CSRD reporters lack targets for half of material topics, but that may not be a bad thing

EFRAG's second State of Play report on CSRD disclosures, finds that companies are on average setting targets for approximately half of their identified material sustainability topics — leaving the remainder without measurable management commitments. The finding, at its surface, points to a structural divergence between materiality assessment — identifying what matters to the business — and management response — doing something measurable about it.

Perigon Take

This finding needs to be put in context with two additional trends: firms are on average reducing the number of topics they disclose as material in their second year of reporting, and the latest European Omnibus regulations have introduced changes to the materiality process itself - the report showed that 82% of companies updated their Double Materiality Assessment between year 1 and 2. The reporting and management landscape is still actively settling.

Before drawing sharp conclusions, the scale of what CSRD demands deserves acknowledgement (the report also finds taht sustainability disclosures now account for 34% of the annual report length). For most firms, particularly in its first incarnation, CSRD represented a substantial step-change in reporting obligations. Some lag between identifying material topics and committing to targets is to be expected — and arguably preferable to rushing into poorly evidenced commitments, a mistake many organisations made with climate targets only a few years ago.

Materiality assessment, when conducted rigorously, should absolutely form the foundation for where a firm focuses its metrics and management attention. But targets are not always the right tool, particularly in early years when data availability is limited and understanding of the underlying trends is still developing. Monitoring via KPIs, KRIs, or early warning indicators (EWIs) os a sound and defensible approach while that understanding matures.

If stakeholders are pressing your organisation for targets across every material topic, that pressure is worth weighing carefully — but it is not in itself a reason to act before the strategic and evidential basis is in place. The more important question for boards is whether materiality assessment is genuinely embedded as a strategic process, rather than treated as a reporting compliance exercise. When it is, the gap between identification and management response tends to close naturally, over a time horizon that makes sense from commercial and risk perspectives.

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