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Double Materiality


The first European Sustainability Reporting Standards (ESRS) were published in summer of 2023 and were designed to harmonise non-financial reporting frameworks and implement the requirements of the EU’s Corporate Sustainability Reporting Directive (CSRD).

The structure is similar to earlier, voluntary, disclosure systems, such as the Global Reporting Initiative (GRI), with general requirements for all entities, disclosures specific to different sectors (e.g., Mining & Coal Mining or Food & Beverages), and topic standards for specific environmental, social, or governance-related impacts.

But how do you know which topics to report on? The sector standards do have their own requirements, but much of this comes down to the results of a double materiality assessments. In the case of ESRS, this comes down to two ways something can be material:

Impact materiality (the inside-out perspective) or how the company affects the environment and/or society

Financial materiality (the outside-in perspective) or how the company is affected by the environmental and/or society

Think of it like a matrix, where a topic can have low or high financial or impact materiality, or both.


These effects need not be happening right now either, as the ESRS (as well as GRI) distinguishes between actual and potential risks and opportunities and considers both to be important in considering what is material for your company. Likewise, effects can be positive or negative and can be anywhere from as short-term as one year to long-term impacts lasting more than five years. Finally, importantly, the ESRS does not only consider impacts (financial or not) that happen within your business activities, but also considers upstream and downstream in your value chain.

To get started on a materiality assessment, stakeholder engagement with what the ESRS calls “affected stakeholders” (e.g., employees, local communities, suppliers) who have the potential to affect what is material or who are likely to be affected by these topics is critical, though the ESRS does not strictly specify and particular method of doing this. To gain a better understanding of your context and impacts, consultation with experts (e.g., in due diligence) or peers is necessary.

Figuring out which topics are most material comes down to a few factors, depending on whether it is a positive or negative impact and whether it is happening currently or expected in the future:




  • How good the impact is (scale)
  • How widespread the benefit is (scope)


  • How bad the impact is (scale)
  • How widespread the harm is (scope)
  • How easily the harm can be fixed and returned to the natural state (irremediability)



  • How good the impact would be (scale)
  • How widespread the benefit would be (scope)
  • How likely this impact is


  • How bad the impact would be (scale)
  • How widespread the harm would be (scope)
  • How easily the harm could be fixed and returned to the natural state (irremediability)
  • How likely this impact is

A high score in any of these areas can be enough to make a topic material. However, it should be noted that in the case of negative impacts to human rights, the severity takes precedence over likelihood. Thus, if there is a risk of harm to human rights, this should be considered, regardless of how unlikely.

Once you have identified several topics that you think are important for your organisation and correlated those with the topics laid out in the ESRS, you can set a threshold for reporting only those most material topics. As of now, EFRAG (the body responsible for the ESRS) does not have requirements for the specific number of topics to report on, but it could be good to include more than a few.

The Topic Standards in the ESRS are specific requirements for material impacts, so they will guide your reporting in each of the areas you’ve identified as material.


In summary, the steps to fulfilling the Corporate Sustainability Reporting Directive include:

  1. Understand the context in which your organisation operates
  2. Identify key affected stakeholders to engage in your assessment
  3. Conduct interviews with these stakeholders, internally and externally, to see which topics arise most frequently and which participants seem most focussed on
  4. Align these topics with those laid out in the ESRS
  5. Consider both impact and financial materiality based on factors such severity (for better or worse)
  6. Set a threshold for reporting
  7. Report on the most material topics (and within that, the most material data points) according to the relevant ESRS

For more information on conducting a materiality assessment, please read EFRAG’s Implementation Guidance for the Materiality Assessment.

Why EFF?

Here at EFF, we have experience conducting materiality assessments even for large multinational corporations and can bring this background to support your own Double Materiality Assessment. This includes practicable advice based on our knowledge of the relevant European legislation and training to your team on the fundamentals of DMA. Our services also include the behind-the-scenes support in the time-consuming labour of contacting and interviewing stakeholders and analysing their conclusions.

Get in touch if you’re interested in getting started on your Double Materiality Assessment today!



CSRD: Corporate Sustainability Reporting Directive

EFRAG: European Financial Reporting Advisory Group

ESRS: European Sustainability Reporting Standards

GRI: Global Reporting Initiative

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