Materiality Assessment
A materiality assessment is a structured process for identifying and prioritizing the sustainability topics most relevant to an organization and its stakeholders. Under CSRD, it specifically refers to the double materiality assessment (DMA) that determines which ESRS topics require full disclosure.
Materiality assessments determine what goes into a sustainability report. Under traditional financial materiality (ISSB, SEC), the focus is on issues that could affect financial performance. Under double materiality (CSRD), the scope expands to include issues where the company impacts society and the environment.
The assessment process typically involves: identifying a long list of sustainability topics from frameworks (ESRS, GRI, SASB), engaging stakeholders (employees, customers, investors, communities, NGOs), evaluating each topic for materiality using defined criteria, prioritizing topics using a materiality matrix, and obtaining governance approval.
For climate topics, materiality is effectively predetermined — climate change (ESRS E1) is material for virtually every covered company under CSRD. But the assessment still determines the depth and specificity of climate disclosures, and which other environmental topics (water, biodiversity, circular economy) require reporting.
Best practice includes refreshing the materiality assessment annually, documenting methodology and stakeholder input, and connecting material topics to KPIs and management actions. The assessment should drive strategy, not just reporting.
Frequently asked questions
What is a materiality assessment? +
A materiality assessment identifies and prioritizes the sustainability topics most relevant to an organization and its stakeholders. Under CSRD, the double materiality assessment determines which ESRS topics require full disclosure based on both impact and financial materiality.
Related terms
Double Materiality
Double materiality is the assessment framework required by the EU's CSRD that evaluates sustainability topics from two perspectives: impact materiality (how the company affects society and the environment) and financial materiality (how sustainability issues affect the company's financial performance, position, and cash flows).
CSRD (Corporate Sustainability Reporting Directive)
The Corporate Sustainability Reporting Directive (CSRD) is the European Union's mandatory sustainability reporting law. It requires companies operating in the EU above certain thresholds to disclose environmental, social, and governance (ESG) information according to the European Sustainability Reporting Standards (ESRS), with third-party assurance.
ESRS (European Sustainability Reporting Standards)
ESRS are the detailed reporting standards developed by EFRAG that specify what companies must disclose under the EU's CSRD. They cover ten sustainability topics across environmental, social, and governance dimensions, with ESRS E1 (Climate Change) requiring detailed emissions data, transition plans, and climate risk assessments.
Carbon Accounting
Carbon accounting is the systematic process of measuring, recording, and reporting the greenhouse gas (GHG) emissions produced by an organization, product, or activity. It follows standardized methodologies — most commonly the GHG Protocol — to quantify emissions across Scope 1 (direct), Scope 2 (purchased energy), and Scope 3 (value chain) categories, producing an auditable inventory that underpins disclosure, reduction planning, and regulatory compliance.