Even as the regulatory scope of the CSRD is expected to narrow under the EU’s Omnibus reform, the reality is that double materiality assessment has become a best practice for credible sustainability reporting and strategic decision-making.
Leading companies are already applying double materiality assessment voluntarily through globally used frameworks such as the GRI. Today, around three-quarters of the world’s largest companies use GRI Standards as the foundation for their sustainability reporting, and stakeholder-driven impact materiality is embedded in these disclosures. At the same time, investors, lenders, and regulators increasingly expect companies to complement these criteria with a financial risk and opportunity lens and effectively apply double materiality even where it is not legally required.
What double materiality does is to push sustainability reporting beyond traditional risk disclosure. Companies must assess both how ESG issues affect financial performance (outside-in) and how corporate activities impact the economy, environment, and society (inside-out). This dual perspective is widely recognized as essential for strong governance, credible transition planning, and long-term value creation, not just regulatory alignment.
In other words, whether your company falls inside or outside the future CSRD scope, a double materiality assessment is quickly becoming the benchmark for high-quality ESG reporting, investor-grade data, and resilient business strategy.
This piece guides you through everything about double materiality assessment. You’ll learn the simple concepts and practical steps that will get your organization ready for 2026 and beyond.
Double materiality marks a transformation in how companies handle their sustainability coverage. Companies must think about two distinct but connected viewpoints when they review ESG matters.
Financial materiality shows how sustainability factors affect your company’s financial performance and value. This “outside-in” viewpoint looks at how environmental or social issues could disrupt your supply chain, raise operational costs, or create new market opportunities.
Impact materiality looks at your business’s effects on the environment and society, which is the “inside-out” viewpoint. Your carbon emissions, waste management practices, labor conditions, and other external effects make up this perspective.
These viewpoints connect deeply. A company that switches to sustainable packaging cuts plastic waste (impact materiality) and boosts earnings through better brand image and new customers (financial materiality).
Traditional single materiality coverage serves investors by focusing on how sustainability issues affect financial performance. To cite an instance, see how a single materiality assessment reviews climate change’s disruption of your supply chain but misses your operations’ contribution to climate change.
Double materiality takes a broader view. Companies must disclose both financial impacts and their effects on the world. This approach helps more stakeholders beyond investors—regulators, employees, customers, and local communities all benefit.
The CSRD requires this dual-lens approach. Frameworks like the UK Sustainability Reporting Standards focus on financial materiality.
By 2026, sustainability disclosure will be shaped less by who is legally required to report and more by how seriously companies treat double materiality as a strategic tool. While the scope of the CSRD is now expected to narrow under the Omnibus reform, double materiality itself remains the conceptual backbone of high-quality ESG reporting, both for regulated companies and for those reporting voluntarily under frameworks such as the GRI.
At the same time, new market infrastructure is emerging. In the UK, ESG ratings providers are moving toward formal regulatory oversight by the Financial Conduct Authority from 2025 onward, reinforcing the demand for consistent, decision-useful sustainability data grounded in materiality analysis.
Investor, customer, and employee expectations are also accelerating. Stakeholders increasingly want to see both sides of performance: how sustainability issues affect business value and how business activities affect people, climate, and the environment. Companies that develop a robust understanding of double materiality by 2026 will gain sharper strategic insight, stronger credibility, and better preparedness for future regulation. Those that wait risk not only falling behind on regulations but also losing chances and damaging their reputation in markets that now see double materiality assessment as the standard for trust.
A well-laid-out methodology that balances different points of view helps companies get a full picture of double materiality assessment. This mandatory exercise helps companies find their most important sustainability matters. Companies evaluate how they affect environmental and social factors and how these factors affect their organization.
The top-down approach gives a broad view of your organization’s ESG scene. Your original assessment starts by looking at economic activities, corporate structure, and standards to build a strong foundation. This approach lets you take a strategic view. You can look at macroeconomic factors and industry trends among company-specific ESG factors.
Your top-down methodology should:
The bottom-up approach focuses on getting people from different levels of your organization to participate. This method is vital since stakeholders are key to a successful double materiality assessment. Their participation can reveal new sustainability matters you hadn’t thought about before.
Staff participation at all levels helps spot ESG opportunities. They can suggest improvements and own sustainability initiatives in their daily work. Interview feedback shows many companies find it hard to understand what ESG topics mean for their business. This makes stakeholder input vital.
Impact materiality assessment needs a map of your whole value chain—upstream, downstream, and internal operations. The ESRS mandates that this assessment include both your operations and those in your value chain.
Your impact evaluation should look at both actual and potential effects, both good and bad. Use criteria of severity (scale, scope, irremediable character) and likelihood. This process helps you find your biggest effects on people and the environment.
