# Stakeholder and ESG Concept Card: [Company, case or course session]

> A concept card for stakeholder analysis and ESG reporting as they are taught in the ethics, strategy and
> sustainability parts of a leading MBA core: who counts as a stakeholder and how much attention each one gets
> (stakeholder salience), what "material" means in financial reporting and in impact reporting (single and double
> materiality), how the EU and ISSB reporting regimes stood in October 2026, and how a greenhouse gas inventory is built
> from scope 1, 2 and 3 activity data. It is for MBA students preparing a case, an ethics or strategy class, or a
> sustainability elective, and for managers who need to read a sustainability statement critically.
> Source basis: Freeman (1984) and Mitchell, Agle and Wood (1997) for stakeholder theory and salience; IFRS S1 and
> IFRS S2 (ISSB, June 2023); the CSRD and ESRS as amended in 2026; the GHG Protocol Corporate Standard and Scope 3
> Standard, written in original words. Regulatory facts are dated; check the official text before you rely on them.
> The companies, numbers and emission factors are fictional or illustrative and were computed in Python.
> Replace every [bracketed] value and every row marked *Example*.
> This is a learning aid, not legal, audit or reporting advice.

<!--
Guidance: How to use this template
- Read "When to use it" and "The idea in plain language" first. You should be able to explain, in one minute, the
  difference between "material to investors" and "material to people and the environment".
- Rebuild Worked example A (Northfield Outdoor Co.) in a spreadsheet with the cell formulas shown. The point is to see
  why scope 3 dominates a retailer's footprint and why the scope 2 method changes the answer.
- Fill every [ ] in Worked example B, then solve Exercise C before you open the answer key.
- The reporting rules moved fast in 2025 and 2026. Every rule in Section "Reporting regimes as of October 2026" is a
  dated fact: re-check EUR-Lex, the European Commission and ifrs.org before you cite it in a paper or at work.
- Answer the self-test from memory, log misses in mba/mba-error-log and repeat after two days and a week.
- Related templates: mba/mba-ethics-guide, mba/mba-strategy-guide, mba/mba-leadership-guide,
  mba/mba-business-communication-card, mba/mba-ai-risk-governance-card, mba/mba-value-chain-card,
  mba/mba-five-forces-card, mba/mba-npv-irr-card, mba/mba-glossary, mba/mba-formula-sheet, mba/mba-error-log,
  finance/issb-sustainability-disclosure, finance/sustainability-double-materiality-assessment,
  project/stakeholder-register, compliance/whistleblowing-policy.
-->

## Document control

<!-- Guidance: Record the course, case or company this card supports and who reviewed your numbers. Update the "Rules checked on" date every time you re-verify the reporting regimes. -->

| Field | Value |
|---|---|
| Course or project | [Business ethics core / sustainability elective / case name] |
| Learner or analyst | [Your name] |
| Business question | [Example: which sustainability matters must Northfield report, and where is its carbon footprint?] |
| Company or setting | [Northfield Outdoor Co. (fictional) / your company] |
| Reporting regimes in scope | [CSRD and ESRS / ISSB-based local standard / voluntary] |
| Rules checked on | YYYY-MM-DD (this card: 2026-10-28) |
| Reviewed by | [Study partner, professor or sustainability lead] |
| Version | [0.1] |
| Last updated | YYYY-MM-DD |

## Contents

- [When to use it](#when-to-use-it)
- [The idea in plain language](#the-idea-in-plain-language)
- [Formulas and notation](#formulas-and-notation)
- [Reporting regimes as of October 2026](#reporting-regimes-as-of-october-2026)
- [Assumptions and limits](#assumptions-and-limits)
- [How managers use it](#how-managers-use-it)
- [Worked example A (fully solved)](#worked-example-a-fully-solved-northfield-outdoor-co)
- [Worked example B (half solved)](#worked-example-b-half-solved-corvane-robotics-footprint)
- [Exercise C (unsolved)](#exercise-c-unsolved-tallow-creek-medical-center)
- [Connections to other cards](#connections-to-other-cards)
- [Common mistakes and misconceptions](#common-mistakes-and-misconceptions)
- [Self-test questions](#self-test-questions)
- [My notes and next steps](#my-notes-and-next-steps)
- [Sources and further reading](#sources-and-further-reading)
- [Answer key](#answer-key)

## When to use it

<!-- Guidance: Start from the decision. Stakeholder salience answers "whose claims get management attention now"; materiality answers "what must be reported or managed"; the GHG inventory answers "where are the emissions". Pick the tool that fits the question. -->

**One-sentence rule:** use stakeholder salience to decide whose claims need attention first, materiality to decide
which sustainability matters a company must manage and disclose, and a GHG inventory to locate the emissions that a
climate target or disclosure has to cover.

| Use when | Do not use when |
|---|---|
| A case asks who is affected by a decision and whose claims management must answer | You need a legal opinion on whether a company is in scope of a law (ask counsel) |
| A board or investor asks why a sustainability topic is or is not in the annual report | The question is purely about short-term profit maximisation with no external effects (use the finance cards) |
| You prepare a strategy, market entry or supplier decision with environmental or social effects | You want to rank companies by a single ESG rating score (ratings use different methods; see mistakes) |
| You must estimate a company's carbon footprint or test a net-zero claim | You need an assured inventory for a filing (that needs the full GHG Protocol process and assurance) |
| An ethics discussion turns to "shareholders versus stakeholders" | The issue is a single individual's ethical choice (use mba/mba-ethics-guide decision frameworks) |

In class this card usually supports the second half of a case discussion: after the economics are clear, the
instructor asks who else is affected, what the company is obliged to disclose, and whether the stated climate goal is
credible given where the emissions sit.

