Double materiality represents a paradigm shift in corporate sustainability reporting. Unlike traditional materiality approaches that focus solely on financial impacts, double materiality under the Corporate Sustainability Reporting Directive (CSRD) requires companies to assess both how sustainability matters affect their financial performance and how their operations impact society and the environment.

This dual perspective—combining financial materiality and impact materiality—fundamentally changes how organisations prioritise sustainability efforts and allocate resources. The double materiality assessment has become the cornerstone of CSRD compliance, determining which European Sustainability Reporting Standards (ESRS) disclosure requirements apply to your organisation.

Recent regulatory developments in 2025, particularly the EU Omnibus Package, have streamlined the process significantly. With approximately 57% fewer mandatory data points and raised reporting thresholds, the burden has shifted from bureaucratic box-ticking to strategic risk management. This creates an opportunity: companies that conduct a thorough materiality assessment gain clarity on material impacts, risks and opportunities whilst simultaneously preparing for the mandatory assurance requirements coming in 2026.

For decision-makers in startups, mid-market companies, and venture capital firms, understanding the double materiality process isn't just about compliance—it's about identifying strategic advantage through sustainability integration.

Strategic Relevance & Market Developments

The Evolution of Materiality Assessment

The concept of double materiality takes sustainability reporting beyond the investor-centric focus of traditional financial reporting. Whilst financial materiality assessment examines how sustainability issues affect a company's financial position, cash flows, and access to capital, impact materiality assessment evaluates the company's actual and potential effects on people and the environment.

This comprehensive approach reflects a fundamental shift in corporate accountability. The Global Reporting Initiative (GRI) pioneered impact-focused reporting, whilst the International Sustainability Standards Board (ISSB) concentrated on financial materiality. CSRD synthesises both perspectives, creating reporting obligations that capture the full spectrum of material matters.

2025 Regulatory Developments: The Omnibus Package

The European Commission responded to industry concerns with substantive reforms in spring 2025. The Omnibus Package introduced three key simplifications:

Reduced Data Burden: The mandatory data points decreased by approximately 57%, allowing companies to focus on genuinely material topics rather than exhaustive disclosure across all ESRS themes. This reduction particularly benefits mid-market organisations struggling with limited sustainability resources.

Raised Thresholds: The revenue threshold for CSRD applicability increased to €50 million, exempting many smaller enterprises from immediate reporting obligations whilst maintaining the directive's focus on systemically significant market participants.

Phased Implementation: The "stop-the-clock" provision delayed sector-specific standards, giving organisations more time to implement the foundational ESRS Set 1 before tackling industry-specific requirements. This pragmatic approach acknowledges the learning curve inherent in comprehensive sustainability reporting.

These changes reflect a maturation of the regulatory framework—moving from theoretical comprehensiveness towards practical implementation focused on material financial effects and sustainability impacts.

Market Dynamics: From Compliance to Competitive Positioning

Forward-looking organisations recognise double materiality assessment as more than a regulatory exercise. It serves as a strategic diagnostic tool that reveals:

• Financial risks and opportunities embedded in climate change, resource scarcity, and regulatory transitions

• Value creation potential through sustainable business model innovation

• Stakeholder expectations that increasingly influence market access, talent acquisition, and brand value

• Supply chain vulnerabilities across upstream and downstream value chains requiring risk management attention

Companies with strong ESG performance demonstrate measurably higher revenue growth and operational resilience. The double materiality framework provides the analytical structure to identify and capture these advantages systematically.

Regulatory Landscape & Compliance Requirements

CSRD vs ESRS: Understanding the Framework

The Corporate Sustainability Reporting Directive establishes who must report and when, whilst the European Sustainability Reporting Standards define what to disclose and how. This distinction matters for practical implementation:

CSRD scope extends to:

• Large EU companies exceeding two of three criteria (€50M revenue, €25M balance sheet, 250 employees)

• Listed SMEs (with opt-out until 2028)

• Non-EU companies with significant EU operations (€150M EU revenue)

ESRS structure comprises:

• Cross-cutting standards (ESRS 1 General Requirements, ESRS 2 General Disclosures)

• Environmental standards (E1-E5 covering climate, pollution, water, biodiversity, circular economy)

• Social standards (S1-S4 addressing workforce, value chain workers, affected communities, consumers)

• Governance standards (G1 on business conduct)

The materiality assessment process determines which topical standards (E1-E5, S1-S4, G1) require full disclosure based on your organisation's specific material impacts, risks and opportunities.

