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    Double materiality assessment explained: how to do one under the revised ESRS in 2026

    A double materiality assessment is the process CSRD reporters use to decide which sustainability matters to report. A matter is material if the company has a significant impact on people or the environment (impact materiality), if it creates financial risks or opportunities (financial materiality), or both. The revised ESRS now also allow a top-down approach.

    Last updated 13 November 2026 · By Ella Sustainability Team

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    What is a double materiality assessment?

    A double materiality assessment (DMA) is how a company subject to the Corporate Sustainability Reporting Directive (CSRD) decides what goes into its sustainability statement under the European Sustainability Reporting Standards (ESRS). It looks at every relevant sustainability matter from two directions. Impact materiality asks how the company affects people and the environment, across its own operations and its upstream and downstream value chain. Financial materiality asks how sustainability matters affect the company, through anticipated financial effects on performance, financial position, cash flows, access to finance and cost of capital. A matter is material if it is material from either perspective, or from both. The output is a list of material impacts, risks and opportunities (IROs), and that list drives which disclosure requirements you report against.
    What is a double materiality assessment?
    PerspectiveQuestion it answersHow it is judgedTypical inputs
    Impact materialityHow does the company affect people and the environment?Severity (scale, scope and irremediable character) of negative impacts, plus likelihood for potential impactsEmissions data, workforce data, supplier and sector risk, stakeholder input
    Financial materialityHow do sustainability matters affect the company?Likelihood and magnitude of anticipated financial effects, against quantitative or qualitative thresholdsEnterprise risk register, finance team input, customer and regulatory exposure
    Double materialityWhich matters must be reported?Material from either perspective or bothCombined IRO list, signed off by management

    Double materiality vs single materiality: how ESRS, ISSB and GRI differ

    The term double materiality is specific to the EU approach. Other frameworks look through one lens, which matters if your group reports in more than one regime or already uses GRI. IFRS S1 and IFRS S2, and the UK Sustainability Reporting Standards built on them, focus on financial materiality: information useful to investors. GRI focuses on impact materiality. EFRAG's implementation guidance on materiality (IG 1) includes chapters on reusing GRI and ISSB work, so a group that already reports under either has a head start on one half of the assessment.
    Double materiality vs single materiality: how ESRS, ISSB and GRI differ
    FrameworkMateriality lensWho it serves
    ESRS (CSRD)Double: impact and financialInvestors, lenders, civil society and affected stakeholders
    IFRS S1 and S2 / UK SRSFinancial (single)Investors and capital providers
    GRI StandardsImpactA wide range of stakeholders

    How to do a double materiality assessment: the four steps

    EFRAG's IG 1 sets the assessment out in four steps, and the revised ESRS keep that shape. The work in each step is mostly data collection and documentation, not scoring. 1. Understand the context: business model, strategy, value chain, locations, and the stakeholders affected. 2. Identify actual and potential impacts, risks and opportunities across own operations and the value chain. 3. Assess and determine which IROs are material, using severity and likelihood for impacts and likelihood and magnitude of financial effects for risks and opportunities, against thresholds you set and document. 4. Report: disclose the process (the IRO-1 disclosure) and the material IROs, then map them to the disclosure requirements you must answer.
    How to do a double materiality assessment: the four steps
    StepMain outputWho usually owns itEvidence an auditor will ask for
    1. ContextValue chain map and stakeholder listSustainability lead with strategy and procurementOrg chart, entity list, supplier spend by category
    2. Identify IROsLong list of impacts, risks and opportunitiesSustainability lead with risk and operationsSources for each IRO: data, sector research, stakeholder input
    3. AssessScored or reasoned shortlist against thresholdsCross-functional working group, finance for financial effectsThreshold rationale, scores or written reasoning, sign-off
    4. ReportIRO-1 process disclosure and list of material mattersSustainability lead with reporting or financeMapping from material IROs to ESRS disclosure requirements

    How do you score impact and financial materiality?