## The idea in plain language

<!-- Guidance: Read once slowly. Then close the card and explain salience, double materiality and the three scopes to someone outside the course in five sentences. -->

**Stakeholders.** Freeman (1984) defined a stakeholder as any group or individual who can affect or is affected by the
achievement of the firm's objectives. That definition is wide on purpose: it covers investors, employees, customers,
suppliers, lenders, communities, regulators, activists and the natural environment represented through others. The
managerial problem is that a wide definition gives no priorities. Mitchell, Agle and Wood (1997) answered with
**salience**: the degree to which managers give priority to competing claims. Salience rises with three attributes.
**Power** is the ability to impose one's will (through money, force, law or reputation). **Legitimacy** is the
perception that the claim is proper or appropriate within accepted norms. **Urgency** is the degree to which the claim
is time-sensitive and critical to the claimant. A stakeholder with one attribute is latent, with two is expectant and
with all three is definitive. Attributes change over time: a community without power can gain it through a regulator or
a media campaign.

**Shareholder and stakeholder views.** Friedman (1970) argued in a widely read *New York Times Magazine* essay that the
social responsibility of business is to increase its profits within the rules of the game, and that managers who spend
shareholders' money on social goals are taxing them without a mandate. Stakeholder theory holds that firms create value
through relationships with all stakeholders and that managers owe duties beyond shareholders (Freeman 1984; Donaldson and
Preston 1995). In practice the debate is narrower than it sounds: many stakeholder investments are justified on
long-run shareholder value grounds (enlightened shareholder value), and the open questions are about trade-offs that
do not pay back.

**Materiality.** Information is "material" when leaving it out or getting it wrong would change a decision. The
question is: whose decision? Under **financial materiality** (the ISSB view in IFRS S1), the user is the investor or
lender, and a sustainability matter is material when it could reasonably be expected to affect the company's cash
flows, access to finance or cost of capital. Under **impact materiality** (part of the EU ESRS view), a matter is
material when the company has, or could have, a significant effect on people or the environment, whatever the effect on
its own finances. **Double materiality** means a matter is reported when it passes either test. A matter often starts
as an impact (the inside-out view; outside-in financial effects come later): pollution first harms a river, then a fine, a lawsuit or a lost licence
turns it into a financial risk. The European Commission used the term "double materiality" in its 2019 non-binding
guidelines on climate reporting, and the CSRD made it a legal basis for reporting.

**Greenhouse gas scopes.** The GHG Protocol Corporate Standard splits a company's emissions into three scopes.
**Scope 1** is direct emissions from sources the company owns or controls (fuel burned in its boilers and trucks,
refrigerant leaks). **Scope 2** is indirect emissions from the generation of electricity, steam, heat or cooling the
company buys. **Scope 3** is all other indirect emissions in the value chain, split by the Scope 3 Standard into 15
categories (8 upstream, such as purchased goods and transport, and 7 downstream, such as use of sold products). For a
retailer or a brand, scope 3 is usually by far the largest part, which is why a target that covers only scopes 1 and 2
can look ambitious and change little.

## Formulas and notation

<!-- Guidance: The emission formula is simple; the work is in the activity data and the factors. The materiality scoring is a common practice convention, not a formula set by any standard: always state your scales and threshold. -->

Emissions from one activity are activity data times an emission factor, and the inventory is the sum:

$$
E_i = A_i \times EF_i, \qquad E_{\text{scope } s} = \sum_{i \in s} E_i, \qquad E_{\text{total}} = E_1 + E_2 + E_3
$$

Scope 2 is reported in two ways (GHG Protocol Scope 2 Guidance, 2015). Location-based uses the average grid factor;
market-based uses the factors of the contracts the company holds, with a residual mix factor for the rest:

$$
E_2^{\text{loc}} = A_{\text{elec}} \times EF_{\text{grid}}, \qquad
E_2^{\text{mkt}} = \sum_k A_k \times EF_k^{\text{contract}} + A_{\text{residual}} \times EF_{\text{residual}}
$$

Spend-based scope 3 estimates multiply spend by an environmentally extended input-output factor:

$$
E_{3,\text{cat 1}} \approx \text{Spend} \times EF_{\text{spend}} \quad (\text{tCO}_2\text{e} = \text{USD} \times \text{kgCO}_2\text{e per USD} / 1000)
$$