The Double Materiality Assessment Process: Updated 2025 Methodology

EFRAG's revised Implementation Guidance (IG 1), published July 2025, introduced a more pragmatic approach to determining materiality:

1. Top-Down Business Model Analysis

The process now must begin with analysing your business model and value chain. This strategic framing allows rapid exclusion of irrelevant topics. A pure software company, for instance, can quickly rule out marine resources or extractive industries without granular justification for every ESRS data point.

This represents a fundamental shift from the initial bottom-up approach that required organisations to assess every sustainability topic against detailed criteria before exclusion.

2. Stakeholder Engagement: Quality Over Quantity

The 2025 guidance clarifies that comprehensive stakeholder engagement doesn't require surveying every possible affected stakeholder. Representative samples, expert consultations, and proportionate engagement suffice—provided the methodology is transparent and defensible.

For engaging stakeholders effectively, focus on:

• Investors and financial institutions concerned with financial materiality

• Employees, suppliers, and local communities affected by impact materiality

• Industry peers and sustainability experts who understand sector-specific sustainability risks

• Regulatory bodies and civil society organisations representing broader public interests

This pragmatic approach acknowledges resource constraints, particularly for mid-market organisations lacking dedicated sustainability teams.

3. Integrated IRO Assessment

The refined methodology emphasises integrated assessment of impacts, risks and opportunities (IROs) rather than three separate analyses. Material impacts often trigger material financial effects through reputation, regulation, or resource availability. Recognising these interconnections early streamlines the assessment whilst improving analytical quality.

4. Burden of Proof Reversal

Previously, organisations needed extensive documentation explaining why each non-material topic was excluded. The 2025 updates reverse this: thematic-level justification (e.g., "biodiversity is immaterial because our digital services have no significant actual or prospective material risk to ecosystems") suffices, provided the reasoning is sound and documented.

Mandatory vs Voluntary Disclosure

Even with reduced data points, CSRD reporting remains substantial. The double materiality assessment serves as a filter: topics assessed as material require full disclosure per the relevant ESRS; immaterial topics may be briefly explained or omitted entirely.

However, certain disclosures remain mandatory regardless of materiality:

• ESRS 2 General Disclosures (governance, strategy, impact management)

• Climate change (ESRS E1) requires at minimum explanation if deemed immaterial

• Own workforce (ESRS S1) follows similar baseline requirements

This tiered approach balances comprehensiveness with proportionality—ensuring transparency on fundamental sustainability matters whilst allowing focused reporting on truly material topics.

Business Case & ROI Considerations

The Strategic Value of Rigorous Materiality Assessment

Whilst compliance drives initial adoption, the business case for thorough double materiality assessment extends well beyond avoiding regulatory penalties. Organisations that invest in robust materiality processes report several strategic benefits:

Executive Engagement Catalyst

The double materiality assessment requires senior leadership involvement in identifying material matters and prioritising stakeholder groups. This creates a structured forum for sustainability discussions at board level—particularly valuable in organisations where ESG typically receives insufficient executive attention.

For SMEs and mid-market companies with limited sustainability expertise, the materiality assessment often represents the first systematic sustainability strategy conversation. Getting this right establishes a foundation for ongoing ESG integration into business planning.

Competitive Intelligence Through Peer Assessment

The materiality assessment process naturally incorporates peer benchmarking to identify industry-standard material topics. This provides legitimate competitive intelligence on sustainability best practices and emerging risks within your sector—insights that inform strategic positioning beyond compliance.

