How it works today at many companies
Sustainability reporting rarely starts with software. It starts with a spreadsheet. Controlling creates "ESG_KPIs_2025.xlsx" with tabs for energy, emissions, workforce and waste. Each department enters its figures: fleet management by email, facility management as a photo of the meter readings, purchasing as an export from the ERP system. Who delivered which figure when is recorded in the shared "Sustainability" mailbox, not in the file. If a value is missing, last year's is copied over and highlighted.
The carbon footprint sits next to it in its own workbook, "CO2_Balance_2025_final_v3.xlsx". The emission factors come from a list someone downloaded two years ago; nobody knows exactly which edition it was. Scope 1 and 2 are complete, Scope 3 covers business travel and commuting. Workforce data also arrives as a PDF from HR, with a reporting date that differs from the fiscal year.
The materiality assessment as a workshop
The double materiality assessment was a half-day workshop. Management, purchasing, HR and production wrote topics on cards and pinned them to a wall. The result is in "Materiality_Matrix_Workshop.pptx": a chart with two axes and some twenty dots. Why "water" sits just below the threshold and "own workforce" just above it is not written on any slide. The scores came from the group's impression, not from data, and who gave which score is not documented. A year later, nobody can repeat the weighting.
Choosing software through demos
At some point the decision is made to introduce ESG reporting software. Selection then often runs through demos and a list of features that seemed important somewhere. Whether the company must report under the ESRS, needs a voluntary report for its bank or mainly a carbon footprint for customer requests is not clarified beforehand. Often nobody asks whether custom KPIs can be added and whether the source of each figure is recorded. What gets assessed is the interface, not the requirements.
The moment it becomes apparent
The trigger usually comes from outside. While preparing the assurance engagement, the auditor asks how the materiality assessment came about: which impacts, risks and opportunities were considered, who assessed them and on what data. Or the bank asks for sustainability information during a loan review, and in the same month a major customer asks about the emissions of the products it buys.
Then it turns out that the figures exist, but their origin does not. The sentence "Someone in controlling put that together back then" is not audit evidence. The matrix on the slide cannot be explained because the reasons were never written down, and software chosen on the strength of a demo does not answer that question either.
The analysis
Five Gaps Between Reporting Need, Data and Software
They arise when software selection, data collection and the materiality assessment are planned independently of each other.
View the double materiality assessment in preecoCriteria without a reporting need
If you choose the software before it is clear whether an ESRS report, a voluntary report or a carbon footprint is needed, you assess features without a yardstick. After the rollout, exactly the disclosures the report requires are missing.
A matrix without justification
A materiality matrix from a workshop shows results, but not how they came about. During the assurance engagement you cannot then show why a topic counts as not material.
Figures without an origin
Values are delivered by email and copied into a spreadsheet. Whether a figure was measured, estimated or carried over from last year can no longer be seen later, and every follow-up question starts from scratch.
A carbon footprint without a factor edition
Emission factors from a downloaded list carry no edition. When the factor edition changes, nobody can trace which total was calculated on which basis.
KPIs that do not grow with you
A report that is voluntary today may become mandatory later or cover new topics. Fixed spreadsheet templates only handle additional disclosures with rework, and prior-year values are easily lost along the way.
The target process in six steps
The double materiality assessment decides what a company reports on under the ESRS, and therefore which data a software tool has to collect. ESRS 1 sets out the principle: a sustainability matter is material if it is material from the impact perspective, the financial perspective or both. EFRAG's implementation guidance on the materiality assessment (IG 1) structures the process in four phases: understanding the context, identifying impacts, risks and opportunities (IROs), assessing them and determining the material ones, and reporting. The following six steps put this into practice.
1. Clarify the context. Business model, sites, products, value chain and stakeholders are described before anything is assessed. This includes the reporting boundary: which entities belong in the sustainability statement? In preeco | sustainability each reporting period has exactly one CSRD reporting boundary, and stakeholder groups sit in a shared register.
2. Set and justify the threshold. Before scores are given, it is fixed when a matter counts as material, separately for impacts and financial effects. The threshold is justified in writing; in preeco the default of 12.5 on a scale of 0 to 25 applies until it is set.
3. Select topics and collect IROs. The starting point is the ten topical standards E1 to E5, S1 to S4 and G1 with their sub-topics. For each topic, actual and potential impacts, risks and opportunities are recorded. The AI in preeco suggests up to ten IROs from data already recorded, each with its source; only what you confirm is adopted.
4. Assess both sides. The impact side follows from scale, scope and irremediability, and for potential impacts also from likelihood. The financial side follows from magnitude and likelihood. Each side is scored or decided with a written justification; stakeholder engagements are attached directly to the IRO.
5. Decide the sub-topics. A sub-topic is material as soon as one of its IROs is material. Sub-topics that clearly do not apply are rated not material only with a justification. The report later needs this justification to explain the omission under ESRS 2 IRO-2.