Emission intensity per unit of revenue:

$$
I = \frac{E}{R} \quad (\text{tCO}_2\text{e per USD million})
$$

A common convention for scoring double materiality (choose and disclose your own scales):

$$
S_{\text{sev}} = \frac{\text{scale} + \text{scope} + \text{irremediability}}{3}, \qquad
M_{\text{impact}} = S_{\text{sev}} \times L_{\text{impact}}, \qquad
M_{\text{fin}} = \text{magnitude} \times L_{\text{fin}}
$$

$$
\text{Material if } M_{\text{impact}} \ge \tau \ \text{ or } \ M_{\text{fin}} \ge \tau
$$

| Symbol | Meaning | Unit |
|---|---|---|
| $A_i$ | Activity data for source i (fuel burned, kWh bought, spend, tonne-km) | kWh, litre, kg, USD, tonne-km |
| $EF_i$ | Emission factor for that activity | kgCO2e per unit |
| $E_i$, $E_s$ | Emissions of one source, of one scope | tCO2e |
| $EF_{\text{grid}}$, $EF_{\text{residual}}$ | Average grid factor, residual mix factor | kgCO2e per kWh |
| $R$ | Revenue | USD million |
| $I$ | Emission intensity | tCO2e per USD million |
| scale, scope, irremediability | Severity dimensions of a negative impact (how grave, how widespread, how hard to reverse) | 1 to 5 |
| $L_{\text{impact}}$, $L_{\text{fin}}$ | Likelihood of the impact, of the financial effect | 1 to 5 |
| magnitude | Size of the potential financial effect | 1 to 5 |
| $\tau$ | Materiality threshold set and disclosed by the company | score, this card uses 10 of 25 |
| P, L, U | Power, legitimacy, urgency (salience attributes) | present (1) or absent (0) |

Salience classes from Mitchell, Agle and Wood (1997), with P, L, U present (1) or absent (0):

| P | L | U | Class | Group | Typical management stance |
|---|---|---|---|---|---|
| 1 | 0 | 0 | Dormant | Latent | Monitor; power could be used if urgency appears |
| 0 | 1 | 0 | Discretionary | Latent | Philanthropy and voluntary engagement |
| 0 | 0 | 1 | Demanding | Latent | Listen, do not let noise set the agenda |
| 1 | 1 | 0 | Dominant | Expectant | Formal channels (board, investor relations, works council) |
| 1 | 0 | 1 | Dangerous | Expectant | Protect people and assets, seek legitimate channels |
| 0 | 1 | 1 | Dependent | Expectant | Needs an advocate with power (regulator, union, NGO, management itself) |
| 1 | 1 | 1 | Definitive | Definitive | Immediate priority |

```mermaid
flowchart TD
  A["Sustainability matter on the long list"] --> B{"Actual or potential impact on people or environment?"}
  B -->|"Yes"| C["Score severity: scale, scope, irremediability"]
  C --> D{"Potential impact?"}
  D -->|"Yes"| E["Multiply severity by likelihood"]
  D -->|"No, actual"| F["Use severity alone"]
  B -->|"No"| G["Impact materiality: not met"]
  E --> H{"Impact score at or above threshold?"}
  F --> H
  A --> I{"Risk or opportunity for cash flows, finance access or cost of capital?"}
  I -->|"Yes"| J["Score magnitude times likelihood"]
  I -->|"No"| K["Financial materiality: not met"]
  J --> L{"Financial score at or above threshold?"}
  H -->|"Yes"| M["Material: report and manage"]
  L -->|"Yes"| M
  H -->|"No"| N["Document the reasoning, revisit next year"]
  L -->|"No"| N
  G --> N
  K --> N
```

## Reporting regimes as of October 2026

<!-- Guidance: These are dated facts, not fixed guidance. Re-check each row on the official page before you rely on it, and write the date you checked in Document control. Pitfall: quoting the 2023 CSRD scope, which no longer applies after Omnibus I. -->

Register U9 of the library's update register covers this section. As of October 2026 (checked 2026-10-28):

| Item | Dated fact (check before you rely on it) | Official source |
|---|---|---|
| CSRD scope | Directive (EU) 2026/470 (Omnibus I) amended the CSRD and narrowed its scope to undertakings and groups with more than 1,000 employees on average and more than EUR 450 million net turnover, for financial years beginning on or after 1 January 2027 for EU undertakings. Third-country groups have their own EU turnover test and a later start. First-wave reporters that fall below the new thresholds may be exempted for financial years 2025 and 2026 where their Member State uses that option. Member States transpose the directive into national law. | EUR-Lex, Directive (EU) 2026/470; national transposition law |
| Earlier deferral | The "stop-the-clock" directive of 14 April 2025 postponed reporting for companies due to report first for financial years 2025 or 2026. | European Commission, corporate sustainability reporting page |
| ESRS | On 3 July 2026 the Commission adopted two delegated acts: one amending Delegated Regulation (EU) 2023/2772 to simplify the ESRS, and one setting a standard for voluntary use by undertakings protected by the value-chain cap. Double materiality stays the basis of the assessment. Check the published regulation for the first year of mandatory use and the transition options. | finance.ec.europa.eu; EUR-Lex |
| ISSB | IFRS S1 (general requirements) and IFRS S2 (climate-related disclosures) were issued in June 2023, effective for annual periods beginning on or after 1 January 2024 where a jurisdiction requires them. They use financial materiality only. | ifrs.org |
| ISSB adoption | Use depends on each jurisdiction: as of mid-2026 secondary sources counted about 35 jurisdictions adopting (S&P Global, July 2026), and the IFRS Foundation reported in early 2026 more than 40 that had decided to use the standards or were taking steps; most adopt with modifications or phase-ins. | ifrs.org jurisdictional profiles |
| GHG Protocol | Corporate Standard (revised edition 2004), Scope 2 Guidance (2015), Corporate Value Chain (Scope 3) Standard (2011). Check ghgprotocol.org for any revised edition before a filing. | ghgprotocol.org |

What follows from the dates: a company can be outside the CSRD after 2027 and still face ESRS-style data requests
from in-scope customers (the amended directive caps what can be demanded from smaller value-chain partners), ISSB-based
rules in another listing market, and investor questionnaires. For a manager the practical question is rarely "are we in
scope?" alone; it is "which users need which information, under which standard, from when?". For the full disclosure
work, use finance/issb-sustainability-disclosure (ISSB) and finance/sustainability-double-materiality-assessment (ESRS).