Value Creation Identification

A properly conducted financial and impact materiality assessment reveals business opportunities often obscured by operational focus. Examples include:

• Energy efficiency investments with measurable payback periods

• Circular economy innovations reducing material costs whilst improving environmental impact

• Sustainable product development responding to emerging customer expectations

• Supply chain resilience measures addressing climate risks before they materialise

The structured IRO assessment methodology ensures these opportunities are systematically identified rather than discovered ad-hoc.

Enhanced Stakeholder Relations

The stakeholder engagement component strengthens relationships with employees, suppliers, customers, and local communities. Many organisations report improved employee engagement and supplier collaboration following materiality assessment—benefits that persist beyond the initial reporting cycle.

Cost-Benefit Reality Check

The investment in double materiality assessment varies significantly based on organisational complexity:

DIY Approach: Mid-sized organisations with clear business models and limited value chain complexity can conduct meaningful assessments using internal resources and standard tools (surveys, workshops, Excel-based documentation). Budget €10,000-30,000 for external facilitation and validation.

Consultancy Support: Complex organisations with international operations, intricate value chains, or multiple business units typically benefit from expert guidance. Investment ranges from €30,000-100,000+ depending on scope—justified by the materiality assessment's multi-year validity and strategic insights.

Software Tools: Whilst basic materiality matrices don't require specialised software, managing the resulting data across 1,000+ ESRS data points increasingly demands structured solutions. Audit-trail requirements and assurance preparation make Excel-based approaches risky for larger organisations. Budget €15,000-50,000 annually for sustainability data management platforms.

The ROI calculation should include avoided costs (regulatory penalties, assurance delays, remedial work), efficiency gains (focused reporting on material topics only), and strategic benefits (stakeholder trust, market positioning, risk mitigation).

Implementation Strategies by Organisation Type

Startups & Growth Companies

For startups—particularly those targeting Article 8 or Article 9 venture capital funds—voluntary sustainability reporting provides strategic differentiation. Even organisations below CSRD thresholds benefit from conducting a simplified double materiality assessment:

Streamlined Approach:

• Focus the financial materiality assessment on investor-relevant sustainability risks (climate transition exposure, social licence to operate, governance red flags)

• Conduct impact materiality assessment aligned with your core value proposition (e.g., climate impact for ClimateTech, social outcomes for HealthTech)

• Document methodology and results—creating audit-ready foundations for future scaling

• Use frameworks like VSME standards for proportionate reporting

VC Due Diligence Preparation: Increasingly, sophisticated investors conduct ESG due diligence during funding rounds. A documented materiality assessment demonstrates governance maturity and reduces perceived risks—potentially improving valuation multiples.

Mid-Market Enterprises

Mid-market companies (€50M-500M revenue) represent the largest cohort entering CSRD compliance in 2025-2026. This segment faces particular challenges: significant enough for mandatory reporting, yet often lacking dedicated sustainability resources.

Pragmatic Implementation:

• Year 1: Conduct double materiality assessment using the top-down methodology—leverage industry templates and peer benchmarks to accelerate the process

• Year 2: Implement data collection systems for material topics only—avoid premature investment in comprehensive ESG data platforms

• Year 3: Prepare for limited assurance requirements (2026 onwards) through internal control documentation

Resource Optimisation: Mid-market organisations benefit most from hybrid approaches—external expertise for materiality assessment design and validation, internal teams for stakeholder engagement and data collection. This balances cost efficiency with quality assurance.

Consider exploring materiality assessment screening tools to accelerate preliminary analysis before detailed assessment.

International Corporations

Large enterprises with diverse operations across geographies and sectors face additional complexity in double materiality assessment:

Segmented Approach: Conduct materiality assessments at relevant operational levels (business units, geographies) whilst ensuring consolidated group-level analysis captures strategic themes. This granularity ensures material matters aren't obscured by aggregation.

Value Chain Mapping: Upstream and downstream value chain analysis becomes critical—particularly for manufactured goods with complex supply chains. New regulations increasingly hold companies accountable for value chain impacts, making thorough mapping essential for both impact and financial materiality.

