Double materiality, step by step

A double materiality assessment (DMA) decides which ESRS topics you have to disclose. Auditors review the DMA before they review the report — get it wrong and the whole disclosure is at risk.

The two dimensions

A topic is material if it crosses the threshold on either dimension:

• Impact materiality — your company’s actual or potential impact on people and the environment, in your operations or your value chain.
• Financial materiality — sustainability-related risks and opportunities that affect your financial position, performance, cash flow, access to finance or cost of capital.

You assess them separately. A topic that meets only one threshold is still material.

The 5-step process

1. Map your stakeholders

Identify who informs your assessment:

• Internal — board, management, workers’ representatives, department heads.
• External — investors, customers, suppliers, regulators, communities, NGOs, industry bodies.

Document who you engaged and how.

2. Build a long list of topics

Start from the ESRS topical standards (E1–E5, S1–S4, G1) and their sub-topics. Add evidence of potential materiality from:

• Industry benchmarks (what peers report as material).
• Internal risk registers.
• Customer or investor surveys.
• Sector regulation and emerging legislation.

Don’t pre-filter at this stage — capture everything plausible.

3. Score impact and financial materiality

For each topic, score both dimensions:

• Impact = severity × likelihood. Severity is scale × scope × irremediability.
• Financial = magnitude of financial effect × likelihood.

Use a consistent scale (e.g. 1–5) and apply the same definitions across all topics. Document your scoring rubric — auditors will ask for it.

4. Set thresholds and select material topics

Define what counts as “material” on each axis. Any topic that crosses either threshold is in scope. Both axes is not required.

Plot the results on a 2-axis matrix (impact horizontal, financial vertical) — it’s the standard visualisation auditors and stakeholders expect.

5. Document and validate

The methodology, scoring criteria, stakeholder engagement records and final list need to be thoroughly documented. Get formal approval from leadership (board or audit committee depending on your governance).

Common pitfalls

• Desk-only exercise: skipping real stakeholder engagement. Auditors expect evidence of consultation, not a literature review.
• Mixing the two dimensions: scoring “how important is climate” instead of scoring impact and financial separately. They’re different questions.
• Setting thresholds too high: a topic that’s material to even one stakeholder group can be enough to require disclosure.
• No board sign-off: if leadership hasn’t approved the result, the assessment carries no governance weight.

Output

The DMA produces:

1. A documented methodology.
2. The list of material topics, with the dimension(s) on which each is material.
3. The materiality matrix.
4. Records of stakeholder engagement.

Everything downstream — data collection, drafting, assurance — flows from that list.