A materiality assessment is the structured process a company uses to determine which sustainability topics are material to it, meaning which topics it should report on and actively manage. A topic is material if the company has significant impacts on people or the environment, if the topic significantly affects the company's financial performance or, under double materiality as required by the CSRD and ESRS, if at least one of these two perspectives applies.
In short: There are three types of materiality assessment: impact materiality (effects on people and the environment, the basis of GRI 3), financial materiality (risks and opportunities for the company, the basis of the ISSB standards) and double materiality, which combines both and is required by the CSRD. After Omnibus I, a double materiality assessment is mandatory only for companies with more than 1,000 employees and more than €450 million net turnover. For SMEs and mid-sized companies it is voluntary; the Voluntary Standard (VS/VSME) requires none. The steps are similar for every type: understand the context, engage stakeholders, build a topic list, assess, apply thresholds, validate and document.
This article is the overview: what a materiality assessment is, which types exist, which one you need and how the process works in general, including an example from a mid-sized manufacturer. If you are in scope of the CSRD and want to run a double materiality assessment in detail, our step-by-step guide to the CSRD double materiality assessment covers every step, criterion and ESRS requirement.
What is a materiality assessment?
No company can report on every sustainability topic in equal depth, and none should. The materiality assessment is the filter: it separates the topics that really matter for your business model, value chain and stakeholders from those that do not. Its result determines the content of your sustainability report, but also where you set targets, collect data and prioritise action.
You will also see the terms ESG materiality assessment, sustainability materiality assessment or materiality analysis. They describe the same process. The important difference is not the name but the perspective from which materiality is judged, which is why the question of materiality in sustainability reporting always starts with the framework you report under.
A good assessment does not score abstract topics such as "climate protection" but specific impacts, risks and opportunities (IROs), for example "greenhouse gas emissions from purchased steel" or "rising energy costs squeeze margins". Our explainer on IROs under the CSRD covers the definitions.
Types of materiality assessment: single and double materiality
Sustainability reporting frameworks define materiality differently. Two forms of single materiality each look at one perspective; double materiality combines them.
| Impact materiality | Financial materiality | Double materiality | |
|---|---|---|---|
| Perspective | Inside-out | Outside-in | Inside-out and outside-in |
| Core question | How does the company affect people and the environment? | How do sustainability matters affect the company's finances? | Both; a topic is material if either applies |
| What you assess | Actual and potential, negative and positive impacts | Risks and opportunities | Impacts, risks and opportunities (IROs) |
| Criteria | Severity (scale, scope, irremediable character), plus likelihood for potential impacts | Likelihood and magnitude of financial effects | Both sets of criteria |
| Framework | GRI 3: Material Topics (2021) | ISSB standards (IFRS S1) | CSRD / ESRS |
| Main audience | All stakeholders | Investors, lenders and other creditors | Stakeholders and providers of capital |
| Mandatory? | For reports in accordance with the GRI Standards | Where jurisdictions have adopted the ISSB standards | For companies in scope of the CSRD |
We compare the frameworks process by process, including what you can reuse from an existing assessment, in GRI vs. ESRS materiality assessment and ISSB vs. ESRS materiality assessment.
Double materiality: definition
Under the ESRS, a sustainability matter is material if it meets the criteria for impact materiality, financial materiality or both. A matter is financially material if it has, or could reasonably be expected to have, a material effect on the company's cash flows, financial position, financial performance, access to finance or cost of capital over the short, medium or long term. The two perspectives are linked: a severe impact today often becomes a financial risk tomorrow, through regulation, litigation or customer pressure.
In other words, a GRI assessment covers roughly half of a double materiality assessment, and an ISSB assessment the other half.
Which materiality assessment do you need?
Since the Omnibus I Directive (EU) 2026/470, the question for most companies is no longer "do we have to?" but "what is worth doing?". Use this table to find your path:
| Your situation | Mandatory? | Which assessment | Read next |
|---|---|---|---|
| EU company with more than 1,000 employees and more than €450 million net turnover | Yes (CSRD) | Double materiality assessment under the ESRS, described under ESRS 2 IRO-1, subject to limited assurance | CSRD double materiality guide |
| Non-EU group with more than €450 million EU turnover and an EU subsidiary or branch above €200 million | Yes, from FY2028 | Double materiality assessment under the ESRS | VSME vs. ESRS after Omnibus |
| SME or mid-sized company with up to 1,000 employees, reporting voluntarily under the VS/VSME | No | The VS requires no materiality assessment; a lean assessment is still useful | VSME vs. ESRS after Omnibus |
| Reporting under the GRI Standards | Yes, under GRI 3 | Impact materiality | GRI vs. ESRS |
| Reporting under the ISSB standards (IFRS S1/S2), e.g. for international investors | Depends on jurisdiction or investor requirements | Financial materiality | ISSB vs. ESRS |
Why a voluntary assessment pays off for mid-sized companies: the Voluntary Standard (Delegated Regulation (EU) 2026/1560), the successor to the VSME, works on an "if applicable" principle instead of a materiality assessment. The questions still come: large customers ask for carbon data, banks send ESG questionnaires, and the VS Comprehensive Module asks about strategy (C1) and climate risks (C4). A lean materiality assessment tells you which topics you really need to manage, which additional disclosures make sense beyond the standard and how prepared you are if you grow into the scope of the CSRD.