Assurance Readiness: Large corporations face reasonable assurance requirements (equivalent to financial audit rigour) from 2028. Building robust internal controls, documentation standards, and evidence trails during the initial materiality assessment dramatically reduces future assurance costs.

Venture Capital & Private Equity

For investment managers, double materiality assessment serves dual purposes: ensuring portfolio companies meet sustainability reporting obligations whilst providing ESG data for fund-level reporting under the Sustainable Finance Disclosure Regulation (SFDR).

Portfolio-Level Approach:

• Establish standardised materiality assessment methodology across portfolio companies—enabling comparability and aggregation

• Prioritise financially material sustainability risks that could impair portfolio value

• Integrate impact materiality assessment into investment thesis validation—particularly for Article 9 funds requiring positive sustainability outcomes

LP Reporting Excellence: Limited partners increasingly demand robust ESG data and impact metrics. Portfolio companies with documented materiality assessments provide the foundation for credible fund-level sustainability reporting.

Explore ESG investment frameworks to align materiality assessment with investor expectations.

Integration: From Assessment to Action

Translating Material Topics into Corporate Strategy

The double materiality assessment delivers analytical clarity—but value creation requires translating insights into action. This integration follows a structured path:

1. Strategic Prioritisation

Not all material matters demand immediate action. Prioritise based on:

• Urgency: Regulatory deadlines, stakeholder pressure intensity

• Impact potential: Magnitude of negative impacts or positive value creation

• Resource requirements: Implementation complexity and investment needs

• Risk exposure: Probability and severity of material financial effects

2. Integration into Business Planning

Material sustainability topics should inform:

• Capital allocation decisions (e.g., energy efficiency investments reducing scope 2 emissions whilst improving operational costs)

• Product development roadmaps (circular economy opportunities, sustainable materials)

• Supply chain strategy (climate resilience, human rights due diligence)

• Market positioning (sustainability as differentiation for customer segments valuing environmental impact)

For practical implementation guidance, review ESRS compliance strategies.

3. KPI Cascade

Translate material topics into measurable key performance indicators across organisational levels. Financial materiality drives risk-adjusted financial metrics; impact materiality translates to absolute sustainability performance indicators (emissions reductions, water consumption, workforce diversity).

4. Reporting Integration

The materiality assessment directly determines CSRD reporting scope. For each material topic:

• Apply the relevant ESRS disclosure requirements fully

• Establish data collection processes ensuring audit quality

• Create internal controls documenting methodology and assumptions

• Develop narrative explanations connecting material matters to business strategy

This systematic approach ensures the materiality assessment transcends compliance to drive genuine business transformation.

Change Management & Organisational Implementation

Building Internal Capability

Successful double materiality assessment requires cross-functional collaboration rarely present in traditional organisational structures:

Governance Structure:

• Executive ownership (CFO or CSO) ensuring strategic alignment

• Sustainability team leadership coordinating the assessment process

• Finance involvement connecting material financial effects to business planning

• Operations input on value chain impacts and implementation feasibility

• Legal and compliance reviewing regulatory requirements and exposure

Stakeholder Engagement Infrastructure:

Engaging stakeholders systematically demands dedicated processes:

• Investor relations managing financial materiality dialogues

• HR conducting employee surveys and consultations

• Procurement engaging suppliers on upstream value chain impacts

• Customer-facing teams gathering client sustainability expectations

• Community relations addressing local communities and affected stakeholders

Capacity Building:

The double materiality process builds organisational sustainability literacy. Ensure knowledge transfer through:

• Cross-functional workshops explaining impact and financial materiality concepts

• Documentation accessible to non-specialists

• Regular updates as the regulatory framework evolves

• External training on ESRS requirements and best practices

This capability development pays dividends beyond initial compliance—creating foundations for ongoing sustainability integration.

Common Implementation Challenges

Challenge 1: Data Availability

Many material sustainability issues lack established measurement systems. The materiality assessment identifies these gaps, enabling targeted investment in data infrastructure rather than attempting comprehensive measurement prematurely.