6. Review, activate, report. A completeness check lists what is still missing. Activation locks the assessments, and the disclosures of the material sub-topics are switched on in the data collection modules and report generators. Every change is in the activity log, with person, time and before and after values.
Choosing ESG reporting software: criteria from the reporting need
Selection starts with the report you need. A voluntary report under EFRAG's VSME standard for small and medium-sized companies does not require a double materiality assessment. A carbon footprint for customer requests usually needs Scope 1 to 3 with traceable emission factors. A report under the ESRS presupposes the materiality assessment. This gives the criteria: standard covered, company size, data sources, the ability to add KPIs and documented data collection. preeco | sustainability is designed for the CSRD and ESRS, without a dedicated VSME report generator; energy and emission records carry data quality and verification status.
Before and after compared directly
| Criterion | Before | After |
|---|---|---|
| Software selection | Based on the demo | Based on reporting standard and data needs |
| Materiality | Matrix on a slide | IROs with both sides assessed and justified |
| Threshold | Not defined | Set and justified per reporting period |
| Data origin | In the mailbox | Data quality and verification status per record |
| Emission factors | List without an edition | Versioned factor editions per record |
| Non-material topics | Silently left out | Justified omission in the report |
| Collaboration | Annual workshop | Stakeholder engagements on the IRO |
| Evidence | "Someone put that together" | Activity log with before and after values |
In practice
What this looks like in preeco | sustainability
The three building blocks that connect the materiality assessment, data and report.
Double materiality assessment
IROs for all ten topical standards, both sides assessed against a justified threshold, stakeholder engagements on the IRO and an activation that switches on the disclosures of the material sub-topics.
Data request on your emissions
Kernbach Automotive Group SE · FY 2025
Carbon footprint across Scope 1 to 3
Scope 1, Scope 2 location- and market-based and all 15 Scope 3 categories, versioned factor editions per record, data quality and verification status, and supplier data through a portal.
Disclosure reports under the ESRS
One report generator per topical standard, data tables taken directly from the data collection modules, justified omissions for non-material sub-topics and a checksum that detects later changes to finalized reports.
What the switch means in practice
Existing work is not lost. The topics from the workshop are a useful starting point for the IRO list, and the KPI spreadsheet shows which data is already collected in-house. The previous carbon footprint also stays useful, because its activity data is the basis for the records in the new reporting period. What is new is that every assessment gets a justification and every figure an origin.
Before choosing software, clarify which report will be needed over the next two to three years and who supplies which data. Decide who owns the materiality assessment and which departments assess impacts and financial effects. The sustainability team moderates and reviews instead of collecting every figure itself.
Start with the topics where materiality is likely, such as climate change and own workforce. Each topic can be activated individually in preeco | sustainability; the others stay in draft until their data is available.
Three mistakes that make the materiality assessment vulnerable
Building the matrix before the data. If you place dots on a chart first and look for the reasons later, you cannot explain the result. Describe impacts, risks and opportunities first, then assess them.
Dropping non-material topics without a reason. The report has to explain why a topic is missing. A justification written only during the audit rarely convinces.
Choosing software by feature lists. A long list says nothing about whether the disclosures of your report are covered. In the demo, use your own data to check how a KPI is produced and where its origin is recorded.
How to tell it is time
- Your materiality matrix is a slide without written justifications.
- You cannot say who supplied a KPI, when and from which source.
- The emission factors in your carbon footprint have no edition or source.
- Your bank, customers or auditor ask for sustainability information you first have to gather.
- Software selection is coming up, but the reporting need has not been clarified.
FAQ
Frequently Asked Questions About ESG Reporting Software and Materiality
The report you have to or want to produce: an ESRS report, a voluntary VSME report or a carbon footprint. This gives the criteria: standard covered, company size and group structure, data sources and interfaces, the ability to add KPIs, and documentation of who recorded which figure, when and from which source.
Not necessarily. EFRAG's VSME standard is aimed at non-listed small and medium-sized companies and consists of a basic module and a comprehensive module. For a small number of KPIs, a structured template can be enough. preeco | sustainability is designed for reporting under the CSRD and ESRS and does not include a dedicated VSME report generator.
Software for a carbon footprint should cover Scope 1, Scope 2 location- and market-based and the relevant Scope 3 categories, and record which emission factor each value was calculated with. In preeco | sustainability every record keeps the factor edition it was calculated with, and the climate report under ESRS E1 takes the values directly from the emission records.
Clarify the context and reporting boundary, set the materiality threshold, collect impacts, risks and opportunities per topic, assess both sides, decide the sub-topics and complete the assessment after a completeness check. The framework is set by ESRS 1 and EFRAG's implementation guidance IG 1 on the materiality assessment.
For each IRO, record its source, who assessed it and with what justification. Stakeholder engagements belong directly with the matter concerned. In preeco | sustainability, AI suggestions name the records they come from, and the activity log records every change with person, time and before and after values.
Walk through your materiality assessment together
Bring your current matrix, the KPI spreadsheet or your bank's requirements. In 30 minutes we show how preeco | sustainability turns them into a traceable assessment.