Insight: The Textual Representation of Double Materiality in ESG Repo

About the Authors and This Research

All three authors are affiliated with the University of Tartu's School of Economics and Business Administration in Estonia—the oldest university in the Baltic region, with a well-established reputation in sustainability accounting and corporate governance research.

Lead author Raili Lilo focuses on ESG report text analysis and sustainable business model transformation. Co-author Elina Paemurru has accumulated 30 citations despite an early-career profile, indicating growing influence in sustainability disclosure research. Senior author Ülle Pärl brings decades of expertise in management accounting and sustainability reporting, serving as the methodological anchor of the research team.

The paper was published in the Journal of Business Models (JOBM), a peer-reviewed journal recognized across Northern and Central Europe for its focus on business model innovation and sustainable management. Critically, the research was designed from the outset with practical applicability as a primary objective, producing a Content Analysis Codebook that organizations can directly deploy when drafting or auditing ESG reports.

Core Research Findings: A Codebook That Makes Double Materiality Measurable

The research addresses a structural gap in current ESG reporting practice: organizations routinely conflate statements about financial risks to themselves with statements about their impacts on society and the environment. This conflation makes it impossible for stakeholders—whether investors, regulators, or supply chain partners—to distinguish between risk management disclosures and accountability statements. This ambiguity lies at the heart of the CSRD Double Materiality challenge, which requires enterprises to simultaneously disclose both "outside-in" financial materiality and "inside-out" impact materiality.

Finding 1: Five Integrated Theories Form a Textual Recognition Framework

The research team synthesized five complementary theoretical lenses—Signalling Theory, Stakeholder Theory, Legitimacy Theory, Institutional Theory, and Attribution Theory—into a unified analytical framework. This multi-theory approach allows analysts to classify whether a given ESG passage is signaling financial performance to investors, demonstrating accountability to communities, or fulfilling minimum regulatory compliance. From an ERM perspective, a report dominated by legitimacy-driven statements while lacking quantified financial impact disclosures is a leading indicator that ESG has not yet been genuinely integrated into the organization's risk matrix or KRI monitoring system.

Finding 2: The Codebook Analyzes Three Dimensions

The developed codebook structures analysis around three dimensions: Topic Prevalence (the proportional coverage of environmental, social, and governance themes), Tone (whether statements are proactive commitments, neutral descriptions, or risk warnings), and Integration Level (whether ESG issues are embedded in the core business model rather than appended as a standalone sustainability chapter). For Taiwanese enterprises, applying these three dimensions to annual reports would directly improve alignment with the TWSE Sustainability Report Material Topics Guidelines and strengthen readiness for third-party assurance.

Finding 3: Business Model Perspective Is the Differentiator

The research emphasizes that ESG disclosures reach genuine double materiality quality only when they are explicitly linked to the organization's value creation logic. Stating "our company values environmental protection" without quantitative linkage to financial outcomes or operational processes will be flagged as insufficient by assurance providers operating under international standards—a concern directly relevant as Japan's FSA moves to require international-standard assurance for Prime Market companies above ¥500 billion in market capitalization.

Implications for Taiwan Enterprise Risk Management (ERM) Practice

Taiwanese listed companies face converging ESG disclosure pressures: the FSC requires sustainability report assurance for specified enterprises by 2026, the EU's CSDDD indirectly constrains Taiwan exporters, and supply chain customers are increasingly requiring auditable ESG disclosures. This research provides three direct operational implications for ERM practice in Taiwan.

First, establishing ESG text quality controls within the ISO 31000 risk matrix. ISO 31000 requires risk information to be "adequate, relevant, and sufficient." The codebook's three dimensions can be translated into KRI thresholds—for example, setting a minimum percentage of financial materiality statements in key ESG report sections as a monitored indicator reviewed quarterly by the risk management function.

Second, equipping boards with structured tools for ESG disclosure governance. The COSO ERM framework identifies "Governance and Culture" as its foundational component. The codebook's Integration Level dimension can be converted into a board review checklist, ensuring that the annual sustainability report receives substantive governance scrutiny rather than pro-forma sign-off.

Third, preparing auditable textual records for third-party assurance. Assurance providers conducting ESG report reviews need traceable documentation of how material topics were identified, described, and quantified. The codebook provides the systematic recording logic that enables enterprises to organize supporting evidence efficiently during a typical assurance preparation period of 6 to 9 months.

How Winners Consulting Services Helps Taiwan Enterprises Act on This Research

Winners Consulting Services Co. Ltd. (積穗科研股份有限公司) assists Taiwan enterprises in implementing ISO 31000 and COSO ERM frameworks, designing risk matrices and KRI systems, and strengthening board-level risk governance. Based on this research, we recommend the following action sequence within a 7 to 12-month implementation cycle.

