Double materiality assessment

A double materiality assessment decides which sustainability topics a company reports under the ESRS, by asking of each whether its impacts are material and whether its risks or opportunities are.

The 2026 revision of ESRS 1 kept the test and loosened the method: a top-down route, qualitative conclusions, and no duty to assess every possible impact.

This page walks the method paragraph by paragraph, shows what EFRAG’s IG 1 still adds, and ends with what the company must disclose.

The assessment is the gate every ESRS statement passes through: it decides which topical standards apply and which of their sub-topics are reported.

It tests the two limbs of Article 19a(1) of the Accounting Directive: the company’s impacts on sustainability matters, and how those matters affect the company.

A topic is material, and reported, if it passes either test.

The output is twofold: a list of material topics and sub-topics, and a record of how the company reached it, which it must disclose.

Since the revision, the gate also works the other way: information a datapoint prescribes that is not material must not be disclosed (¶24).

The concept itself is on double materiality, and the standards the assessment opens on the European Sustainability Reporting Standards.

For an actual negative impact, materiality is judged on severity alone; for a potential one, on severity and likelihood together (¶40).

Severity is scale, scope and irremediable character, and any one of the three can make an impact severe (AR 22).

For a potential negative human-rights impact, severity takes precedence over likelihood.

Positive impacts are judged on scale and scope, plus likelihood if potential, and are never netted against negative ones (¶41, ¶44).

Risks and opportunities are judged on the likelihood of occurrence and the potential magnitude of the financial effects (¶50), using likely scenarios or forecasts where they help (AR 31).

AR 13 relaxes the arithmetic: quantitative information or scoring is “not necessarily required”, and the company need not search exhaustively for information.

AR 15 adds that a company need not analyse each severity characteristic, or every time horizon, where a conclusion can be reached without doing so.

Policies and actions count only if implemented and reasonably effective; a policy that relies on future actions does not reduce an impact’s assessed severity (¶43, AR 27).

The two limbs are assessed separately and read together.

Paragraph 35 requires the company to consider how they interact: an impact can be financially material from the start or become so later.

Paragraph 36 makes impacts the usual starting point, and adds that some risks, such as physical climate risk, do not arise from the company’s impacts at all.

Dependencies on natural, human and social resources are a source of risk in their own right, whether or not the company affects those resources (¶49).

The concept is worked through on double materiality.

The assessment is itself disclosed, under revised ESRS 2: IRO-1 describes the process and IRO-2 reports the outcome.

AR 24 of ESRS 2 bars boilerplate: the company describes its own process, not the fact that it applied the criteria in ESRS 1 or followed a recommended process.

IRO-2 also requires a table of every datapoint derived from other EU legislation, showing where each is reported or that it is “not material” (¶37(g)).

SBM-3 then connects the material matters to the company’s strategy, business model and financial effects.

The 2023 versions of these requirements, still usable for 2026, are in Delegated Regulation (EU) 2023/2772; the EU directive behind them is the CSRD.

A fictional manufacturer separately assesses a community impact and a production risk from the same water dependency.

An editorial evidence trail connects the business context, judgement and resulting disclosures.