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    Double Materiality

    Definition

    Assessment of both an organisation's impacts on people and the environment and sustainability matters with financial effects on the organisation.

    Editorial definition: The QHSE Standard, updated 3 October 2026 · https://qhsetech.com/glossary/double-materiality

    Scope: Under ESRS, a matter can be material from either perspective; it need not meet both.

    Example for your evaluation: Keep the impact and financial assessments distinct, with evidence for each conclusion.

    Sources checked: . Examples are editorial illustrations.

    How ESRS 1 describes double materiality

    In ESRS 1 as first adopted (Commission Delegated Regulation (EU) 2023/2772), double materiality has two dimensions: impact materiality and financial materiality. Unless specified otherwise, the terms material and materiality in the ESRS refer to double materiality. A sustainability matter is material from an impact perspective when it relates to the undertaking's material actual or potential, positive or negative impacts on people or the environment over the short, medium or long term, including impacts connected with its own operations and its upstream and downstream value chain and business relationships. It is material from a financial perspective if it triggers, or could reasonably be expected to trigger, material financial effects on the undertaking.

    The standard sets criteria for each dimension. For a negative impact, materiality of an actual impact rests on its severity, and for a potential impact on severity and likelihood, with severity judged by scale, scope and irremediable character. For positive impacts the factors are scale and scope for actual impacts, and scale, scope and likelihood for potential ones. The two assessments are inter-related and their interdependencies must be considered. In general the starting point is the assessment of impacts, although there may be material risks and opportunities that do not relate to the undertaking's impacts. Appropriate quantitative or qualitative thresholds must be applied, and impacts are captured by the impact perspective whether or not they are financially material.

    The legal frame has moved since that text. Directive 2013/34/EU, as amended by Directive (EU) 2026/470 (adopted 24 February 2026, in force 18 March 2026, to be transposed by 19 March 2027), requires covered undertakings to report both their impacts on sustainability matters and how sustainability matters affect them. The 2026 Directive's recitals call for simplified standards and clearer instructions on applying the materiality principle, and the Commission adopted two delegated acts amending the ESRS on 3 July 2026. The wording described here comes from the 2023 text, so check the version in force for the reporting period before relying on any criterion. This page is general information and not legal advice.

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    What a materiality-assessment record holds in software

    • The long list of sustainability matters considered and the sources used to compile it, such as the standards' topic lists, sector knowledge and stakeholder input.
    • A stakeholder engagement record: who was consulted, how and when, and whether they are affected stakeholders or users of the statements.
    • An impact assessment per matter: description, positive or negative, actual or potential, where in the value chain, scale, scope, irremediable character and likelihood, with the reasoning.
    • A financial assessment per matter: the risk or opportunity, time horizon, likelihood and size of the financial effect, and the thresholds used.
    • The methodology and thresholds, their version and who approved them.
    • The result for each matter on each dimension, with reasons, approvals and what changed from the previous year.

    Double materiality, financial materiality and a materiality matrix

    Double materiality is not materiality counted twice and it is not a two-axis chart in itself. A matrix can display results, but the standard asks for two assessments, each with its own criteria. The ESRS describe financial materiality as an expansion of the materiality used for financial statements, which looks at what influences the decisions of investors, lenders and other primary users; they add the impact perspective, so a matter that is material only on the impact side can still be reportable. A matrix is a visual output, not the evidence behind it, and a score without its reasoning is hard to defend to a reviewer.

    A hypothetical example: assessing water use at a plating works

    This case is invented to illustrate the records and uses no real data. A metal finishing company lists water use among its candidate matters. For the impact assessment, the team records that the process draws water from a stressed river basin and sends rinse water to treatment. It classes the effect as an actual negative impact in its own operations and rates severity by scale (the volume against the basin), scope (local) and whether the effect can be remedied. For the financial assessment, it asks whether water availability could interrupt production, whether regulation could raise costs, and whether a new permit condition changes the picture. It estimates a range for the effect and its likelihood over the medium term, using thresholds the board has approved.

