Double Materiality Assessment: A Step-by-Step Guide for CSRD

A workshop with sticky notes pasted into a matrix is not a double materiality assessment. EFRAG's non-authoritative IG 1 guidance says the ESRS do not prescribe specific documentation, but that some is reasonable to expect, to inform governance and to help assurance providers (FAQ 12). Write it so that a stranger could follow each conclusion.

This guide walks through seven stages, with the artefacts each one should produce. For the wider context, see the glossary entries on materiality assessment, the ESRS and the EU Omnibus changes.

What "double" actually means

Double materiality combines two perspectives:

• Impact materiality — the actual or potential, positive or negative, short, medium, or long-term effects of your activities and value chain on people and the environment
• Financial materiality — the risks and opportunities arising from sustainability matters that could reasonably be expected to affect your cash flows, access to finance, or cost of capital

A topic is material if it is significant from either perspective. You do not get to net them off.

Where the assessment sits in the ESRS

The references below are to ESRS Set 1 in Delegated Regulation (EU) 2023/2772 (see EFRAG's ESRS 1 text).

Which version applies. The revised ESRS (Delegated Regulation (EU) 2026/1563, adopted 3 July 2026) apply to financial years beginning on or after 1 January 2027. For a financial year starting in 2026, an undertaking may apply either version, or the 2023 text with some reliefs from the revised one, and must say which.

• The concept: ESRS 1, chapter 3, "Double materiality as the basis for sustainability disclosures".
• The long list: ESRS 1, AR 16, tabulates the topics, sub-topics and sub-sub-topics ("sustainability matters") covered by the topical standards. EFRAG's IG 1 (FAQ 8) calls it a good starting point, not a checklist, and says entity-specific matters should be considered on top of it.
• The stakeholders: ESRS 1, paragraph 22, names two main groups: affected stakeholders, whose interests are or could be affected by your activities, and users of sustainability statements, such as investors, lenders, business partners and civil society organisations. Engaging only investors and raters leaves the impact perspective blind.
• Severity: ESRS 1, paragraph 45: severity rests on scale, scope and irremediable character; actual negative impacts are assessed on severity, potential ones on severity and likelihood, and for a potential negative human rights impact severity takes precedence over likelihood.
• The disclosures: ESRS 2 IRO-1 (the process used to identify and assess material impacts, risks and opportunities, including under paragraph 53(h) whether and how it changed since the prior period), IRO-2 (the disclosure requirements covered by the statement) and SBM-3 (the material impacts, risks and opportunities and their interaction with strategy and business model).
• In the revised ESRS 1: a top-down conclusion at topic level is allowed where materiality or non-materiality is evident (paragraph 27), as is a bottom-up assessment (paragraph 28); the assessment need not cover every possible impact (paragraph 32); and significant changes call for a review (paragraph 34).

Stage 1 — Map your value chain

Before you can score anything, draw the value chain. Under the revised ESRS 1 (paragraph 33) the value-chain part may rest on average regional or sector data, without direct input from value-chain actors, so record which basis you used. Upstream (tier-1, tier-2, tier-N suppliers, raw materials, logistics), own operations (sites, fleets, IT), downstream (customers, product use, end-of-life). For each segment:

• Geography
• Activity type
• Workforce footprint (own + contracted)
• Resource intensity (energy, water, materials)
• Known incidents or controversies (last 3 years)

This is the substrate every later judgement rests on. Pull it from your ERP, supplier master data, and HSE incident system rather than re-inventing it in a workshop.

Stage 2 — Build the long list of sustainability matters

Start from the ESRS topical list (climate change, pollution, water, biodiversity, circular economy, own workforce, value-chain workers, affected communities, consumers, business conduct) and expand into sub-topics and entity-specific matters. Cross-reference:

• Sector-specific frameworks (SASB, GRI sector standards)
• Peer disclosures
• Investor letters and proxy statements
• Recent regulatory enforcement in your sector
• The risks already in your enterprise risk register

There is no required number of matters. Where the revised top-down approach applies, a topic-level conclusion can replace a long register for topics whose materiality is evident.

Stage 3 — Identify and engage stakeholders

The ESRS do not mandate a particular form of stakeholder engagement (EFRAG IG 1, FAQ 15), but IG 1 treats engagement with affected stakeholders as central to impact materiality, and IRO-1 asks whether and how consultation informed the assessment. An illustrative log, with invented figures:

Expect questions about sampling rationale and how non-responses were handled, and have the answers written down.

Stage 4 — Score impact materiality

Assess actual negative impacts by severity and potential negative impacts by severity and likelihood. Severity considers scale, scope and irremediable character; positive impacts use scale and scope, with likelihood for potential impacts. For potential negative human-rights impacts, severity takes precedence over likelihood.

Set and document appropriate quantitative and/or qualitative thresholds, considering the undertaking's circumstances. The cited EFRAG IG1 guidance, May 2024 does not prescribe a single scoring formula. A numerical scale may help organize discussion, but it must not hide a severe impact behind an aggregate score.