## Assumptions and limits

<!-- Guidance: Name the assumption that drives your answer. In a GHG example it is almost always the scope 3 factor; in a materiality example it is the threshold. -->

1. **Salience is perception.** Mitchell, Agle and Wood describe what managers pay attention to, not what is morally
   owed. A dependent stakeholder (legitimate and urgent, no power) may deserve more than it gets. Salience is a
   descriptive and diagnostic tool; use the ethics frameworks in mba/mba-ethics-guide for the normative question.
2. **Binary attributes hide degree.** Real power and legitimacy are continuous and contested. Score them 0 to 3 when
   the class needs nuance, and say who judged them.
3. **Materiality scores are judgements.** The 1 to 5 scales and the threshold of 10 used here are a common convention
   in practice, not rules from IFRS S1 or ESRS. The standards require a process and its disclosure, not a formula. A
   different threshold changes the list.
4. **Severity before likelihood for human rights.** Under the ESRS approach, for potential negative human rights
   impacts severity takes precedence over likelihood, so a low-probability but grave impact can be material. A pure
   product of the two can hide it.
5. **Emission factors are uncertain.** Spend-based scope 3 factors average over whole industries and price levels; a
   10% price rise raises "emissions" by 10% with no physical change. Supplier-specific data are better when available.
6. **Organisational boundary.** The inventory depends on the consolidation approach (equity share, financial control
   or operational control). Two analysts using different approaches get different scope 1 and 2 totals.
7. **Double counting across companies is expected.** One company's scope 1 is another's scope 3. Totals cannot be
   added across a supply chain to get an economy-wide figure.
8. **The factors in this card are illustrative.** They are rounded, plausible values for teaching, not official
   factors. Use the factors your reporting regime or data provider specifies.

## How managers use it

<!-- Guidance: Each use below is a decision. When you write a case answer, name which of these decisions your analysis supports. -->

| Decision | How the tools help | Watch out for |
|---|---|---|
| Prioritising engagement | Salience mapping shows which groups need a formal channel now and which need monitoring | Ignoring dependent groups until an NGO or regulator gives them power |
| Setting the reporting scope | Double materiality decides which topics enter the sustainability statement | A list shaped by what is easy to report rather than by impact |
| Strategy and capital allocation | Financially material matters feed risk registers, scenario analysis and NPV assumptions | Treating carbon cost as zero in a project NPV (link mba/mba-npv-irr-card) |
| Climate targets | The inventory shows where reductions are possible; scope 3 hot spots point to suppliers and products | Targets on scopes 1 and 2 only, for a company whose scope 3 is 97% of the total |
| Supplier management | Category 1 hot spots identify suppliers for data requests and joint reduction work | Asking small suppliers for more than the law or their capacity allows |
| Board oversight | Material topics and salient stakeholders define the board's sustainability agenda | A committee with no link to strategy or pay |
| Investor dialogue | ISSB-style disclosures answer the questions investors ask | Promising "net zero" without interim targets or a credible plan |

## Worked example A (fully solved): Northfield Outdoor Co.

<!-- Guidance: Rebuild the three tables in a spreadsheet. Put activity data in column C, factors in column D and the formula =C2*D2/1000 in column E. Then change one factor and see which totals move. -->

**Situation (fictional).** Northfield Outdoor Co. is a mid-size outdoor-gear retailer and brand with stores, a
distribution centre (DC) and e-commerce. Revenue for the year is USD 640 million; it has 1,600 employees. The board asks
three questions: which stakeholders need attention in a dispute over a new DC, which sustainability topics are material,
and where its emissions are. All numbers and factors are *Example* values.

**Step 1: salience.** Each group is scored present (1) or absent (0) on power, legitimacy and urgency.

| ID | Stakeholder (*Example*) | P | L | U | Class |
|---|---|---|---|---|---|
| SH-01 | Key institutional investors (no current issue raised) | 1 | 1 | 0 | Dominant |
| SH-02 | Store employees asking for safer heat conditions in the DC | 0 | 1 | 1 | Dependent |
| SH-03 | Activist group blockading the DC entrance | 1 | 0 | 1 | Dangerous |
| SH-04 | Local regulator issuing a noise and traffic notice for the DC | 1 | 1 | 1 | Definitive |
| SH-05 | Communities near supplier fabric mills | 0 | 1 | 0 | Discretionary |
| SH-06 | Large former franchisee that could sue but has no current claim | 1 | 0 | 0 | Dormant |

Reading: the regulator (SH-04) is the immediate priority. The employees (SH-02) have a legitimate and urgent claim but
no power on their own; management should act before a union or inspector gives them power, which would make them
definitive. The blockade (SH-03) is power plus urgency without legitimacy in the eyes of most observers; the response is
safety first and an offer of a legitimate channel, not concessions under pressure.