Materiality assessment steps: the process in 6 steps
Whether GRI, ISSB, ESRS or voluntary, a materiality assessment almost always follows the same six steps. The depth differs, the logic does not. The ESRS-specific details (top-down approach, gross vs. net, disclosure requirements) are covered in the CSRD guide and in our article on the double materiality assessment under the revised ESRS.
Step 1: Understand the context and value chain
Start with your business, not with a topic list. What do you sell, to whom, from which sites, with which raw materials and suppliers? Map your value chain from raw material to end of life. Strategy documents, the risk register, customer requests and energy data already provide most of the input. Our DMA document checklist lists what to collect.
Step 2: Identify and engage stakeholders
Who is affected by your activities (employees, local communities, workers at suppliers), and who uses your reports (banks, investors, large customers)? Interviews, workshops and questionnaires are all valid formats. Under the revised ESRS, engagement that already takes place in your due diligence processes is sufficient (ESRS 1 §42); a separate large-scale survey is not required. See our articles on stakeholder analysis and the materiality assessment questionnaire template.
Step 3: Build the topic list and long list
Start from a standard list of sustainability matters. Under the ESRS, that is the list in ESRS 1 Appendix A, covering ten topics from climate change (E1) to business conduct (G1). Since 2026 it is non-binding guidance, not a form to complete line by line. All topics and sub-topics are in our ESRS topics list 2026. Add company-specific topics and describe specific impacts, risks and opportunities for the relevant ones. Under the ESRS you may decide obviously material or obviously immaterial topics top-down, with a short rationale (ESRS 1 §27).
Step 4: Assess impacts, risks and opportunities
Define scales and criteria before you score:
| Dimension | Criteria | Typical scale |
|---|---|---|
| Impact | Scale, scope, irremediable character (together: severity); likelihood for potential impacts | 1–5 with described levels |
| Financial | Magnitude of the financial effect (e.g. EBIT effect), likelihood, time horizon | 1–5, ideally taken from your risk management |
For potential human rights impacts, severity takes precedence over likelihood (ESRS 1 §40). The full calculation is shown in our double materiality assessment example.
Step 5: Set thresholds and present the result
No framework prescribes fixed thresholds; you set and justify your own, for example "material at a score of 3.0 or higher in at least one dimension". Many companies present the result in a materiality matrix. It is required neither by GRI nor by the ESRS, but it is a good way to communicate with management and stakeholders. Our article on the materiality matrix under the revised ESRS shows how to build one that says something.
Step 6: Validate, document and update
Have management approve the result and document methodology, sources, scores and rationales so that a third party can follow them. For companies in scope of the CSRD, the auditor reviews the process under limited assurance; our double materiality assessment audit checklist summarises what they look for. Under the revised ESRS you only need to update the assessment when significant changes occur (ESRS 1 §34). In an ESRS context, the next step is mapping your material topics to datapoints, for example with our ESRS Data Points Mapping Tool.
All six steps in one place instead of ten spreadsheets
Materiality Master guides you through your materiality assessment: stakeholders, IROs, scoring, your own thresholds, materiality matrix and audit trail. For a lean voluntary assessment as well as a full ESRS double materiality assessment.
Materiality assessment for SMEs: the proportionate approach
A voluntary materiality assessment for a mid-sized company does not have to look like a corporate one. The revised ESRS point in the same direction: no exhaustive search for every possible IRO (ESRS 1 §32) and top-down decisions for obvious cases. For a company with 50 to 500 employees, this approach works well:
- Form a small core team. Management plus three to five people from operations, procurement, HR, sales and finance. One person owns the process.
- Prepare for one to two days. Collect customer requests, bank questionnaires, energy and material consumption, accident statistics and the risk list.
- Narrow down to 10 to 15 topics. Go through the ten ESRS topics top-down, drop obviously irrelevant ones with a one-sentence rationale and add what is specific to your industry.
- Run a half-day workshop. The core team scores each remaining topic based on one or two specific impacts and risks on a 1–5 scale.
- Ask outside in a targeted way. Short conversations with two or three key customers, your bank and employee representatives replace a large survey.
