The ESRS Adjustments to the Double Materiality Assessment
The ESRS adjustments to the Double Materiality Assessment make reporting more strategic, clearer, and more practical for companies.
- EFRAG published a draft revision of the ESRS in 2025, focused on making the Double Materiality Assessment (DMA) more practical and less complex.
- A top-down approach is now permitted alongside the existing bottom-up process, giving companies more flexibility in how they conduct the DMA.
- An "Information Materiality Filter" ensures that only IROs likely to result in material disclosures are examined in depth.
- Companies gain more flexibility on reporting level (topic, sub-topic, or IRO) and on how they handle value chain data.
- By May 2026, the EU Commission published a further simplified draft ESRS, cutting mandatory data points by over 60%.
On July 31, 2025, the European Financial Reporting Advisory Group (EFRAG) published drafts for the revision of the European Sustainability Reporting Standards (ESRS) with a central focus on the adjustments to the Double Materiality Assessment (DMA) according to ESRS 1. The aim of the changes is to make the analysis more practical, strategic, and less complex.
Background on Double Materiality
Double Materiality is a central concept of ESRS and CSRD. It combines two perspectives:
- Impact Materiality: the company's impact on environment and society
- Financial Materiality: the impact of sustainability-related factors on the company
Companies must systematically examine both perspectives to identify relevant topics, so-called IROs (Impacts, Risks and Opportunities).
Criticism of Previous Practice
In the first implementation round of the ESRS, it became clear that the DMA was difficult to implement for many companies. Specific criticisms included:
- High focus on the process instead of the outcome in the context of the company strategy
- Lack of clarity in applying scoring methods
- Disproportionate level of detail without added value, especially when the DMA was carried out purely for compliance
- Unclear requirements for reporting on mitigated risks or positive impacts
Key Points of the ESRS Adjustments to the Double Materiality Assessment
The changes in the draft for ESRS 1 and the update of the Double Materiality Assessment respond to this feedback with several systemic simplifications:
1. Top-down Instead of Bottom-up
In addition to the bottom-up approach, the ESRS will in future also offer the option of a top-down approach for conducting the DMA. This begins with an analysis of the business model, strategy, value chain, and stakeholders. Relevant topics and IROs are derived from this.
2. Establishment of an Information Filter
Only IROs that are expected to lead to material disclosures in the sustainability report should be examined in depth. This "Information Materiality Filter" is intended to prevent resources from being tied up in irrelevant topics.
3. New Framework
EFRAG emphasizes that the ESRS represent a "Fair Presentation Framework". Relevance and faithful representation are prioritized over mere compliance. Non-material topics may also be reported if necessary, for example at the request of external stakeholders.
4. Flexibility in Reporting
Companies may decide whether to report at the topic, sub-topic, or IRO level. This reduces excessive granularity and strengthens alignment with management logic. Not every IRO must necessarily be assigned to a topic. If only one sub-topic in a standard is material, not all data points of the standard need to be reported, but only those relevant to the sub-topic.
5. Consideration of Mitigated Risks and Positive Impacts
It is explicitly clarified that risks already mitigated by measures, as well as positive impacts, are also subject to reporting, provided they are material.
6. Clarification of Terminology
- The term "material matter" is dropped. Instead, a topic is only subject to reporting if material IROs exist.
- The list of topics in ESRS 1 AR 16 is now purely illustrative.
- A non-binding appendix (NMIG6) illustrates what targeted reporting at the sub-topic level can look like.
7. Aggregation and Location Logic
Companies should report information not for each individual site, but aggregated at an appropriate level. The goal is a focused and meaningful presentation.
The requirements for value chain reporting are also slightly relaxed: companies should first work with available information and be allowed to use estimates or assumptions.
Our Excel template guides you step by step through the Double Materiality Assessment and generates your materiality matrix automatically. Updated for the revised ESRS requirements.
Conclusion: Less Obligation, More Responsibility
With the ESRS adjustments to the Double Materiality Assessment, EFRAG aims to make sustainability reporting more targeted, comparable, and strategically sound. Companies gain more leeway for self-responsibility, but at the same time must provide sound reasons for what they report and what they do not.
What Happened Next: The 2026 Simplified ESRS
The EFRAG draft from 2025 was the first step. By May 2026, the EU Commission went further. On 6 May 2026, the Commission published a draft of significantly simplified ESRS for consultation. The key figures from that draft:
- Mandatory data points cut by over 60%
- Total data points reduced by over 70%
- Reporting costs per company down by over 30%
- Shorter and clearer standards with new flexibilities
- Further simplified materiality assessment
This means the direction set by the EFRAG adjustments to the DMA in 2025 has been reinforced and extended at EU level. Companies that already conducted a well-structured DMA following the EFRAG guidance are well-positioned to adapt to the further-simplified requirements.
Frequently Asked Questions about the ESRS Adjustments to the DMA
What is the main goal of the ESRS adjustments to the Double Materiality Assessment?
The core goal is to reduce unnecessary complexity while keeping the analysis strategically meaningful. EFRAG introduced a top-down approach, an information materiality filter, and more flexibility on reporting level so companies can focus their efforts on what genuinely matters for their business and stakeholders.
What is the Information Materiality Filter?
The Information Materiality Filter is a step in the DMA process that screens IROs (Impacts, Risks and Opportunities) before they are examined in full detail. Only IROs expected to lead to material disclosures move through to the deeper analysis. This prevents teams from spending significant time on topics that will ultimately not appear in the report.
Can companies now choose between a top-down and a bottom-up approach?
Yes. The revised ESRS allows both. The bottom-up approach starts from individual IROs and works up to topics. The top-down approach starts with the business model, strategy, and value chain, and derives relevant IROs from there. Companies can choose the approach that fits their internal processes and governance.
How do the 2025 EFRAG adjustments relate to the simplified ESRS draft published in May 2026?
The 2025 EFRAG adjustments were a first round of targeted improvements to how the DMA works in practice. The May 2026 Commission draft goes further, cutting mandatory data points by over 60% and simplifying the materiality assessment process even more. Both moves point in the same direction: less administrative burden, more strategic focus.
Note: We are working on keeping our Materiality Assessment Excel Template and the Materiality Master software up to date with the evolving ESRS requirements.