The materiality assessment is more than just an entry point into the sustainability report – it shows what companies have to report on in the first place. According to CSRD and the European Sustainability Reporting Standards (ESRS 1), it is the formal filter through which all sustainability topics must pass.
What is new here is above all the concept of dual materialityCompanies must assess both how environmental and social factors affect their financial success(outside-in, i.e. financial materiality) and what impact their business activities have on the environment and society(inside-out, i.e. impact materiality).
The implementation of this dual perspective is mandatory for all companies subject to reporting requirements from 2024 – regardless of sector or company size.
But how well does this work in practice?
In this article in the “Inside CSRD” series, we take an in-depth look at precisely this question – based on the analysis of more than 200 CSRD reports examined in studies by EY, Deloitte & DRSC, PwC(webcast), Horváth, KPMG, KEY ESG, European Issuers and others.
It becomes clear that the materiality assessment 2024 is an integral part of almost every report – but methodological maturity, transparency and strategic anchoring differ.
In this blog article, we show how widespread implementation actually is – and what differences in quality are noticeable.
1. status quo: everyone is doing it - but how well?
The good news first: almost all companies whose reports were examined in the studies analyzed have carried out a materiality assessment – as required by the CSRD.
However, the studies also show that the quality and maturity of these analyses vary considerably. In some cases, there is a world of difference between a formal “ticked-off” presentation and a transparently documented, strategically embedded analysis.
Duty fulfilled - with room for improvement in terms of depth and transparency
Several studies identify typical weaknesses:
KEY ESG shows that the methodology for materiality assessment is barely comprehensible in many reports: Only a few companies use a materiality matrix, and almost none report numerical assessment methods.
According to Horváth, only 20% of companies visualize the results of their materiality assessment – for example in the form of a matrix as recommended in ESRS 1 (Appendix F).
EY reports that stakeholder engagement was addressed by all companies, but in some cases only superficially: 26% of companies only described their engagement in text form – without visualization or further detail.
Some reports also remain vague when it comes to the link with strategy, risk management and target systems – although this is precisely what would be the actual added value of dual materiality.
Number games without context?
What’s more, although some companies list a large number of “Impacts, Risks & Opportunities” (IROs), they do so without any recognizable prioritization or comprehensible selection.
EuropeanIssuers points out that 77% of companies have used external support for the methodology – which is helpful for getting started, but does not automatically lead to strategic depth.
materiality assessment is omnipresent – but methodologically immature in some cases. Many companies are closely aligned with minimum regulatory requirements, but genuine transparency, stakeholder involvement and strategic prioritization are (still) rare.
2. one analysis, many levels of maturity
A key output of materiality assessment as part of the CSRD is the identification of so-called IROs – Impacts, Risks & Opportunities. They form the backbone of the content of the sustainability report: only topics with at least one material IRO are subject to reporting.
The analyzed studies show: The range of reported IROs is enormous – as is their quality.
Average: Around 40 IROs per report
Horváth calculated an average of 39 IROs per company (median: 36).
Deloitte/DRSC comes to Ø 42 IROs, with a range of 5 to 118 – a clear sign of a lack of comparability.
KEY ESG gives an average number of 38 IROs, also with a high variance (11-102).
These figures clearly show that while some companies cover a broad range of topics, others greatly reduce their analysis – partly due to a lack of data, partly due to strategic caution.
Content distribution: risk dominates, opportunities are missing
The qualitative composition of the IROs is particularly revealing. According to Horváth, the average distribution is as follows:
63% of IROs relate to negative impacts,
25 % relate to risks,
only 12 % for opportunities.
This asymmetry is remarkable: the reports focus heavily on problems – potential opportunities remain underrepresented. Business models for the energy transition, circular economy or sustainable innovations, for example, exist in many cases, but are often not explicitly named as strategic opportunities.
What the figures (don't) say
The absolute number of IROs is not a measure of quality in itself – 100 entries without prioritization are of little help. The decisive factor is whether the IROs were selected, justified and prioritized in a comprehensible manner. However, this is precisely what many reports lack:
KEY ESG criticizes the lack of documentation of the valuation methodology.
EY points out that some companies only list IROs without context or reference to the overall strategy.
Deloitte notes that in some companies the IROs are only formulated very briefly.
materiality assessment 2024 often provides a large number of IROs – but sometimes without methodological clarity, strategic relevance or recognizable decision-making logic. A company that works with a small number of well-founded IROs may be more transparent than a company with 100 unsorted entries.
3. comparison of maturity levels: between minimum standard and best practice
While materiality assessment 2024 appears in all reports, the quality of implementation varies considerably. Some companies simply fulfill their obligations – others use the analysis as a strategic tool. The studies show clear patterns of these different levels of maturity.
Major differences between company types
According to Deloitte/DRSC, larger companies – especially DAX companies – report more frequently in full in accordance with ESRS than smaller listed companies. The number of identified IROs is also higher for them on average, which indicates a structured approach to materiality assessment.
According to the studies, a different approach can be observed depending on experience with ESG reporting: companies that have previously reported in accordance with GRI or TCFD are methodologically more advanced.
Strategic instead of formal: what distinguishes best practices
The few companies that use their materiality assessment strategically have some common characteristics:
Interdisciplinary teams (e.g. ESG, strategy, risk, communication) develop the analysis together.
Stakeholder dialogs are documented in concrete terms – with target groups, methods and results.
The assessment is structured and weighted, e.g. using scoring models or threshold value tables.
Results are linked to targets, measures or KPIs – and not presented in isolation.
IROs are incorporated into risk reports, strategy processes and target systems.
The result: materiality assessment is not treated as an annoying regulation, but as an opportunity for strategic positioning and consistent communication.
4 Conclusion: From duty to positioning
The analysis clearly shows that materiality assessment 2024 is being implemented by almost all companies – but the way in which this is done varies considerably. While some organizations choose a methodically sound, comprehensible and strategically embedded approach, others treat the analysis more as a compulsory regulatory exercise.
What many reports show:
Methodology remains partially opaque
Stakeholder perspectives are often still superficial
Visualizations and evaluation logics are rarely disclosed
Opportunities are mentioned less frequently than risks or negative impacts
At the same time, there are positive examples: Companies that see their materiality assessment as a management tool, link it to strategic goals, KPIs and risk analyses – and thus create real added value for management and report recipients.
Recommendation for practice:
Do not viewmateriality assessment in isolation, but integrate it into strategy and management
Actively create transparency in methodology, prioritization and stakeholder dialogue
Don’t forget opportunities – they show development and innovation potential
Not only list IROs, but prioritize, comment on and link them operationally
The CSRD opens up the space for well-founded sustainability communication – materiality assessment is the gateway. Those who create clarity, structure and depth here position themselves not only in regulatory terms, but also strategically.
