What is meant by a CSRD materiality assessment? And why does the double materiality assessment have an impact on corporate strategy? Many sustainability managers are faced with the challenge of correctly understanding, communicating and implementing the relevance and significance of this analysis.
The materiality assessment helps to identify the most important issues for your company, not only in terms of sustainability. It ensures that relevant opportunities and risks are managed and reported effectively.
CSRD materiality assessment
Definition of double materiality assessment (CSRD)
The double materiality assessment (double materiality) in the context of the Corporate Sustainability Reporting Directive (CSRD), also known as materiality analysis, is a key concept that helps companies to assess both the financial and non-financial impact of their business activities. This method takes two perspectives into account:
- Financial materiality (internal materiality): This involves analyzing how sustainability issues can affect the company’s financial performance. This includes risks and opportunities arising from environmental, social and governance (ESG) factors that affect the company’s financial stability and long-term success.
- Impact materiality (external materiality): This perspective looks at how the company’s business activities affect the environment and society. The aim is to assess the company’s impact on environmental and social systems and to understand which issues are of greatest importance to stakeholders (e.g. employees, investors and nature).
By systematically assessing topics in terms of their relevance, impact and probability of occurrence, we determine which issues are particularly important for the company and therefore worthy of reporting. The aim is to focus resources on areas that make a significant contribution to sustainability and at the same time create transparency for stakeholders. The four steps of the double materiality assessment enable companies to ensure comprehensive and balanced reporting that takes both internal and external interests into account.
Significance of the CSRD materiality assessment for companies
materiality assessment in accordance with the CSRD is of great importance for companies.
It helps to identify and specifically address material sustainability issues, which significantly increases the effectiveness of the sustainability strategy. This not only leads to better use of resources, but also to increased transparency and credibility vis-à-vis stakeholders.
Companies benefit from a structured approach by taking both internal and external influencing factors into account. By prioritizing key topics, companies can optimize their reporting and meet regulatory requirements such as the European Sustainability Reporting Standards (ESRS).
Ultimately, a carefully implemented materiality assessment helps to create competitive advantages by enabling companies to adapt to relevant sustainability trends at an early stage. This not only promotes the long-term business strategy, but also strengthens relationships with stakeholders and can have a positive impact on the company’s value.
CSRD requirements
The CSRD requirements are extended disclosure obligations that are intended to make sustainability reports more comprehensive and stringent. In addition, from 2025, significantly more companies than before will be obliged to publish a sustainability report.
The most important CSRD requirements include detailed reports on ESG aspects and their impact on the business environment, as well as the involvement of stakeholders in the reporting process.
Legal framework of the CSRD
The Corporate Sustainability Reporting Directive creates binding regulations for the sustainability reporting of European companies as well as non-European companies.
- Extended reporting obligations: Companies must disclose detailed information on environmental, social and governance aspects.
- Uniform reporting standards: The CSRD requires the application of uniform standards in accordance with the ESRS.
- Stakeholder participation: The consideration of stakeholder perspectives is mandatory when implementing the CSRD materiality assessment.
- External review: Sustainability reports are subject to an external audit.
- Extended scope of application: Medium-sized corporations and listed SMEs are now also affected.
These measures contribute to the transparency and comparability of company-related sustainability information. Companies and their responsible sustainability managers should deal with the new requirements at an early stage in order to minimize compliance risks and exploit competitive advantages.
Putting the CSRD materiality assessment into practice
Successful implementation of the CSRD materiality assessment requires systematic and well-documented processes. The following steps are recommended and similarly recommended by EFRAG in the ‘Materiality Assessment’ implementation guide:
- Put together a team: First of all, companies should form a task force that bundles the necessary skills and responsibilities. This task force organizes the project and ensures a structured approach. Many companies also enlist the support of CSRD consultancies and freelancers for this purpose.
- Placing in context: To identify the relevant topics or impacts, risks and opportunities (IROs), it is helpful to take a closer look at the corporate context. For example, does the corporate strategy have points of contact with ESG issues, where are the company locations and are environmental risks hidden there, or what opportunities arise from sustainable product innovations?
- Stakeholder analysis: It is essential to identify and consider the perspectives of relevant stakeholders in order to understand their expectations and requirements. This can be done through interviews, surveys and workshops.
- Identification of IROs: This is followed by an analysis of the collected data to identify material issues that could have a significant impact on the company and its stakeholders.
- Evaluation of IROs: These IROs are then evaluated according to a structured process. The list of material topics is often displayed in a materiality matrix. These topics must ultimately be prepared in the sustainability report.
Regular reviews and adjustments to materiality assessment ensure that reporting always remains up-to-date and relevant.
Benefits of materiality assessment for companies
By conducting a CSRD materiality assessment, companies can not only clearly define their sustainability strategies, but also optimize their corporate strategy. By taking the various stakeholder perspectives into account, the company’s reputation and market position are strengthened alongside stakeholder trust.
As regulatory requirements and stakeholder expectations regarding sustainability are constantly increasing, materiality assessment enables proactive adaptation to these changes. This enables companies to better manage risks and identify opportunities at an early stage, which contributes to increasing value and competitiveness in the long term.
materiality assessment as a strategic tool
As the heart of the CSRD, materiality assessment is not only a compliance instrument, but can also serve as a strategic tool for companies. By identifying and evaluating key topics, companies can align and optimize their corporate and sustainability strategy in a targeted manner.
Impact of the CSRD materiality assessment on the corporate strategy
- Risk management and opportunity identification: materiality assessment helps companies to identify potential risks and opportunities in connection with sustainability issues at an early stage. This enables a proactive adjustment of the business strategy in order to minimize risks and exploit opportunities.
- Stakeholder engagement: By incorporating the interests and expectations of various stakeholders into materiality assessment, companies can strengthen their stakeholder relationships. This promotes trust and transparency, which leads to a better reputation and stronger customer loyalty in the long term.
- Resource allocation: Companies can use materiality assessment to better prioritize which sustainability issues are most important to them. This enables a targeted allocation of resources to achieve the greatest impact and increase efficiency.
- Competitive advantage: Companies that strategically integrate sustainability into their business models can set themselves apart from the competition. A well-founded materiality assessment helps them to develop innovative solutions and position themselves as pioneers in the industry.
- Long-term value creation: By focusing on key sustainability issues, companies can create long-term value. This includes not only financial aspects, but also social and environmental values that contribute to sustainable development.
The double materiality according to CSRD therefore offers a valuable basis for anchoring sustainability as an integral part of the corporate strategy. Companies that use this tool effectively can not only meet their compliance requirements, but also strengthen their competitiveness and resilience in a changing market environment.
Find out more about the CSRD materiality assessment
Need more information on double materiality? Here are more valuable CSRD guides, tips and resources:
- CSRD Webinars There are numerous (online) events with a focus on double materiality analysis. This is usually helpful for newcomers to the topic.
- CSRD training coursesIn addition to CSRD training courses, which usually also cover the topic of ‘materiality assessment’, there are now specific courses that specialize exclusively in this area.
- Materiality WorkshopsCSR Tools offers a condensed 4-hour workshop with the aim of guiding and supporting companies in the implementation of an effective materiality assessment in accordance with the current standards (CSRD/ESRS) and best practices.
- Excel template for the materiality assessmentWe have developed a sophisticated Excel template that guides companies step-by-step through the materiality assessment process and automatically calculates which topics are essential.
- AI prompts for the CSRD materiality assessmentThese AI prompts are worth their weight in gold and provide real support in the analysis, which can save a lot of time.