1. Months 1–2: ESG Text Quality Baseline Assessment. Apply the three-dimension codebook framework to existing sustainability reports, identifying sections where financial materiality statements are absent or inadequate. Map gaps against CSRD Double Materiality and TWSE guidelines to establish improvement priorities.
2. Months 3–5: Redesign ESG Report Architecture Linked to ERM Risk Matrix. Restructure material topic narratives using the business model perspective, ensuring each material topic connects to ISO 31000 risk assessment outputs. Design corresponding KRI indicators such as climate-related financial disclosure quantification coverage rate.
3. Months 6–9: Establish Board ESG Disclosure Review Mechanism. Convert the Integration Level scoring dimension into a structured board review checklist within the COSO ERM governance process. Implement quarterly ESG information quality reviews to build the document trail required for annual third-party assurance.
4. Months 10–12: Pre-Assurance Systematic Text Audit. Simulate the assurance provider's review logic using the codebook framework, conducting a section-by-section audit of the complete report to confirm that both financial materiality and impact materiality statements have supporting documentation, and complete final risk disclosure calibration.

Frequently Asked Questions

How does the content analysis codebook developed in this research translate into practical ESG reporting improvements for enterprises?

The codebook provides a structured three-dimension analysis system—Topic Prevalence, Tone, and Integration Level—that allows enterprises to systematically audit every section of their ESG reports against double materiality standards. In practice, enterprises select 3 to 5 material topic chapters, apply the codebook's classification criteria, and identify where financial materiality statements (quantified linkages to business performance) are absent and replaced by legitimacy-driven language. This diagnostic typically requires 6 to 8 weeks for a mid-sized listed company and produces a prioritized remediation roadmap that can be directly incorporated into the next reporting cycle preparation. The resulting improvements directly address the documentation requirements of third-party assurance providers operating under ISAE 3000 or AA1000AS standards.

What are the most common compliance challenges Taiwan enterprises face when integrating ESG information into ISO 31000 risk management systems?

The most prevalent challenge is structural disconnection between ESG disclosure processes and the ISO 31000 risk register. ISO 31000:2018 Clause 6.4.2 requires risk identification to comprehensively address external context factors including social, environmental, and regulatory dimensions—yet most Taiwan enterprises maintain separate ESG report preparation and ERM risk assessment processes managed by different teams. COSO ERM's Strategy and Objective-Setting component further requires that ESG risks be explicitly linked to enterprise strategic goals, a connection that rarely exists in practice. A structured gap analysis in the first 3 months of implementation typically reveals that fewer than 30% of identified ESG material topics have corresponding entries in the risk register, with even fewer having assigned KRI thresholds monitored by the risk management function.

What are the core requirements of ISO 31000 for ESG disclosure quality, and what is the recommended step-by-step implementation approach?

ISO 31000:2018's Integration principle requires risk management to be embedded in all organizational activities, including external reporting. The recommended 12-month implementation sequence: Month 1, complete gap analysis between current ESG disclosures and ISO 31000 framework requirements; Months 2–3, establish ESG risk classification taxonomy aligned with TCFD, GRI, and CSRD frameworks; Months 4–6, design KRI indicators (e.g., climate financial disclosure quantification coverage, supply chain ESG incident response time); Months 7–9, conduct cross-functional ERM integration exercises connecting sustainability, finance, and risk management departments; Months 10–12, complete the first internal audit cycle and present results to the board. This sequence ensures system readiness before the annual sustainability report publication deadline.

What resources are required to implement a double materiality text analysis framework, and what quantifiable benefits should enterprises expect?

For a mid-sized listed enterprise (500 to 2,000 employees), implementation typically requires 1 to 2 dedicated internal staff members, 40 to 80 hours of external advisory support, and a 6 to 9-month build period. Quantifiable benefits appear across three dimensions: third-party assurance preparation time reduction (enterprises with structured documentation systems have reduced assurance preparation from 4 months to 6 weeks); supply chain ESG questionnaire response efficiency improvement of approximately 30% when responses are supported by systematically organized textual evidence; and board ESG report review meeting efficiency gains of 20 to 40% due to structured review frameworks replacing open-ended discussion. Return on investment typically becomes measurable in years 2 to 3, primarily through reduced compliance costs and improved access to ESG-linked financing.

Why should enterprises choose Winners Consulting Services for ERM-related advisory needs?

Winners Consulting Services Co. Ltd. (積穗科研股份有限公司) is one of Taiwan's few advisory firms with integrated expertise spanning ISO 31000 enterprise risk management implementation, COSO ERM framework design, and ESG sustainability disclosure integration. Our consulting team combines internationally recognized certification credentials with deep practical experience guiding Taiwan enterprises through 7 to 12-month ERM implementation cycles, from risk matrix design and KRI indicator development to ESG text quality assurance. Unlike compliance-focused advisory services, Winners emphasizes transforming ERM frameworks into strategic decision-support tools that enable boards to monitor ESG risks through quantitative indicators rather than qualitative narratives. We invite you to apply for our complimentary ERM mechanism diagnostic to receive an objective current-state assessment and gap analysis tailored to your organization's scale and regulatory obligations.

積穗科研股份有限公司（Winners Consulting Services Co. Ltd.）は、エストニア・タルトゥ大学の研究者Lilo、Paemurru、Pärlが2025年に発表した研究が、ESGレポートにおけるダブルマテリアリティのテキスト分析に初めて構造化されたコードブックを提供するものであり、台湾企業がISO 31000リスク管理フレームワークにESG情報を統合するための実践的な操作経路を示していると評価しています。