- Record the result on two to three pages. Material topics, rationales, threshold, date. Check once a year whether anything significant has changed.
This produces a robust result in two to four weeks that you can use in conversations with customers and banks, and expand into a full double materiality assessment if needed.
Materiality assessment example: a mid-sized machining supplier
The (fictitious) Weber Precision Parts GmbH has 120 employees and produces turned and milled parts from steel and aluminium for machinery manufacturers. It is not in scope of the CSRD, but its largest customer is asking for carbon data and its bank has sent an ESG questionnaire. Management opts for a lean, voluntary double materiality assessment and a report under the VS Basic Module.
In the workshop, the core team rules out water (E3), biodiversity (E4), affected communities (S3) and consumers (S4) top-down: one site in an industrial park, low water use, business customers only. Six topics are scored, with a threshold of 3.0 in at least one dimension:
| Topic | Main impact / main risk | Impact | Financial | Result |
|---|---|---|---|---|
| E1 Climate change | Emissions from electricity, gas and purchased steel/aluminium; energy prices and customers' carbon requirements | 3.5 | 3.5 | Material (both) |
| E5 Resource use | High material input, metal chips; raw material prices, revenue from chip recycling | 3.0 | 3.5 | Material (both) |
| S1 Health and safety | Risk of machine injuries, metalworking fluids | 3.5 | 2.5 | Material (impact) |
| S1 Skilled workers and training | Skills shortage threatens delivery capability | 2.5 | 4.0 | Material (financial) |
| E2 Pollution | Metalworking fluids and wastewater, controlled by treatment systems | 2.0 | 1.5 | Not material |
| G1 Business conduct | Low corruption risk in sales, no public sector customers | 1.5 | 2.0 | Not material |
The result fits on one page and has direct consequences: Weber collects Scope 1 and 2 emissions and estimates emissions from purchased metal, sets an energy target and a health and safety target, and answers the customer request with robust figures instead of ad hoc answers. Management estimates the effort at around five person-days.
For a detailed example with a full IRO list, scoring scales and thresholds for a company in scope of the CSRD, see our double materiality assessment example.
Templates and tools: Excel or software?
There are three ways to run a materiality assessment, and none is right for everyone:
| Tool | Works well for | Limits |
|---|---|---|
| Excel template | Small, one-off assessments with few participants | Versions, comments and evidence spread across files; no audit trail; you update for changes in the standards yourself |
| Dedicated software | Several assessors, stakeholder input, assurance, annual updates | Licence fees; does not replace professional judgement |
| Consultants | Little internal capacity, very complex or contested topics | Expensive; know-how often stays with the consultant |
A materiality assessment template in Excel is a legitimate starting point, for example the Excel template from CSR Tools. Make sure it scores specific IROs rather than topic headings, uses scales with described levels and requires a rationale for every score. Once several people score or an auditor needs to follow the assessment, the spreadsheet becomes the bottleneck. We compare the pros and cons in materiality assessment tools: why software beats Excel, give a market overview in the best double materiality assessment software, and compare cost and effort in software vs. consultants.
Common mistakes in materiality assessments
- Scoring topics instead of impacts. "How important is climate protection?" produces opinions. "How severe are our emissions from purchased steel?" produces an assessment.
- Confusing the stakeholder survey with the assessment. A survey is an input, not a decision. Popular topics are not automatically material.
- Adjusting thresholds afterwards. Set scales and thresholds before scoring, or the result cannot be defended.
- Counting planned measures. Under the ESRS, potential impacts may only be reduced by measures that are already implemented and effective (ESRS 1 §43).
- Ignoring the value chain. For many manufacturers, the largest impacts sit in raw materials or product use, not at their own sites.
- Starting too big. 300 IROs and a three-month engagement programme are rarely needed. Top-down for the obvious, detailed scoring for the unclear.
- Not documenting. Without recorded rationales, the assessment can neither be followed nor updated next year.
Key takeaways
- A materiality assessment determines which sustainability topics a company should report on and manage.
- Single materiality looks at either impacts (GRI 3) or financial effects (ISSB); double materiality (CSRD/ESRS) combines both.
- A double materiality assessment is mandatory only for companies with more than 1,000 employees and more than €450 million net turnover. For SMEs it is voluntary but often worthwhile.
- The process has six steps: context, stakeholders, topic list, assessment, thresholds and matrix, validation and documentation.
- For mid-sized companies a proportionate approach is enough: 10 to 15 topics, a half-day workshop, a two-page result.
Want to run your materiality assessment in a structured, audit-ready way, whether lean or under the ESRS? Try Materiality Master for free or see our plans and pricing. Consultancies running assessments for several clients can find out more on our page for consultants.