Challenge 2: Stakeholder Fatigue

Organisations conducting parallel ESG initiatives (CSRD, CBAM, supply chain due diligence, investor ESG questionnaires) risk overwhelming stakeholders. Coordinate engagement activities to reduce burden whilst maintaining quality—consolidated surveys addressing multiple frameworks simultaneously where feasible.

Challenge 3: Evolving Standards

ESRS continue evolving through implementation guidance and future amendments. Build flexibility into your materiality assessment methodology, anticipating refinements rather than treating initial results as immutable.

For detailed guidance on navigating these challenges, explore resources on CSRD reporting best practices.

Visualisation & Documentation

The Materiality Matrix: Form and Function

Whilst no longer formally mandatory under the 2025 guidance, visual materiality matrices remain valuable communication tools. An effective matrix plots material topics across two axes:

X-Axis (Financial Materiality): The magnitude of potential financial impacts on the company's performance, position, and cash flows—considering short, medium and long-term horizons.

Y-Axis (Impact Materiality): The severity and likelihood of the company's impacts on people and the planet—addressing both negative impacts requiring mitigation and positive impacts worth amplifying.

Topics positioned in the upper-right quadrant represent high double materiality—requiring priority attention and comprehensive CSRD disclosure. The matrix enables at-a-glance understanding of strategic sustainability priorities for executive decision-making.

Documentation Requirements

Assurance providers will scrutinise your materiality assessment methodology rigorously. Maintain documentation including:

• Business model and value chain analysis justifying topic selection

• Stakeholder engagement methodology and evidence of consultations

• IRO assessment criteria and scoring methodology

• Materiality thresholds and their justification

• Decisions to exclude topics as immaterial, with supporting rationale

• Approval process and governance sign-off

This documentation serves dual purposes: enabling external assurance whilst creating an audit trail supporting materiality conclusions if challenged by regulators or stakeholders.

For practical templates and frameworks, review double materiality analysis resources.

Technology & Tools Evolution

Software Landscape 2025

The assertion that "Excel suffices" requires significant qualification in 2025. Whilst basic materiality matrix creation remains possible in spreadsheets, several factors drive organisations towards specialised solutions:

Audit Trail Requirements: Assurance providers demand documented evidence trails showing how data was collected, validated, and aggregated. Excel's limited version control and change tracking create assurance risks for organisations facing mandatory external verification.

Data Point Management: Even with the 57% reduction, material topics still cascade into hundreds of required ESRS data points. Managing these at scale—particularly across multiple reporting entities—benefits from structured database approaches rather than spreadsheet proliferation.

AI-Assisted Analysis: Emerging tools leverage artificial intelligence to accelerate preliminary IRO mapping, suggesting potential material topics based on sector benchmarks and business model descriptions. Whilst human judgment remains essential, AI support reduces assessment timescales significantly.

Integration Requirements: CSRD data increasingly integrates with financial reporting systems, risk registers, and operational databases. Purpose-built sustainability platforms offer connectivity that manual processes struggle to maintain.

Decision Framework:

• Startups/SMEs: Begin with Excel-based approaches, investing in software only as complexity demands

• Mid-Market: Evaluate lightweight sustainability data platforms (€15-30K annually) offering balance between functionality and cost

• Large Enterprises: Enterprise-grade solutions (€50-150K annually) justify costs through efficiency gains, assurance readiness, and integration capabilities

Emerging Technology Trends

Blockchain for Value Chain Traceability: Distributed ledger technology enables verified sustainability data across complex supply chains—particularly relevant for upstream and downstream value chain impact assessment.

IoT Sensors for Real-Time Measurement: Connected devices automate environmental impact data collection (energy, water, emissions), improving accuracy whilst reducing manual effort.

Machine Learning for Materiality Prediction: Advanced analytics identify patterns across peer organisations, flagging potentially material topics based on business characteristics—accelerating preliminary assessment phases.

These technologies mature rapidly; organisations should monitor developments whilst avoiding premature investment in unproven solutions.

Future Outlook & Strategic Recommendations

The Assurance Challenge: 2026 and Beyond

Limited assurance (review-level verification) becomes mandatory for many organisations from 2026, escalating to reasonable assurance (audit-level rigour) by 2028. The materiality assessment will be the first element assurance providers examine—it determines the entire reporting scope, making methodology defensiveness critical.