**Step 2: double materiality.** Scales are 1 to 5; threshold $\tau = 10$ on a 1 to 25 score. Impact severity is the
mean of scale, scope and irremediability; potential impacts are multiplied by likelihood.

| ID | Topic (*Example*) | Scale, scope, irremediable | Severity | Impact likelihood | Impact score | Financial magnitude x likelihood | Financial score | Material? |
|---|---|---|---|---|---|---|---|---|
| DM-01 | Climate change (GHG emissions) | 4, 4, 4 | 4.00 | 5 | 20.00 | 4 x 4 | 16 | Both |
| DM-02 | Working conditions in the supply chain | 5, 3, 4 | 4.00 | 3 | 12.00 | 3 x 3 | 9 | Impact only |
| DM-03 | Product chemicals (PFAS in waterproofing) | 4, 3, 4 | 3.67 | 4 | 14.67 | 4 x 4 | 16 | Both |
| DM-04 | Packaging waste | 2, 3, 2 | 2.33 | 5 | 11.67 | 2 x 4 | 8 | Impact only |
| DM-05 | Data privacy (e-commerce) | 3, 2, 2 | 2.33 | 2 | 4.67 | 4 x 2 | 8 | Not material |
| DM-06 | Biodiversity at store sites | 2, 1, 2 | 1.67 | 2 | 3.33 | 1 x 2 | 2 | Not material |

Excel, with scale, scope and irremediability in C:E, impact likelihood in F, magnitude in G and financial likelihood
in H: severity `=AVERAGE(C2:E2)`, impact score `=AVERAGE(C2:E2)*F2`, financial score `=G2*H2`, material
`=IF(OR(AVERAGE(C2:E2)*F2>=10,G2*H2>=10),"Material","Not material")`.

Reading: under a financial-only (ISSB) lens, only DM-01 and DM-03 pass. Under double materiality (ESRS), DM-02 and DM-04
are added because of their effects on people and the environment. DM-02 also shows limit 4: supply-chain labour abuse
is a human rights impact, so its severity of 4.00 would justify reporting even with a lower likelihood. Data privacy
(DM-05) falls below the threshold here, but an analyst should challenge the financial magnitude of 4 with likelihood 2:
one large breach can move it.

**Step 3: GHG inventory.** Factors are illustrative.

| ID | Scope | Source (*Example*) | Activity | Factor (kgCO2e per unit) | tCO2e | Excel |
|---|---|---|---|---|---|---|
| GHG-01 | 1 | Natural gas, stores and DC | 1,850,000 kWh | 0.183 | 338.6 | `=1850000*0.183/1000` |
| GHG-02 | 1 | Fleet diesel | 210,000 litres | 2.68 | 562.8 | `=210000*2.68/1000` |
| GHG-03 | 1 | Refrigerant leakage (HFC blend) | 12 kg | 2,088 | 25.1 | `=12*2088/1000` |
| GHG-04 | 2 location | Electricity at grid average | 6,400,000 kWh | 0.380 | 2,432.0 | `=6400000*0.38/1000` |
| GHG-05 | 2 market | Electricity under renewable contracts (40%) | 2,560,000 kWh | 0.000 | 0.0 | `=2560000*0/1000` |
| GHG-06 | 2 market | Electricity at residual mix (60%) | 3,840,000 kWh | 0.450 | 1,728.0 | `=3840000*0.45/1000` |
| GHG-07 | 3, cat 1 | Purchased goods, spend-based | USD 210,000,000 | 0.42 per USD | 88,200.0 | `=210000000*0.42/1000` |
| GHG-08 | 3, cat 4 | Upstream transport | 48,000,000 tonne-km | 0.11 | 5,280.0 | `=48000000*0.11/1000` |
| GHG-09 | 3, cat 7 | Employee commuting | 1,600 employees | 2,100 per employee | 3,360.0 | `=1600*2100/1000` |

| Total | tCO2e | Share of market-based total | Excel |
|---|---|---|---|
| Scope 1 | 926.4 | 0.9% | `=338.6+562.8+25.1` |
| Scope 2, location-based | 2,432.0 | (reported alongside) | `=6400000*0.38/1000` |
| Scope 2, market-based | 1,728.0 | 1.7% | `=0+1728` |
| Scope 3 (three categories) | 96,840.0 | 97.3% | `=88200+5280+3360` |
| Total, market-based | 99,494.4 | 100% | `=926.4+1728+96840` |
| Total, location-based | 100,198.4 |  | `=926.4+2432+96840` |

Intensities at USD 640 million revenue: scopes 1 and 2 (market-based) 4.15 tCO2e per USD million
(`=(926.4+1728)/640`); all scopes 155.5 tCO2e per USD million (`=99494.4/640`). Purchased goods alone are 88.6% of the
market-based total (`=88200/99494.4`).