    For negative impacts, severity is built from three parts: scale (how grave the impact is), scope (how widespread) and irremediable character (how hard it is to put right). Positive impacts are judged on scale and scope. For potential impacts you add likelihood. For risks and opportunities you judge the likelihood and the size of the anticipated financial effect over short, medium and long-term time horizons. Most teams use a 1 to 5 scale for each part and set a threshold for what counts as material. The scale matters less than writing down why the threshold sits where it does, because that rationale is what gets tested.
    How do you score impact and financial materiality?
    ScoreScale (impact)Scope (impact)Financial magnitude (risk or opportunity)
    1Minimal harm or benefitIsolated, one site or a few peopleNegligible against your financial thresholds
    3Moderate harm or benefitSeveral sites, a business unit or a supplier groupNoticeable effect on a business line's results
    5Severe harm, for example to health or rightsWidespread across the group or value chainMaterial effect on group results, cash flows or cost of capital

    What the revised ESRS change for double materiality in 2026 and 2027

    The European Commission adopted the revised, simplified ESRS on 3 July 2026. They were published in the Official Journal on 21 September 2026 as Delegated Regulation (EU) 2026/1563, entered into force on 10 November 2026 and apply to financial years beginning on or after 1 January 2027, so first reports land in 2028. The double materiality principle stays. What changes is how much work it takes. A top-down approach is now permitted alongside bottom-up: you start from the business model, strategy and value chain and reason about matters where the answer is clear, instead of scoring every sub-topic. The AR 16 topic list becomes illustrative. Companies can use reasonable and supportable information available without undue cost or effort, with a limit on data collection from the value chain, and can report at topic, sub-topic or IRO level. Mandatory datapoints fall by more than 60%. For financial years starting in 2026, companies in scope can apply the existing ESRS, the existing ESRS with a set of reliefs from the new regulation (including the top-down approach and the value chain limit), or the revised ESRS in full, and must state which version they used.
    What the revised ESRS change for double materiality in 2026 and 2027
    AreaESRS (2023)Revised ESRS (2026)
    ApproachBottom-up identification across the AR 16 listTop-down permitted alongside bottom-up; AR 16 list illustrative
    Value chain informationCollect where needed for the assessmentReasonable and supportable information without undue cost or effort, with a limit on value chain data collection
    Reporting levelTopic and sub-topic structureTopic, sub-topic or IRO level
    Mandatory datapointsFull ESRS setCut by more than 60%
    ApplicationApplies until the revised standards take over; still an option for FY2026Mandatory for financial years from 1 January 2027; optional for FY2026

    Top-down or bottom-up: which approach should you use?

    Our view: use both. Take the top-down route for the matters any reader would expect to be material for your sector, such as climate change for most companies with a meaningful energy or travel footprint, or own workforce for a services business. Write the reasoning down properly, because the written justification replaces the scoring trail. Keep bottom-up scoring for the margins: emerging topics, matters a stakeholder has raised, and anything in the value chain where you lack data. That is where judgement gets challenged. The trap we see is treating top-down as a shortcut that needs no evidence. If your reasoning says climate is material because of Scope 3 purchased goods, an auditor will still expect a Scope 3 estimate behind it.
    Top-down or bottom-up: which approach should you use?
    Use top-down whenUse bottom-up when
    The conclusion is obvious for your sector and activitiesThe answer is uncertain or contested
    You have made public commitments on the matterA stakeholder has raised a concern you have not assessed before
    Existing risk management already covers itValue chain exposure is unclear or data is thin

    When do you need to redo a double materiality assessment?