Preparation Priorities:

• Document materiality methodology comprehensively during the initial assessment

• Establish internal controls over sustainability data equivalent to financial controls

• Conduct dry-run assurance engagements identifying weaknesses before mandatory requirements

• Budget adequately—sustainability assurance costs will approach financial audit expenses for complex organisations

Regulatory Evolution

The Omnibus Package represents pragmatic refinement rather than final state. Expect continued evolution:

Sector-Specific Standards: Delayed but not abandoned—industry-specific ESRS will eventually demand deeper materiality analysis within sector contexts.

Global Alignment: International Sustainability Standards Board (ISSB) standards create partial overlap with ESRS on financial materiality. Organisations with global reporting obligations should anticipate consolidated approaches bridging frameworks.

Supply Chain Extension: The Corporate Sustainability Due Diligence Directive (CSDDD) and other value chain regulations will intensify pressure on upstream and downstream impact assessment—double materiality provides the analytical foundation for this expanding scope.

Strategic Positioning Recommendations

For Startups:

• Conduct voluntary materiality assessment early—it's cheaper to embed sustainability governance from inception than retrofit later

• Align with VC ESG expectations through documented materiality

• Position sustainability integration as investor de-risking rather than compliance burden

For Mid-Market Companies:

• Leverage simplified approaches and industry templates—avoid gold-plating initial assessments

• Focus resources on financially material topics with measurable ROI

• Build sustainability capability incrementally rather than attempting comprehensive transformation immediately

• Explore materiality screening services to accelerate initial analysis

For Large Enterprises:

• Integrate double materiality assessment into existing enterprise risk management frameworks

• Develop sector-leading sustainability reporting positioning your organisation for competitive advantage

• Invest in robust data infrastructure supporting both compliance and strategic decision-making

• Prepare for reasonable assurance requirements through early control environment maturation

For Investors:

• Standardise materiality assessment methodology across portfolio companies

• Integrate ESG materiality into investment due diligence systematically

• Use portfolio-level materiality insights to inform impact carry mechanisms

• Position fund-level sustainability reporting as LP relation differentiator

Final Perspective

Double materiality assessment represents more than regulatory compliance—it's a strategic diagnostic revealing both risks requiring mitigation and opportunities worth pursuing. Organisations treating it as tick-box bureaucracy miss the analytical value whilst likely producing defensively weak outputs that fail assurance.

The 2025 regulatory simplifications remove excuses: the process is more pragmatic, thresholds are proportionate, and the burden focuses on genuinely material matters. This creates space for strategic thoughtfulness rather than comprehensive exhaustion.

Those conducting rigorous, well-documented materiality assessments in 2025 position themselves advantageously for the assurance era beginning 2026. Those deferring or superficially completing assessments will face costly remediation under external scrutiny.

The choice isn't whether to engage with double materiality—it's whether to do so strategically or reactively.

Frequently Asked Questions

Why is double materiality assessment (DMA) important for CSRD?

Double materiality assessment determines which sustainability matters require disclosure under CSRD. Without it, organisations cannot define their reporting scope—the DMA is the mandatory foundation for all subsequent ESRS compliance work. It also ensures resources focus on genuinely material impacts, risks and opportunities rather than exhaustive disclosure across all possible topics.

What is the difference between CSRD and ESRS?

The Corporate Sustainability Reporting Directive (CSRD) is the EU regulation defining who must report, when reporting begins, and the legal framework for assurance. The European Sustainability Reporting Standards (ESRS) are the technical standards defining what to disclose and how. CSRD creates the obligation; ESRS provides the detailed requirements.

What is the difference between materiality and double materiality?

Traditional materiality considers only how sustainability issues affect the company's financial performance—the "outside-in" perspective focused on financial risks and opportunities. Double materiality adds impact materiality: how the company's operations affect people and the planet—the "inside-out" perspective on actual and potential sustainability impacts. CSRD requires both dimensions.