Stage 5 — Score financial materiality

For each matter, identify the risks and opportunities and score:

• Magnitude (financial impact range, in €) over short / medium / long horizons
• Likelihood (1–5)

Document the financial effects, time horizons, assumptions and evidence relevant to the undertaking. Numerical magnitude bands and likelihood scales can be tools in your method; they are not prescribed universal cut-offs. Consider qualitative factors and dependencies as well as available estimates.

Set appropriate quantitative and/or qualitative financial materiality thresholds and explain the judgments behind them. EFRAG IG1 distinguishes this assessment from financial-statement materiality; do not copy an EBITDA percentage without considering the relevant effects and time horizons.

Stage 6 — Consolidate and validate

A matter is material if it crosses either threshold. Plot the results, but treat the matrix as a visualisation, not the assessment. The assessment is the underlying evidence and documented judgments, including any scores used.

Validation steps that will save you in assurance:

• Independent review by a function not involved in scoring (internal audit works well)
• Reconciliation against the enterprise risk register (gaps in either direction must be explained)
• Board or audit-committee approval, with minutes referencing the methodology version

Stage 7 — Document and version-control

A sensible file set, as our suggestion rather than a requirement:

1. Methodology document (scoring scales, thresholds, governance)
2. Stakeholder engagement log (who, when, what they said, how it was reflected)
3. Long-list register with scores per matter
4. Threshold rationale memo
5. Validation and approval evidence
6. Mapping from material topics to ESRS datapoints (handover to disclosure team)

Version everything. EFRAG's IG 1 (FAQ 7) says the undertaking must determine its material impacts, risks and opportunities at each reporting date, and may do so through an annual update focused on what changed; the revised ESRS 1 (paragraph 34) asks for a review when significant changes have occurred. Either way, you need the previous version to explain changes.

After the first cycle, one workable split (our suggestion) is to keep the foundations stable and refresh the outputs:

• Keep stable unless something major changes: the methodology (scales, thresholds), the stakeholder map and the taxonomy of impacts, risks and opportunities.
• Refresh every cycle: stakeholder engagement evidence, the inventory of impacts, risks and opportunities, the scores and the material topic list.

Any change to the process is itself a disclosure under IRO-1, so log the reason for each one.

Tooling

You can run the first cycle in spreadsheets. By cycle two — when stakeholder engagement evidence, scoring history, and version control all need to live in one place — some groups move to a dedicated ESG / materiality platform. Look for:

• Stakeholder engagement module with response storage
• Configurable scoring scales (impact and financial)
• Audit trail per scoring change, with reviewer
• Mapping to the ESRS datapoint list and XBRL taxonomy (Directive (EU) 2026/470 says undertakings need not mark up sustainability reporting until the Commission adopts the rules)
• Integration with your risk register (often via API to Archer, ServiceNow, or your GRC tool)

For the steps from scope to first sustainability statement, see the readiness checklist in our ESRS implementation guide; for tooling, see the ESG reporting software comparison.

Common pitfalls

• Treating it as an ESG team exercise. Finance, risk, procurement, HR, and legal must all sign off.
• Reusing last year's matrix. The methodology may carry over; the scores must be re-evaluated against fresh evidence.
• Skipping the value chain. ESRS materiality is not limited to your own operations.
• Confusing "we have a policy" with "the matter is not material". The revised ESRS 1 (paragraph 43) says actual negative impacts are assessed as they manifested in the reporting year, and potential ones take account of implemented policies and actions only where they can reasonably be assumed to reduce severity or likelihood. A policy on paper is not, by itself, a reason to exclude a matter.
• Letting consultants run the whole thing. External help is fine; ownership and the audit trail must stay in-house.

Worked example: a small group exposed to a serious hazard

This is a constructed example, not an observed case. A packaging plant with 600 workers has 40 who handle solvent-based inks. The matter is own-workforce health and safety.

What to ask a software vendor

This site does not rank vendors. The double materiality software guide and the ESG platform comparison set out documented scope, and the QHSE Software Capability Map 2026 shows which capability statements are documented, conditional or unverified. Put the same requests to every vendor, using your own data:

1. Which ESRS version do the templates follow, and can you switch?
2. Can you record a top-down conclusion per topic and a bottom-up assessment per impact, each with its reason?
3. Export the methodology version, scores, reviewers and approvals as files an assurance provider can read.
4. Who can change a score after approval, and where is that logged?

For definitions, see the glossary entries on double materiality and the CSRD. The CSRD software comparison and the scope 3 emissions guide cover the tooling and data that follow a material-topic list.

A defensible double materiality assessment is not glamorous. It is structured judgement, documented at the level a stranger could reperform. Get the discipline right in cycle one and every subsequent CSRD year becomes a delta — not a re-do.

Updated 24 September 2026: merged the sourced sections of Double Materiality Assessment: A Step-by-Step Method.

Reviewed 4 October 2026: unsupported statements about EFRAG guidance, assurance findings and matter counts were removed; revised ESRS 1 changes, a worked example and vendor questions were added.