to continuously improving our approach, collaborating with stakeholders, and fostering a sustainable and ethical supply chain.
ALL IN ALL, EVEN AS REGULATORS EASE OFF THE COMPLIANCE BURDENS FOR COMPANIES OF OUR SIZE, MUNICH ELECTRIFICATION REFUSES TO COAST. WE WILL KEEP UP THE PACE - VOLUNTARILY RAISING THE BAR FOR SOCIAL AND ENVIRONMENTAL STEWARDSHIP BECAUSE IT IS THE RIGHT THING TO DO FOR PEOPLE, FOR THE PLANET, AND FOR THE LONG-TERM HEALTH OF OUR BUSINESS.