Is double materiality assessment mandatory?

Yes, for all organisations within CSRD scope. The materiality assessment is not optional—it's the required first step determining which ESRS disclosure requirements apply. Organisations cannot selectively report on preferred topics; the assessment must follow the structured methodology defined in ESRS 1 and supported by EFRAG implementation guidance.

How often should we update our materiality assessment?

EFRAG guidance suggests reviewing materiality every two to three years absent significant changes. However, material business model shifts, major regulatory developments, or changing stakeholder expectations may trigger earlier reassessment. The key is balancing currency with efficiency—annual updates create excessive burden for typically stable materiality conclusions.

Can we use existing GRI materiality assessments for CSRD?

GRI materiality assessments provide useful inputs—particularly for impact materiality—but don't satisfy CSRD requirements independently. The financial materiality dimension requires additional analysis, and the methodology must align with ESRS requirements on IRO assessment and stakeholder engagement. You may leverage existing work whilst supplementing gaps.

What role does the value chain play in materiality assessment?

CSRD defines materiality across the entire value chain—upstream suppliers and downstream distribution, use, and end-of-life. Material impacts often occur in the value chain rather than direct operations (e.g., scope 3 emissions, supply chain human rights risks). The 2025 guidance emphasises value chain mapping as a starting point for identifying potentially material topics.

How do we balance financial and impact materiality when they conflict?

Double materiality doesn't require choosing—topics material on either dimension require disclosure. A topic might be financially immaterial but have severe environmental impact (e.g., pollution from a minor production site); this still demands reporting on the impact materiality dimension. The assessment evaluates both perspectives independently.

What's the consequence of incorrect materiality assessment?

Errors in materiality assessment cascade into incorrect reporting scope—potentially omitting required disclosures or providing irrelevant information. Assurance providers will challenge methodology and conclusions; material failures could prevent positive assurance opinions. Additionally, regulators may question obviously incomplete assessments, creating enforcement risks.

Should SMEs conduct materiality assessments even if not CSRD-mandatory?

For SMEs in large corporate value chains or targeting sustainability-conscious investors, voluntary materiality assessment provides strategic value. It demonstrates governance maturity, supports VSME reporting, and prepares for potential future mandatory requirements. The investment is proportionate to organisational complexity.

How Fiegenbaum Solutions Can Support Your Materiality Assessment

Conducting a defensible double materiality assessment requires balancing methodological rigour with pragmatic efficiency. Drawing on experience across 300+ sustainability projects, we provide targeted support:

Strategic Scoping: Business model analysis identifying potentially material topics through value chain mapping and sector benchmark comparison—accelerating preliminary assessment whilst ensuring comprehensiveness.

Stakeholder Engagement Design: Proportionate engagement methodologies balancing stakeholder input quality with resource efficiency—avoiding both superficial consultation and excessive burden.

IRO Assessment Facilitation: Structured workshops evaluating impacts, risks and opportunities against financial and impact materiality thresholds—applying the refined 2025 EFRAG methodology.

Documentation Excellence: Audit-ready documentation supporting materiality conclusions through clear methodology description, evidence trails, and governance approvals—essential for future assurance readiness.

Integration Support: Translating materiality insights into actionable sustainability strategies, KPI frameworks, and CSRD reporting structures—ensuring the assessment delivers strategic value beyond compliance.

Whether you're approaching your first materiality assessment, refining existing processes ahead of assurance requirements, or integrating ESG into investment due diligence, we can help navigate the complexity efficiently.

Contact us to discuss your specific materiality assessment needs.

References

European Financial Reporting Advisory Group. (2025). ESRS Implementation Guidance 1: Materiality Assessment.

European Commission. (2024). Directive (EU) 2022/2464 – Corporate Sustainability Reporting Directive.

European Financial Reporting Advisory Group. (2023). European Sustainability Reporting Standards Set 1.

Global Reporting Initiative. (2021). GRI Universal Standards 2021.

International Sustainability Standards Board. (2023). IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.

United Nations. (2011). Guiding Principles on Business and Human Rights.