Double Materiality Assessment
for Technology

Double materiality assessment for Technology

Technology companies entering the CSRD reporting population face a materiality profile that depends heavily on whether they are software-only or have hardware in the value chain. A pure SaaS provider's environmental footprint centres on data centre energy consumption and the embodied carbon of cloud infrastructure. A hardware manufacturer or electronics retailer inherits the full mining-to-disposal chain with its conflict minerals, hazardous waste, and factory labour conditions. The double materiality assessment under ESRS 1.20-33 must reflect this distinction, not apply a generic "tech sector" template.

E1 Climate change is material for nearly all technology companies. Data centres consumed an estimated 460 TWh of electricity globally in 2024 (per the IEA's Electricity 2024 report), and that figure is climbing with AI workloads. Even companies that outsource to hyperscale cloud providers bear Scope 3 category 1 exposure for purchased cloud services. On financial materiality, energy price volatility and carbon pricing mechanisms (EU ETS for data centres in scope) create direct cost exposure. E5 Resource use and circular economy applies to companies producing hardware, managing electronic waste, or consuming significant quantities of rare earth minerals. The EU's proposed Ecodesign for Sustainable Products Regulation will impose circular economy obligations on electronics manufacturers. S1 Own workforce is material across the sector, but the specific sub-topics differ from manufacturing. Technology companies face materiality on working time (crunch culture), diversity and inclusion metrics, and adequate wages for contractor workforces. S4 Consumers and end-users is where technology diverges most from other sectors. Algorithmic bias, data privacy (GDPR enforcement actions totalled over EUR 2.1 billion in fines between 2018 and 2024), digital addiction in minors, and content moderation failures all fall under S4's impact materiality scope. G1 Business conduct covers anti-competitive practices, lobbying transparency, and tax practices, all areas of active regulatory scrutiny for large technology firms.

Assurance providers reviewing technology company assessments flag two recurring issues. First, entities exclude E2 Pollution and E3 Water without adequate justification. Data centres in water-stressed locations use significant volumes for cooling (Google reported 5.6 billion gallons of water use in 2022 across its facilities). Dismissing E3 without site-by-site analysis is a gap. Second, entities treat S4 as immaterial because they are not consumer-facing, ignoring that business customers' employees and their data subjects qualify as end-users under ESRS S4. A B2B SaaS company processing personal data for its clients has S4 exposure through those data subjects.

Technology companies should segment their assessment by business line. For each line, map the value chain and identify the relevant ESRS topics. Software businesses focus on E1 (energy), S1 (workforce), S4 (data ethics, privacy), and G1. Hardware businesses add E2 (hazardous substances in manufacturing), E5 (e-waste, conflict minerals), and S2 (factory labour conditions in the supply chain). Use energy consumption data from cloud provider sustainability reports, Scope 3 estimates from spend-based models, and privacy incident logs as quantitative inputs. For S4, document the volume of personal data processed, the number of data subjects affected, and any regulatory actions or complaints received.