IRO Analysis

The IRO (Impacts, Risks, and Opportunities) analysis is the core analytical phase of the Double Materiality Assessment. In this phase, AI generates a comprehensive set of IROs based on your organization's context, and you refine the selection to determine which IROs will be presented to stakeholders for scoring.

How IROs are generated

Karomia's AI generates over 1,000 potential IROs by combining two sources of information:

1. Business activity descriptions — The commercial and internal activities you defined in the Set the Scene phase.
2. Extracted document facts — Key facts and data points extracted from the documents you uploaded.

The AI cross-references these sources against the full set of ESRS topics to produce IROs that are specific to your organization's context.

AI initial scoring

For each generated IRO, the AI performs an initial scoring across the following dimensions:

• Scale — How widespread is the impact across the value chain?
• Scope — How deep or significant is the impact?
• Irremediability — How difficult is it to reverse or remediate the impact?
• Magnitude — What is the potential financial effect?
• Likelihood — How probable is the impact, risk, or opportunity?

IRO classification

Each IRO is tagged with the following attributes:

Attribute	Options	Description
Time horizon	Short-term (<5 years) / Long-term (>5 years)	When the IRO is expected to manifest or is currently occurring.
Status	Actual / Potential	Whether the IRO is currently happening or could happen in the future.
Connection	Direct / Indirect	Whether the IRO stems from the organization's own operations or its value chain.

ESRS topics covered

IROs are organized under the ESRS topic structure. The following table provides a summary of each topic:

Topic	Full name	Description
E1	Climate change	Greenhouse gas emissions, energy consumption, climate adaptation and mitigation.
E2	Pollution	Air, water, and soil pollution; substances of concern; pollution prevention.
E3	Water and marine resources	Water consumption, water stress, marine ecosystem impacts.
E4	Biodiversity and ecosystems	Impacts on habitats, species, ecosystem services, and land use.
E5	Resource use and circular economy	Resource inflows, resource outflows, waste management, circular design.
S1	Own workforce	Working conditions, equal treatment, health and safety, training for own employees.
S2	Workers in the value chain	Labor rights, working conditions, and health and safety for value chain workers.
S3	Affected communities	Community rights, land rights, Indigenous peoples, local economic impacts.
S4	Consumers and end-users	Product safety, information provision, personal data protection, accessibility.
G1	Business conduct	Corporate culture, anti-corruption, supplier relationships, political engagement.

Selecting IROs for stakeholder engagement

From the 1,000+ generated IROs, you select a shortlist that will be converted into questions for stakeholders. This selection process is critical and typically takes approximately 4 hours.

Selection recommendations

Follow these guidelines when selecting IROs:

• Minimum coverage — Select at least 2 IROs per ESRS subtopic: one impact-focused and one financially-focused. This ensures balanced coverage across both materiality dimensions.
• Prioritize negative impacts — Negative impacts are generally more important for materiality assessment under ESRS. Ensure they are well-represented.
• Stay objective — Select IROs based on their relevance and potential significance, not based on what the organization prefers to disclose.
• Review AI scores — Use the AI's initial scoring as a starting point, but apply your own judgment and organizational knowledge.

info

Each selected IRO becomes a question that stakeholders will score during data collection. The quality of your selection directly affects the quality of the assessment outcomes.

Editing IRO questions

Once you have selected your IROs, each one is converted into a stakeholder-facing question. You can refine these questions to improve clarity:

• Title — Edit the short title displayed to stakeholders.
• Question — Modify the question text that stakeholders will respond to.
• Description — Update the explanatory text that provides context for the question.
• Translations — Review and refine machine-translated versions of questions in any of the assessment's configured languages.

tip

Take the time to review translations, especially for technical terms. While machine translation provides a strong starting point, domain-specific terminology may benefit from manual refinement.

Stakeholder mapping

Before launching data collection, you need to define and configure your stakeholder groups.

Identifying stakeholder groups

Karomia provides the following default stakeholder groups:

• Employees — Your organization's own workforce.
• Management — Senior leadership and department heads.
• Board — Board of directors or supervisory board members.
• Customers — Direct customers and end-users.
• Suppliers — Key suppliers and business partners.

You can add additional stakeholder groups based on your organization's specific context (e.g., investors, local communities, regulators, NGOs).

When to split stakeholder groups

Consider splitting a stakeholder group into subgroups when:

• Different segments have significantly different perspectives (e.g., office employees vs. factory workers).
• You need to analyze results separately for different segments.
• Different segments require different survey languages or question sets.

AI desk research scoring

Karomia's AI can perform desk research scoring for stakeholder groups where direct engagement is impractical. The AI simulates how a stakeholder group would likely score each IRO based on publicly available information, industry benchmarks, and the organization's context.

Weight assignment

For each stakeholder group, you assign a weight per ESRS topic that reflects how relevant that topic is to that group's perspective:

Weight level	Multiplier	When to use
Low	x1	The topic has minimal relevance to this stakeholder group.
Normal	x3	The topic has standard relevance to this stakeholder group. This is the default.
High	x6	The topic is highly relevant to this stakeholder group's perspective or expertise.

These weights are factored into the final materiality calculation to ensure that stakeholder input is proportionally weighted based on relevance.

Next steps

• Results — Review and finalize your materiality determination.