Materiality and stakeholders

Introduction

To ensure that we focus on the most relevant topics, in line with the latest market trends and developments as discussed in the previous sub-chapter, we have assessed the material topics in consultation with our stakeholders. This chapter explains our approach in stakeholder engagement and how we apply the concept of double materiality.

The matrix below shows the outcome of the double materiality assessment in consultation with our stakeholders. In total, 11 topics were determined to be material.

For the stakeholder analysis and double materiality assessment, Numidia engaged the services of a consultancy company that specializes in sustainability reporting. The double materiality assessment is based on the requirements of the GRI standards and the European Sustainability Reporting Standards (ESRS).

The GRI standards defines material topics as “topics that represent the organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights.” The ESRS requires companies to report on sustainability matters based on the double materiality principle. According to the ESRS 2 reporting standard: “Double materiality has two dimensions: impact materiality and financial materiality. A sustainability matter meets the criterion of double materiality if it is material from the impact perspective or the financial perspective or both.”

impact materiality

“A sustainability matter is material from an impact perspective when it pertains to the undertaking’s material actual or potential, positive or negative impacts on people or the environment over the short, medium- or long-term. Impacts include those connected with the undertaking’s own operations and upstream and downstream value chain, including through its products and services, as well as through its business relationships. Business relationships include those in the undertaking’s upstream and downstream value chain and are not limited to direct contractual relationships.”

financial materiality

"A sustainability matter is material from a financial perspective if it triggers or could reasonably be expected to trigger material financial effects on the undertaking. This is the case when a sustainability matter generates risks or opportunities that have a material influence or could reasonably be expected to have a material influence, on the undertaking’s development, financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium- or longterm. Risks and opportunities may derive from past events or future events. The financial materiality of a sustainability matter is not constrained to matters that are within the control of the undertaking but includes information on material risks and opportunities attributable to business relationships beyond the scope of consolidation used in the preparation of financial statements.”

Source: EFRAG, July 2023

Methodology

Numidia applies a 4-step approach to double materiality:

define

The define’ stage starts by identifying the applicable (sector specific) standards and requirements within the context of the organization’s business model and activities. Determining the key stakeholders is based on understanding and overseeing the full value chain.

Numidia’s business model and value chain is explained in the chapter "Value creation model". Stakeholders have been identified based on their activities and relations in the value chain. We have divided stakeholders into two groups: direct stakeholders and indirect stakeholders.

The direct stakeholders are parties we engage with within the value chain. There is no direct contact with indirect stakeholders, but they are important for the dairy industry in the broader perspective and should therefore be taken into consideration.

stakeholder engagement strategy

Stakeholder groups differ in terms of number of people, their impact, and their relation. For example, there is a far greater number of customers than financial institutions. Engagement strategies are determined per stakeholder group for the specific purpose of the double materiality analysis. The goal is to ensure that the outcome reflects the view of each group as much as possible.

For the larger groups (e.g. Customers), carrying out a survey is considered the most suitable way of collecting a sample large enough to be representative of the whole group. We also conducted interviews with selected parties within the group membership. For the external stakeholder groups with a smaller number of people, we used the method of in-depth interviews.

Indirect stakeholders were not directly engaged, but their interests have been taken into account through direct stakeholders who are in a position to represent their views.

Next to the stakeholders, internal experts are involved as well as they have the most knowledge of Numidia and its value chain. In order to get the input of internal experts, we conducted in-depth expert sessions. The internal experts were carefully selected to reflect all aspects of Numidia’s Value chain and involve a sufficient level of seniority.

identify

The goal of this stage is to identify actual and potential (positive and negative) impacts, risks and opportunities.

This assessment is made through desk research on internal and external sources. The main sources/methods used are: the value chain model, long list, peer reviews, sector studies, audit report (Ecovadis/Sedex) media checks, and internal expert insights.

The results are consolidated into a “short list” of potential material impacts, risks and opportunities which are grouped into a total of 20 topics. This short list is finalized after the board of directors signs off on it. The short list can be found under "Short list of potential material topics" in the Other information section of this report.

assess

The goal of the assessment phase is to make a list of material topics from the short list. This is done by carrying out surveys and interviews with stakeholders, as well as conducting in-depth expert sessions, to get different views on potential material impacts, risks and opportunities.

The outcomes are consolidated, weighted, and calibrated. The qualitative input from internal experts is quantified by considering and weighting several factors: impact, scale/scope, likelihood, and irremediability. The (quantitative and qualitative) input from the external stakeholders is used to validate the outcome of the internal experts. The results are visualized in a double materiality matrix.

prioritize

The outcomes are calibrated in order to come to a material topic list. The calibration session is facilitated by the external consultancy company in cooperation with key internal experts. This session validates the consolidated outcome and determines the order in which the topics are ranked.

A threshold is also defined to separate the material from the non-material topics. The list of material topics is finalized by BoD approval. The final list, with reference to the ESRS topics, can be found under "Material topics" in the Other information section of this report.

Double materiality matrix

Based on the results of the double materiality assessment, the following Double Materiality matrix is created:

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Next steps

disclosure mapping

In order to determine the full scope of the reporting, material topics need to be mapped to the applicable ESRS and GRI disclosures. For the 2023 report, the focus is on the GRI standards.

The full ESRS mapping from topic to sub-topic, including disclosure requirements, is planned for 2024.

non-material topics

Some topics have been classified as non-material, while the impact on the industry is significant:

• Biodiversity

• Operational waste, water and pollution

• Water usage and efficiency in the value chain

• Animal health & welfare

These are classified as non-material due to various reasons, despite them having an undeniable impact on the total supply chain:

• Most of these topics are high on the agenda in Europe, New Zealand and at certain multinationals, but not in other regions or customer groups. As Numidia is operating on a global scale the financial impact is limited as there are sufficient sourcing options. Despite the environmental pressure in certain regions, global production is not decreasing. 

• Numidia has no direct control over these topics, not being a producer itself. The indirect impact Numidia can make through its suppliers is also limited, as our market share and procurement volume does not give us significant bargaining power. 

• Global production is not so much demand driven, but more supply driven on the short to mid-term. Producers will process all the milk available and have sufficient possibilities to sell. Numidia's demand and purchase volume has no impact on the volumes being produced. A lower demand from Numidia would not result in lower production volumes.  

However, we expect this to change in the long-term as the requirements from customers and legislators are expected to change over time. Driven by increasing (end) customer demand for sustainable products, Numidia can translate and embed these customer requirements into its procurement policy. This fits with Numidia's ambition to increase its impact, as we recognize the importance of these topics on an industry level.

continuous stakeholder engagement

The double materiality assessment is subject to change because Numidia’s supply chain and (industry) requirements are continuously developing. That is why the outcomes need to be periodically validated. The goal is to embed this process into the exiting stakeholder engagement structures: e.g. the Great-Place-To-Work surveys, the Net Promoter Score surveys, supplier audits, Board of Directors meetings, etc.