    EFRAG's IG 1 addresses how often to update the assessment, and the revised ESRS make clear you do not have to rebuild it from scratch every year. Revisit it when something material changes: an acquisition or disposal, a new business line, a move into new countries, a change in your value chain, new regulation, or new evidence from stakeholders. Group structure is the trigger teams most often miss. On a recent sales call, a large services group described how adding two European entities to an external ESG assessment changed its result sharply, even though its policies had not changed. A DMA reacts the same way: new entities bring new sites, workforces and suppliers, and the conclusions you documented last year may no longer hold. Keep a short log each year of what changed and whether it affects any IRO. That log is your evidence for carrying the assessment forward.

    The data behind a defensible double materiality assessment

    Scoring workshops get the attention. The evidence behind each IRO is what auditors and limited assurance providers test, and it is the slowest part to pull together. For most large companies the core inputs are an entity and site list, energy and fuel data, a carbon footprint across Scope 1, 2 and 3, workforce data by country, supplier spend by category, existing policies, and the risk register. Each sits with a different owner. Ella is AI-native ESG reporting software built as an agent for this part of the job. It sends collect links to data owners, chases missing responses, reads bills, spend exports and policy documents, and keeps the source on every number, so the evidence behind each material matter is ready when the auditor asks.
    The data behind a defensible double materiality assessment
    EvidenceUsually held byUsed for
    Entity, site and country listFinance or company secretariatStep 1 context and scoping
    Scope 1, 2 and 3 emissionsSustainability or operationsClimate change impact and transition risk
    Headcount, turnover and health and safety dataHROwn workforce impacts
    Supplier spend by category and countryProcurementValue chain impacts and supplier risk
    Risk register and financial thresholdsFinance and riskFinancial materiality

    How Ella helps

    ESG reporting software

    Collect, evidence and report CSRD and VSME data with a source on every number.

    ESG strategy software

    Turn material topics into targets, actions and owners your board can track.

    Carbon accounting software

    Build the Scope 1 to 3 inventory your climate materiality conclusions depend on.

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    Frequently Asked Questions

    What is a double materiality assessment?

    It is the process CSRD reporters use to decide which sustainability matters to disclose under the ESRS. A matter is material if the company has a significant impact on people or the environment, if the matter creates significant financial risks or opportunities for the company, or both.

    How do you do a double materiality assessment step by step?

    Follow the four steps in EFRAG's IG 1: understand the context and value chain, identify actual and potential impacts, risks and opportunities, assess them against documented thresholds, then report the process and the material matters and map them to ESRS disclosure requirements.

    What is the difference between impact materiality and financial materiality?

    Impact materiality looks outward at the company's effects on people and the environment, judged on severity and likelihood. Financial materiality looks inward at how sustainability matters could affect performance, financial position, cash flows, access to finance and cost of capital.

    What changed for double materiality in the revised ESRS?

    The revised ESRS (Delegated Regulation (EU) 2026/1563) keep double materiality but permit a top-down approach, make the AR 16 topic list illustrative, limit value chain data collection and cut mandatory datapoints by more than 60%. They apply to financial years from 1 January 2027.

    Can we use the top-down approach for our 2026 report?

    Yes, if you are in CSRD scope for a financial year starting in 2026. You can apply the existing ESRS with a set of reliefs from the revised standards, which include the top-down approach, or apply the revised ESRS in full. You must state which version you used.

    How often should a double materiality assessment be updated?

    You do not need a full rebuild every year. Review it annually and update it when something significant changes, such as an acquisition, a new market or business line, a change in the value chain, new regulation or new stakeholder evidence. Record the review either way.

    Does ISSB or UK SRS require a double materiality assessment?

    No. IFRS S1 and S2, and the UK SRS based on them, use financial materiality, meaning information useful to investors. A group reporting under both ESRS and UK SRS can reuse its financial materiality work for the ISSB-based report.

    Do we need a consultant to run a double materiality assessment?

    Not always. Consultants help with stakeholder engagement and judgement calls. Most of the time goes on collecting and evidencing data from colleagues, which ESG reporting software such as Ella can automate, leaving the sustainability team to own the decisions.

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