**Conclusion.** Northfield's footprint is a supplier footprint. A plan to put solar panels on every store would address
part of 1.7% of emissions; the decisive levers are fabric and material choices, supplier energy and transport. The
spend-based factor is the weakest number in the inventory, so the first improvement is supplier-specific data for the
top suppliers that make up most of category 1 spend. The renewable contracts lower scope 2 from 2,432.0 to 1,728.0
tCO2e under the market-based method; both figures must be shown, and the claim must be backed by contractual instruments
that meet the Scope 2 Guidance quality criteria.

```vega-lite
{
  "$schema": "https://vega.github.io/schema/vega-lite/v5.json",
  "title": "Northfield Outdoor Co. emissions by source, market-based (Example, illustrative factors)",
  "width": 420,
  "height": 240,
  "data": {"values": [
    {"source": "Scope 1: gas, diesel, refrigerant", "tco2e": 926.4, "scope": "Scope 1"},
    {"source": "Scope 2: electricity (market-based)", "tco2e": 1728.0, "scope": "Scope 2"},
    {"source": "Scope 3 cat 1: purchased goods", "tco2e": 88200.0, "scope": "Scope 3"},
    {"source": "Scope 3 cat 4: upstream transport", "tco2e": 5280.0, "scope": "Scope 3"},
    {"source": "Scope 3 cat 7: commuting", "tco2e": 3360.0, "scope": "Scope 3"}
  ]},
  "mark": {"type": "bar"},
  "encoding": {
    "y": {"field": "source", "type": "nominal", "sort": "-x", "title": null},
    "x": {"field": "tco2e", "type": "quantitative", "title": "tCO2e", "axis": {"format": "~s"}},
    "color": {"field": "scope", "type": "nominal", "title": "Scope"},
    "tooltip": [{"field": "source", "type": "nominal"}, {"field": "tco2e", "type": "quantitative", "format": ",.1f"}]
  }
}
```

## Worked example B (half solved): Corvane Robotics footprint

<!-- Guidance: Fill each [ ] and the missing classification. Check: the market-based total should be close to 24,441 tCO2e. -->

**Situation (fictional).** Corvane Robotics, a venture-backed warehouse-robotics company, prepares its first inventory
for an investor questionnaire. It burns 420,000 kWh of natural gas (factor 0.183), buys 2,900,000 kWh of electricity
(grid 0.380; its supply contract has a supplier-specific factor of 0.200), spends USD 58 million on purchased goods
(spend factor 0.30 kgCO2e per USD) and sold 1,200 robots, each using 14,000 kWh of electricity over its life (use the
grid factor 0.380 for category 11, use of sold products).

| ID | Scope | Source | Calculation | tCO2e |
|---|---|---|---|---|
| CV-01 | 1 | Natural gas | `=420000*0.183/1000` | 76.9 |
| CV-02 | 2 location | Electricity, grid | `=2900000*0.38/1000` | [ ] |
| CV-03 | 2 market | Electricity, supplier factor | [ ] | 580.0 |
| CV-04 | 3, cat 1 | Purchased goods | `=58000000*0.3/1000` | [ ] |
| CV-05 | 3, cat 11 | Use of sold robots | [ ] | 6,384.0 |
| | | Total, market-based | [ ] | [ ] |

Questions:

1. Which scope dominates, and what share of the market-based total is category 11? [ ]
2. Corvane's investors hold board seats and have asked for the inventory before the next funding round. Classify them
   on P, L, U. [ ]
3. Why can category 11 be a lever for Corvane even though it does not control its customers' electricity? [ ]

## Exercise C (unsolved): Tallow Creek Medical Center

<!-- Guidance: Solve on paper or in a spreadsheet, then compare with the answer key outline. There is more than one defensible threshold; state yours. -->

Tallow Creek Medical Center, a regional hospital (fictional), is not in scope of any mandatory regime but its lenders
ask for a sustainability summary. Using the scales above:

1. Classify on P, L, U: (a) the nurses' union raising unsafe staffing ahead of contract talks, (b) the state health
   regulator inspecting after a complaint, (c) patients' families posting about long emergency waits, (d) a bond
   investor with covenants. Which group is definitive?
2. Score three topics with your own reasoning: anaesthetic gas emissions (some anaesthetic gases have very high global
   warming potentials), patient data privacy, and access to care for uninsured patients. Which are impact-material,
   which financially material?
3. The hospital burns 3,200,000 kWh of gas (0.183), buys 9,500,000 kWh of electricity (grid 0.380) and uses 400 kg of
   an anaesthetic gas with an illustrative factor of 2,540 kgCO2e per kg. Compute scopes 1 and 2 (location-based) and the
   share of scope 1 that comes from anaesthetic gases.
4. Write two sentences for the board on what the inventory leaves out.

## Connections to other cards

<!-- Guidance: Use these links when a case crosses topics; the best class contributions connect frameworks. -->

| Card or template | Connection |
|---|---|
| mba/mba-ethics-guide | Normative theories (stakeholder theory, Friedman, Rawls) behind the salience and materiality choices |
| mba/mba-five-forces-card and mba/mba-value-chain-card | Where in the value chain impacts arise; scope 3 maps onto the upstream and downstream value chain |
| mba/mba-npv-irr-card and mba/mba-dcf-valuation-card | Financially material risks become cash-flow assumptions, carbon prices and scenario NPVs |
| mba/mba-ai-risk-governance-card | Same governance logic: board oversight, risk register, disclosure |
| mba/mba-business-communication-card | Writing a balanced sustainability message without greenwashing |
| finance/issb-sustainability-disclosure | Full ISSB disclosure work, jurisdiction table, climate metrics |
| finance/sustainability-double-materiality-assessment | Full ESRS double materiality process, IRO list, scope tests |
| project/stakeholder-register | Operational stakeholder register for a project |

