Open two sustainability reports from companies in the same sector. One runs to 300 pages and discloses against 80 metrics. The other covers 40 pages and focuses sharply on 12 material topics with clear targets, governance and evidence. Which one tells you more about where the company actually stands? Usually the shorter one. The rigour of the double materiality assessment (DMA) is the factor that most reliably separates strong reports from weak ones. Get it right, and the rest of the report follows. Get it wrong, and no amount of data or formatting rescues the result.
Not legal advice. This article is general information for businesses, based on official sources checked in October 2026. Laws, thresholds and deadlines change, and how they apply depends on your company’s facts. Check the current text of each law or ask a qualified lawyer before you act.
Summary
- A materiality assessment identifies the sustainability topics that matter most, either because of the organisation’s impacts on people and the environment, because of financial risks and opportunities, or both. It decides what you disclose and in what depth.
- Double materiality remains the core of the EU’s CSRD and ESRS. After Omnibus I (Directive (EU) 2026/470, in force since March 18, 2026), CSRD covers companies with more than 1,000 employees and over EUR 450 million net turnover.
- The Commission adopted the revised, simplified ESRS on July 3, 2026. They apply mandatorily from financial year 2027, with early application allowed for FY2026, and they allow a top-down approach to the DMA.
- Assurance is still required, but at limited level, not reasonable assurance.
- Five steps: define the topic universe, assess impacts, assess financial effects, use stakeholder input where it adds value, and document the process.
What is materiality in sustainability reporting?
Materiality means information that could influence users’ decisions if left out or misstated. Sustainability reporting uses it in two ways, and the difference shapes every framework.
Financial materiality (outside-in) asks which sustainability topics could affect the company’s cash flows, financial position or risk profile. The ISSB’s IFRS S1 and S2, the SASB Standards and the TCFD framework use this lens. It is investor focused.
Impact materiality (inside-out) asks which topics reflect the company’s significant effects on people and the environment, whether or not those effects hit its finances. The GRI Standards use this lens.
Double materiality combines both. A topic is material if it is material from either perspective. The CSRD and ESRS use double materiality, which makes the scope broader than single-materiality frameworks. Our comparison of GRI, SASB, TCFD and ISSB shows how the lenses fit together.
Why does materiality assessment matter so much in 2026?
How does materiality decide what you disclose?
Materiality sets the scope of the report. Under GRI, you report on the topics your assessment identifies. Under ESRS, the DMA result decides which topical disclosure requirements apply to you, and the revised ESRS state that you should not report information that is not material. Too many topics, too few topics or the wrong ones will misrepresent your performance and fail user needs.
Is a double materiality assessment still legally required under CSRD?
Yes, for companies still in scope. Omnibus I raised the thresholds to more than 1,000 employees and over EUR 450 million net turnover, so many former wave-two and wave-three companies, including listed SMEs, dropped out. Second-wave reports fall due in 2028 on financial year 2027, and Member States must transpose the CSRD changes by March 19, 2027. In-scope companies must document and disclose their DMA process and results. Assurance applies at limited level.
What changed in the revised ESRS?
The revised ESRS cut volume sharply while keeping double materiality. The Commission adopted them on July 3, 2026, and the text runs to about 163 pages instead of 284. They apply mandatorily from financial years starting on or after January 1, 2027, and companies could apply them early for FY2026. For the DMA, the key changes are:
- Top-down approach: you can reach conclusions at topic level without scoring every individual impact, risk and opportunity.
- Undue cost or effort relief: you may use reasonable and supportable information that is available without undue cost or effort, with limits on value chain data.
- Stakeholder input: consultation is no longer a rigid requirement, but affected stakeholders’ views still help show that impacts were identified properly.
Companies that applied the 2023 ESRS in FY2026 can use certain reliefs, including the top-down DMA. Check your transition option with your auditor.
What do the UK, US and Canada require?
