'The double' materiality assessment required from the EU Corporate Sustainability Reporting Directive (CSRD) often appears complex at first glance — but with the right approach, it can be implemented in a targeted manner. To support companies in this process, the European Financial Reporting Advisory Group (EFRAG) has published finalized implementation guidelines and a simplified set of standards to provide guidance. This is intended to create clarity and make the materiality analysis more accessible, focusing on a significantly reduced set of mandatory data points.

Although there is no one-size-fits-all materiality assessment, we’ve created a consolidated guide of information based on EFRAG’s documentation to guide you in carrying out your double materiality assessment when it comes time to prepare your reporting according to the CSRD. Following the 2026 Omnibus updates, this process is now primarily mandatory for companies with over 1,000 employees and €450M in turnover

Keep in mind that the individual process design of the assessment is based on the specific circumstances of your own company, such as the type of economic activity, the geographic location, the business relationships or value chains of your company. The guidelines can therefore only serve as a basis.

Performing a Double Materiality Assessment based on the ESRS

According to EFRAG, the analysis of materiality under CSRD should be designed to identify all material impacts, risks and opportunities and, in turn, exclude those that are not material to your organization. With 2026 Omnibus updates, this exclusion process is now more critical, as the total number of mandatory data points has been reduced drastically to simplify the reporting burden.

EFRAG describes three main steps for conducting a materiality assessment:

1. Understanding the (Company and Value Chain) Context and extract potential sustainability matters
2. Based on step 1, Identify impacts, risks and opportunities (IROs) and list them. 
3. Value the IROs and validate your results with stakeholders  to create a final list of sustainability topics to be included in reporting

The aim of these steps is to obtain a list of material impacts, risks and opportunities to report on.

In the following, you can find an over view of the steps to perform a materiality assessment:

Step 1) Understand the Context and Define a Strategy for Stakeholder Involvement

Set the stage for your double materiality assessment:

1. Analyze your company’s activities, business model, business relationships and value chain (upstream and/or downstream) 

• Review your company’s business plan, strategies, financial statements, and investor-related information (if applicable)
• Map business activities and products/services in relation to their geographic locations
• Map the type and nature of economic relationships and the upstream and/or downstream value chain. Note the "Value Chain Cap": You are now legally restricted from requesting data from partners with fewer than 1,000 employees that exceeds the simplified VSME (Voluntary SME) standard
• Identify the scope of information for the reporting regarding your company’s own operations and the value chain

2. Analyze your the legal and regulatory environment

• Factor in relevant EU and sector specific regulation
• Analyze media reports, peers and benchmarks, as well as other publications and scientific articles on sustainability developments

3. Set a time frame for your dual materiality analysis based on the time definition of ESRS 1:

• Short-term: period adopted by the undertaking as the reporting period in its financial statements
• Medium-term: from the end of the short-term reporting period up to 5 years
• Long-term: more than 5 years

4. Define how you plan to engage stakeholders

• Analyze current stakeholder-directed activities (exchange with other departments, such as communication or investor relations)
• Identify key stakeholders and categorize them according to the nature of the relationship, activity, or product and service. When engaging SME partners (<1,000 employees), remember they have a statutory right to provide only VSME-level data for your CSRD report
• Define when to involve stakeholders in the materiality assessment process (e.g., at the stage of validating the list of potential sustainability topics, or scaling the severity and time horizons of impact materiality)

Engaging Stakeholders in the Assessment

Stakeholders are involved in the process to gain an understanding of the actual and potential impacts of the company on people and the planet. Their input and feedback provides an explanation of the importance of sustainability issues from the perspective of the concerned stakeholder groups.

Step 2) Identify Potential Material Topics and their Impacts, Risks, and Opportunities

If applicable, base this process on previously conducted analyses and processes, including

• Existing materiality assessments based on other frameworks (e.g., GRI)
• Existing due diligence processes (aligned with CSDDD)
• Previous feedback and inputs from stakeholders (e.g., surveys for customer or employee satisfaction) 
• Comparisons with benchmarks in the sector

Create a list of potential material sustainability matters (topics / sub-topics / sub-sub topics and identify the related impacts, risks and opportunities, leveraging your previous analyses and processes.