## Common mistakes and misconceptions

<!-- Guidance: Read before any exam or case write-up. Most errors come from mixing the investor lens and the impact lens. -->

1. **"Stakeholder theory means ignoring shareholders."** It treats shareholders as one important group among several;
   the dispute is about trade-offs that do not pay back, not about whether investors matter.
2. **Salience equals moral priority.** Salience describes attention. Dependent stakeholders without power may have the
   strongest moral claim.
3. **Single materiality equals double materiality minus a bit.** The two lenses ask different questions for different
   users; a matter can be impact-material and financially immaterial (DM-02 above) and the reverse.
4. **Treating the threshold as given by the standard.** Neither IFRS S1 nor ESRS sets a numeric threshold; the company
   sets it and must explain it.
5. **Reporting only one scope 2 figure.** The GHG Protocol Scope 2 Guidance asks for both location-based and
   market-based figures when the company operates in markets with contractual instruments.
6. **Ignoring scope 3 because it is "not ours".** For many firms it is most of the footprint and where the business
   risk sits (supplier carbon costs, product regulation).
7. **Adding emissions across companies.** One company's scope 1 is another's scope 3; summing across a value chain
   double-counts.
8. **Confusing an ESG rating with materiality.** Ratings from different providers use different weights and often
   correlate weakly; they are not a materiality assessment.
9. **Quoting the pre-2026 CSRD scope.** The Omnibus I amendment changed the thresholds and dates; always state the
   version and date you used.
10. **Spend-based factors as precise numbers.** They are estimates; report one decimal at most and say so.

## Self-test questions

<!-- Guidance: Answer from memory first. Then check the answer key and log misses. -->

1. Define a stakeholder in Freeman's (1984) sense, and name the three salience attributes of Mitchell, Agle and Wood
   (1997).
2. A group has legitimacy and urgency but no power. What class is it, and what usually happens next?
3. State the difference between financial materiality and impact materiality in one sentence each.
4. Under double materiality, is a topic that is impact-material but financially immaterial reported? Why?
5. Classify into scopes: (a) diesel in the company's own trucks, (b) electricity bought for stores, (c) a supplier's
   factory emissions for goods the company buys, (d) electricity used by customers to run the company's products.
6. A company buys 1,000,000 kWh. The grid factor is 0.40 and half the electricity is covered by renewable contracts at
   0; the residual mix is 0.50. Compute location-based and market-based scope 2.
7. Spend on purchased goods is USD 50 million at 0.35 kgCO2e per USD. Compute category 1 emissions. Then prices rise 10%
   with no change in volume: what happens to the estimate, and what does that tell you?
8. Why might a retailer's scopes 1 and 2 target be misleading?
9. What did Friedman (1970) argue, and what is the strongest stakeholder-theory reply?
10. As of October 2026, what two cumulative thresholds define the amended CSRD scope for EU undertakings, and from which
    financial years?
11. Why does severity take precedence over likelihood for potential human rights impacts?
12. Name two reasons two analysts could get different scope 1 totals for the same company.

## My notes and next steps

<!-- Guidance: Write what you will do differently in your next case or report, not a summary of the card. -->

| Item | My note |
|---|---|
| The idea I found hardest | [ ] |
| A company I will analyse with this card | [ ] |
| Regime facts I re-checked, and the date | [ ] |
| Questions for class or office hours | [ ] |
| Next card to study | [mba/mba-ethics-guide / finance/sustainability-double-materiality-assessment] |

## Sources and further reading

<!-- Guidance: Cite primary works and the official texts; textbooks are named for further reading only. -->

- Freeman, R. E. (1984). *Strategic Management: A Stakeholder Approach*. Pitman.
- Mitchell, R. K., Agle, B. R., and Wood, D. J. (1997). Toward a theory of stakeholder identification and salience:
  defining the principle of who and what really counts. *Academy of Management Review*, 22(4), 853-886.
- Donaldson, T., and Preston, L. E. (1995). The stakeholder theory of the corporation: concepts, evidence, and
  implications. *Academy of Management Review*, 20(1), 65-91.
- Friedman, M. (1970). The social responsibility of business is to increase its profits. *The New York Times
  Magazine*, 13 September 1970.
- Khan, M., Serafeim, G., and Yoon, A. (2016). Corporate sustainability: first evidence on materiality. *The
  Accounting Review*, 91(6), 1697-1724.
- Eccles, R. G., Ioannou, I., and Serafeim, G. (2014). The impact of corporate sustainability on organizational
  processes and performance. *Management Science*, 60(11), 2835-2857.
- International Sustainability Standards Board (2023). IFRS S1 General Requirements for Disclosure of
  Sustainability-related Financial Information; IFRS S2 Climate-related Disclosures. https://www.ifrs.org
- European Union. Directive (EU) 2026/470 (Omnibus I) amending the CSRD, on EUR-Lex:
  https://eur-lex.europa.eu/eli/dir/2026/470/oj/eng ; European Commission, corporate sustainability reporting:
  https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
- World Resources Institute and World Business Council for Sustainable Development. *The Greenhouse Gas Protocol: A
  Corporate Accounting and Reporting Standard* (revised edition, 2004); *GHG Protocol Scope 2 Guidance* (2015);
  *Corporate Value Chain (Scope 3) Accounting and Reporting Standard* (2011). https://ghgprotocol.org
- Textbooks, by name only: Crane, A., Matten, D., Glozer, S., and Spence, L., *Business Ethics: Managing Corporate
  Citizenship and Sustainability in the Age of Globalization* (Oxford University Press); Freeman, R. E., Harrison, J. S.,
  Wicks, A. C., Parmar, B. L., and de Colle, S., *Stakeholder Theory: The State of the Art* (Cambridge University Press,
  2010).
- Open resource: OpenStax, *Business Ethics* (CC BY-NC-SA 4.0), https://openstax.org/details/books/business-ethics,
  chapters on stakeholders and sustainability.