Financial materiality assessment looks at how sustainability matters create financial effects on your business performance, position, cash flows, or access to finance. This point of view calls information material if it could shape primary users’ decisions about financial reports.
Your evaluation needs consistent scoring criteria based on each impact, risk, and opportunity’s (IRO) severity and likelihood. This scoring helps you rank issues by setting proper quantitative and qualitative thresholds.
A systematic four-step process helps capture both effect and financial materiality points of view when setting up a resilient double materiality assessment in 2026.
Start by identifying all business activities throughout your value chain. Map upstream, downstream, and internal operations to understand their effects. Your stakeholder mapping should determine which groups your operations directly affect. Think about both internal stakeholders like employees and board members, as well as external ones such as customers, suppliers, and communities. Nature and future generations count as silent stakeholders that deserve attention when relevant.
The next step involves creating a materiality matrix after you spot potential sustainability matters. This matrix plots issues based on their importance to stakeholders and financial effect on your company. You’ll need consistent scoring criteria for both impact materiality (severity, scope, irremediable character) and financial materiality (magnitude of financial effects). The visual representation helps you decide which ESG issues need immediate attention and resources.
Whether your organization reports under the ESRS because it is in scope of the CSRD, or reports voluntarily using frameworks such as GRI, your double materiality assessment should be structured to meet the expectations of both regulatory and leading voluntary standards.
For ESRS reporters, this includes identifying material impacts, risks, and opportunities (IROs) and determining which sustainability topics require disclosure under the European rules. For companies outside CSRD scope, GRI provides a globally recognized model for conducting impact-focused materiality assessments and increasingly encourages the integration of financial relevance, resulting in a practical “double-lens” approach similar to ESRS.
Ensuring your DMA can serve either or both frameworks helps maintain consistency across reporting channels, supports investor and stakeholder needs, and keeps your organization prepared for evolving regulatory expectations. Our DMA in Practice course walks you through how to structure your assessment so it aligns seamlessly with ESRS requirements where applicable, while remaining fully compatible with GRI for those reporting voluntarily.
When your preliminary results are defined, the next step is to test and refine them through structured feedback. This means engaging internal decision-makers and external voices to confirm whether your prioritized topics reflect real-world impacts and business dynamics. With nearly half of large organizations now applying some form of double materiality approach, stakeholders increasingly expect to see a transparent rationale behind topic selection.
Document each stage of your process with evidence gathered, how input was evaluated, and the reasoning behind final decisions. Clear documentation strengthens the credibility of your assessment, but it also provides essential support for assurance, investor scrutiny, and long-term comparability.
Double materiality assessment provides strategic advantages that affect your bottom line even if you are not asked to be compliant. Companies that implement this approach see great business benefits, while those who ignore it can face growing risks.
A full picture of double materiality strengthens your risk management capabilities. Your team can spot potential threats before they escalate by evaluating both financial and impact-related risks. This detailed approach reveals risks that traditional methods might miss and ensures proper resource allocation for mitigation.
Companies with strong ESG strategies attract more investors. Standardized information from double materiality assessments helps investors make confident decisions about where to put their money. 85% of individual investors want to invest sustainably. This makes transparency in sustainability practices vital for building stakeholder trust.
Businesses might face indirect pressure through their global supply chain roles, even if regulations don’t directly affect them.
Modern stakeholders now demand substantiated ESG data from companies. If you aim to promote your company as a ”sustainable” one, then the path of a credible disclosure should be on the business agenda. The level of detail is not as important as ensuring that you include evidence for the information you choose to communicate. Lacking transparency can damage your reputation and may result in legal claims from stakeholders seeking better disclosures, reduced customer loyalty, decreased employee involvement, and financial claims if ESG statements are misleading.
Companies that overlook double materiality might miss great opportunities to create long-term value. Detailed reporting helps management teams learn about how business performance and sustainability work together. This knowledge reveals priorities and areas where innovation can happen.
The sustainability landscape is difficult to stay still, but what we should keep from this continuous evolvement is that double materiality assessment is the defining tool for credible, decision-useful ESG reporting.
Currently, most companies, primarily SMEs, are not formally required to report. But even in the context of voluntary reporting, the ability to understand and articulate both their impacts on the world and the world’s impacts on their business should be a strategic consideration for trust, strategy, and long-term value creation.
Companies that act now will enter 2026 with clarity and a competitive edge. Why miss out on risk alignment with stakeholder expectations and a favorable reputation when your company can have broad strategic insight and position itself in a market that recognizes transparency and balance in sustainability disclosures?
If you want to develop this skill confidently, our Double Materiality Assessment in Practice course offers clear guidance, tools, and examples to help you conduct a thorough double materiality assessment that meets ESRS standards when needed and supports voluntary reporting through GRI and other frameworks.