    The result is a matter that is material on the impact dimension and, at present, below the threshold on the financial dimension, with a review date set for the following year. Because the impact criteria are met, the company treats the matter as reportable. A second matter, labour conditions at a supplier, is assessed in the value chain with no direct data, so the team records the basis of its estimate, such as sector and country information, and a plan to improve it. The records show who approved both assessments and which stakeholders were consulted.

    Common misunderstandings about double materiality

    • Double does not mean both dimensions must be met. The impact and financial criteria are set out separately, and a matter can be material from either perspective.
    • Impact is not just a company's risk. Under the ESRS, impacts on people and the environment are captured whether or not they have financial consequences.
    • A materiality assessment is not a stakeholder survey. Engagement with affected stakeholders informs it, but the assessment applies criteria and thresholds and records the reasoning.
    • A completed assessment is not permanent. Facts, thresholds and the standards themselves change, so keep dates and versions with each result.

    How double materiality relates to other glossary terms

    Double materiality is the filter that decides which topics reach a sustainability statement, so it connects to the reporting law and to the data behind it.

    • CSRD: the EU framework under which the ESRS and the double materiality principle apply.
    • ESG: the topic grouping that the assessment sorts into material and not material matters.
    • Scope 3 emissions: a value-chain topic where the assessment helps decide which categories are significant.
    • ISO 14001: an environmental aspects evaluation is a different exercise, though some of its data can inform the environmental topics.

    Records and evidence that usually exist for a materiality assessment

    • The long list of matters and the sources used to build it.
    • Stakeholder engagement notes, attendance and the way input was used.
    • The methodology, criteria and thresholds, with approval and date.
    • Scoring or reasoning per matter on each dimension, with the evidence relied on.
    • Management and board review records.
    • A comparison with the previous assessment and an explanation of changes.

    What a software tool needs to capture for double materiality

    • Separate impact and financial assessments for each matter, with their own criteria fields and not one combined score.
    • A reasoning field next to every rating, and attachment of evidence.
    • Thresholds and methodology held as a versioned record that results refer to.
    • A stakeholder log that distinguishes affected stakeholders from users of the statements.
    • Value-chain location tagging for impacts and a flag where the basis is an estimate.
    • Approval workflow and year-on-year comparison with reasons for each change.
    • An export of the full reasoning for a reviewer, not only the results chart.

    Catalog profiles documenting CSRD reporting workflows

    The list comes from the CSRD workflow rule. It does not show that a product supports a double materiality assessment, which should be checked in the double materiality guide and in a demonstration.

    Same rule for every product: tagged “ESG Reporting”, “ESG Frameworks Reporting”, “Sustainability Reporting”, “Materiality Assessment”, “ESG & Sustainability” or “Sustainability & ESG”, with a sourced CSRD, ESRS or materiality capability in its record, or one the vendor stated to us, labelled as vendor-stated. Documented and conditional capabilities qualify; check the linked scope before treating a module as included.

    Tekmon pays for a sponsored placement (above); its place in this list follows the same rule as every entry. How lists are ordered

    All 14 matching profiles are shown. Documentation review, not hands-on testing or a claim of compliance.

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    Frequently asked questions

    Is double materiality the same as a materiality matrix?

    No. A matrix is a way of displaying results. The ESRS call for an impact assessment and a financial assessment, each with its own criteria, and the reasoning behind each rating.

    Who has to carry out the assessment?

    Under the amended Directive 2013/34/EU, the reporting obligation applies to undertakings above EUR 450 million net turnover and an average of 1,000 employees, with national transposition due by 19 March 2027. Other organisations may carry one out voluntarily or for customers.

    Do the criteria still read as they did in 2023?

    Not necessarily. Two delegated acts amending the ESRS were adopted on 3 July 2026. Check the text that applies to your reporting period.

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