## Answer key

<!-- Guidance: Check your reasoning, not only the number. -->

**Worked example B.** CV-02 = 1,102.0 tCO2e. CV-03 `=2900000*0.2/1000` = 580.0. CV-04 = 17,400.0. CV-05
`=1200*14000*0.38/1000` = 6,384.0. Market-based total `=76.9+580+17400+6384` = 24,440.9 tCO2e (shown as 24,441 when
rounded). (1) Scope 3 dominates (23,784.0 of 24,440.9, 97.3%); category 11 is 26.1% (`=6384/24440.9`). (2) Power (board
seats, funding) and legitimacy (owners); urgency is present because they need it before the round: definitive. If there
were no deadline they would be dominant. (3) Product design (energy efficiency per pick) cuts customers' electricity use
and is a selling point; category 11 links the climate goal to the product roadmap.

**Exercise C outline.** (1) Union: power (strike), legitimacy, urgency (talks): definitive. Regulator: definitive.
Families: legitimacy and urgency, power through media, arguably dependent becoming dangerous or definitive. Bond
investor: dominant, definitive if a covenant is close to breach. (2) Anaesthetic gases: high impact (climate), modest
financial; privacy: high financial (fines, trust) and impact on patients; access: high impact, financial depends on the
payer mix. (3) Gas 585.6 tCO2e (`=3200000*0.183/1000`); anaesthetic gas 1,016.0 (`=400*2540/1000`); scope 1 = 1,601.6;
scope 2 location-based 3,610.0 (`=9500000*0.38/1000`); anaesthetic share of scope 1 = 63.4% (`=1016/1601.6`).
(4) Scope 3 (medicines, devices, food, patient and staff travel) is missing and probably largest; factors are
illustrative.

**Self-test.**

1. Any group or individual who can affect or is affected by the achievement of the firm's objectives. Power,
   legitimacy, urgency.
2. Dependent. It relies on others with power (a regulator, union, NGO or management) to advance its claim; if it gains
   power it becomes definitive.
3. Financial: could reasonably be expected to affect the company's cash flows, access to finance or cost of capital,
   which matters to investors. Impact: the company's actual or potential significant effects on people or the
   environment.
4. Yes: under double materiality passing either test is enough, because the users include those affected and those who
   assess the company's impacts, not only investors.
5. (a) Scope 1, (b) scope 2, (c) scope 3 category 1, (d) scope 3 category 11.
6. Location-based 400.0 tCO2e (`=1000000*0.4/1000`); market-based 250.0 tCO2e (`=500000*0/1000+500000*0.5/1000`).
7. 17,500.0 tCO2e (`=50000000*0.35/1000`). After a 10% price rise the spend-based estimate rises to 19,250.0 with no
   physical change: spend factors measure money, so switch to physical or supplier data for the main categories.
8. Scopes 1 and 2 are often below 5% of a retailer's footprint (2.7% for Northfield), so the target leaves most
   emissions untouched.
9. Business's social responsibility is to increase profits within the rules of the game; spending on social goals is
   spending other people's money without a mandate. Reply: value is created through stakeholder relationships, many
   stakeholder investments raise long-run value, and markets and rules are incomplete (externalities), so profit
   within the rules does not guarantee that harm is avoided.
10. More than 1,000 employees on average and more than EUR 450 million net turnover, both required, for financial years
    beginning on or after 1 January 2027 for EU undertakings (Directive (EU) 2026/470; check EUR-Lex and national law).
11. Because the harm to people can be grave and irreversible; multiplying by a low likelihood could hide a risk that
    the company has a responsibility to prevent.
12. Different consolidation approaches (equity share, financial or operational control), and different factors or
    estimation methods (for example the refrigerant global warming potential used).

## Revision history

<!-- Guidance: Add a row each time you change data, factors or the regime facts. -->

| Version | Date | Author | Change summary |
|---|---|---|---|
| 0.1 | YYYY-MM-DD | [Your name] | First draft from the template |
| 0.2 | YYYY-MM-DD | [Your name] | *Example:* Replaced illustrative factors with the course data set, re-checked regime facts |

## Standard and licence note

Based on Freeman (1984), Mitchell, Agle and Wood (1997), IFRS S1 and IFRS S2 (ISSB, 2023), the CSRD as amended by
Directive (EU) 2026/470 and the revised ESRS, and the GHG Protocol Corporate, Scope 2 and Scope 3 standards, as checked
on 2026-10-28. The text, scoring convention, worked examples, exercises and questions are original; no textbook text,
standard text or published case is copied. Northfield Outdoor Co., Corvane Robotics and Tallow Creek Medical Center are
fictional, and the emission factors are illustrative. This card is independent and not affiliated with or endorsed by
any business school, standard setter or public authority. Check the current official texts before you rely on them.
Template licence: MIT.