None of them requires double materiality, but each has its own lens. The UK Sustainability Reporting Standards, published on February 25, 2026 on a voluntary basis, follow the ISSB’s financial materiality approach, and the FCA proposes making them mandatory for listed companies from January 1, 2027. In the US, California SB 253 is about GHG emissions reporting, not materiality, with first Scope 1 and 2 reports due November 10, 2026, while the SEC climate rule is stayed with rescission proposed in May 2026. Canadian securities regulators paused mandatory climate disclosure work in April 2025. Multinationals with EU subsidiaries still need a DMA for the EU entities.
How do you conduct a rigorous double materiality assessment?
Step 1: How do you define the topic universe?
Start from the ESRS topic list: environment (E1 to E5), social (S1 to S4) and governance (G1). Add sector topics from GRI Topic Standards or SASB. List broadly first and narrow later so you do not miss a major impact or risk.
Step 2: How do you assess impact materiality?
Assess actual and potential impacts across your upstream supply chain, operations and downstream use. Rate severity (scale, scope, irremediable character) and, for potential impacts, likelihood. For human rights impacts, link the work to your due diligence process. The EU CSDDD, as amended by Omnibus I, now applies to companies with more than 5,000 employees and EUR 1.5 billion turnover, from July 26, 2029, so many companies will run due diligence voluntarily or because customers ask for it.
Step 3: How do you assess financial materiality?
For each topic, judge whether risks or opportunities could affect your cash flows, access to finance or cost of capital in the short, medium or long term. Draw on your risk register, scenario analysis, industry benchmarks and investor feedback. Climate, nature and supply chain risks often look small in the short term and large in the medium and long term.
Step 4: How do you use stakeholder input?
Use it where it improves the assessment, especially for impacts on workers and communities. The revised ESRS do not demand a fixed consultation programme, but a short employee survey alone will not convince an auditor that you understood affected people’s views. Record who you consulted, how and what changed as a result.
Step 5: How do you document the results?
Record criteria, thresholds, data sources and your reasoning for each topic you include or exclude. Auditors will test this file. Present results as a matrix, a ranked list or a table; the standards do not prescribe a format.
What are the most common materiality pitfalls?
The most common pitfalls are thin evidence, mixing up the two lenses, and a stale assessment. Using the top-down approach does not excuse weak documentation, and conflating impact and financial materiality fails both ESRS and ISSB logic. Review your assessment each reporting period and whenever your business, value chain or regulatory context changes. Finally, link outcomes to targets and governance, otherwise the DMA stays a paper exercise.
Frequently Asked Questions: Materiality Assessments
What is the difference between single and double materiality?
Single materiality looks from one direction: financial materiality (how sustainability issues affect the company, as in ISSB, SASB and TCFD) or impact materiality (how the company affects the world, as in GRI). Double materiality, used by the CSRD and ESRS, applies both. A topic is material if it is material under either lens.
How often should you update a materiality assessment?
Review it every reporting period and update it when your business model, operating context, value chain or regulation changes. Because auditors test the process, a documented, repeatable method saves effort year after year.
Do I still need a materiality matrix under CSRD?
No. A matrix plots topics by impact significance and financial significance and is a common way to show results, but neither CSRD nor ESRS requires it. What matters is that you disclose your method, criteria and the resulting list of material topics.
How does the materiality assessment connect to the EU Taxonomy?
The Taxonomy does not require a DMA, but it sits alongside CSRD reporting. In-scope companies disclose the share of turnover, capex and opex aligned with the Taxonomy, and the Do No Significant Harm criteria draw on the same environmental areas your DMA covers. Check the current Taxonomy disclosure rules, which were simplified by a July 2025 delegated act.
Can small companies use a simplified assessment?
Yes. Companies below the CSRD thresholds are out of scope, including listed SMEs. The Commission adopted a voluntary sustainability reporting standard on July 3, 2026 for smaller companies, and the VSME protects suppliers below 1,000 employees from excessive data requests. Voluntary GRI reporters can scale the assessment to their size. Process quality matters more than scale.
Related reading: GRI vs SASB vs TCFD vs ISSB: ESG Reporting Frameworks | What Is LCSA? A Holistic Approach to Sustainability Measurement | Why Sustainability Assessment Matters | LCA vs LCSA: What Is the Difference?
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