1. Top-down: 

Identify the list of sustainability topics first, then assess if material IROs exist. This is now the preferred method to ensure alignment with the Omnibus I "Quick Fix" reductions

Two approaches:

• Start with the overview of topics covered by the ESRS with regard to the Environmental, Social and Governance Standards (based on AR 16) and complement this list with topics from previous analyses (see 1), or
• Start with the list of topics from existing enterprise risk management systems, or the due diligence processes and complement this list based on a comparison with the topics covered by the ESRS (based on AR 16)

2. Bottom up:

Identify the list of sustainability matters based on impacts, risks, and opportunities at a detailed level. Categorize them into topics and sub-topics and compare them to the topics covered by the ESRS (based on AR 16)

Step 3) Assess the Materiality of the Identified Impacts, Risks, and Opportunities 

This process involves assessing both impact materiality and financial materiality based on the list of potentially material topics with the aim of determining the final list of material topics. 

Examples for Impact Materiality Analysis: Assessing Materiality for Actual Impacts

Actual impacts are determined based on the severity (scale, scope, and irremediability) and categorized from low to high. All impacts exceeding a certain threshold are considered material.

• Scale: The gravity of the impact (e.g., human rights violations)
• Scope: The reach of the impact (e.g., number of affected people or regions)
• Irremediability: The difficulty of repairing the damage (negative impacts only)

More specifically, an example of an impact which affects scale could be a negative impact which leads to a violation of human rights or non-compliance with a certain law/regulation. Scope, on the other hand, can be determined more quantitatively by assessing the number of people or regions affected by an impact, such as the number of people a negative impact would affect.

Steps to conduct:

1. Determine the scale of impact
2. Determine the scope of impact
3. Determine the irremediability of impact (for negative impacts only)

Examples for Impact Materiality Analysis: Assessing Materiality for Potential Impacts 

Potential impacts are measured by considering both severity and likelihood.

Likelihood of an impact can be measured qualitatively or quantitatively depending on the type of impact, for example, the likelihood of a human rights violation to occur. 

However, ESRS 1 also states that severity takes precedence over likelihood when identifying material matters related to human rights impacts.

See below, for an illustrative example thresholds for the materiality of potential impacts, all topics in the dark squares (e.g., Impact 1 and Impact 2) would then be considered material topics (Impact 3 is not material):

Steps to conduct:

1. Determine the severity (based on the above criteria)
2. Estimate the likelihood of occurrence
3. Apply the "Quick Fix" Filter: For 2026, even if a potential impact is material, check if it falls under the two-year phase-in exemptions (such as specific biodiversity or value chain metrics) to streamline your initial reporting cycle.

Guidance: Report based on the Double Materiality Assessment According to CSRD

Reporting must encompass the assessment process and the outcomes in accordance with requirements stated in ESRS 2 IRO-1, ESRS 2 SBM-3, and ESRS 2 IRO-2.

Following the materiality assessment process, the company is required report on:

1. The process to identify and assess its material impacts risks and opportunities (ESRS 2 IRO-1). This must now include a description of the "scoping exercise" used to identify high-risk areas in the value chain
2. Material impacts, risks and opportunities and the interaction with its strategy and business model (ESRS 2 SBM-3)
3. Disclosure requirements in ESRS covered by its sustainability reporting (ESRS 2 IRO-2)

ESG Software: Document Double Materiality Analysis and Streamline CSRD Reporting Process

Sunhat’s Proof AI solution supports you in covering all the ESRS disclosure requirements of material topics and simplifies your reporting practice. By reflecting the outcomes of your materiality assessment in a software, you make sure to capture your materiality assessment in a structured and accessible way.

Sunhat’s software solution can help you to:

• find synergies between existing frameworks by leveraging the materiality assessment 
• gain an overview of the outcomes of the materiality assessment and the relevant disclosure requirements
• get started with easy-to-use templates based on the ESRS Application Requirements and EFRAG data point list — all customized to your materiality assessment‍

If you’re interested in getting to know more about Sunhat’s smooth and intuitive CSRD module, request a demo.