Materiality matrix: how to build a double materiality matrix (with example)

The materiality matrix is the best-known output of a materiality assessment: a chart in which each sustainability topic appears as a dot. The further up and to the right a dot sits, the more important the topic. Simple enough. In practice, though, many matrices come from sticky dots in a workshop rather than a traceable assessment, and then they do not stand up to scrutiny.

In this article, we show you how to derive a double materiality matrix properly from your IRO scores, how to set the threshold and what to watch out for in the presentation. At the end, we work through a fictional example from mechanical engineering.

What is a materiality matrix?

A materiality matrix is a scatter chart with two axes. Each axis represents one perspective of double materiality:

• Horizontal axis: financial materiality (outside-in). How strongly do risks and opportunities arising from a sustainability topic affect your company's financial position, performance, cash flows or access to capital?
• Vertical axis: impact materiality (inside-out). How strongly does your company, through its own operations and value chain, affect the environment and people?

In the past, many companies plotted "importance to stakeholders" on one axis. That was the classic single materiality matrix, for example in the GRI world. In a double materiality matrix under the CSRD and ESRS, the two assessment dimensions replace that logic. Stakeholders feed into the assessment of impacts rather than forming an axis of their own.

Step by step: how to build the materiality matrix

1. Define topics and IROs

Start with a longlist of possible topics. The ESRS topic list (AR 16) serves as a guide; in the revised ESRS it is only illustrative, and a top-down approach is also allowed. For each topic, you describe the specific impacts, risks and opportunities (IROs). We explain how in our article on understanding and using IROs.

2. Score impacts (impact axis)

For each impact, you assess its severity using:

• Scale: How serious is the impact?
• Scope: How many people or how much of the environment is affected?
• Irremediable character: Can a negative impact be reversed?
• Likelihood: only for potential impacts, i.e. those that have not yet occurred.

Positive impacts are scored on scale and scope (and likelihood if potential); irremediable character does not apply.

3. Score risks and opportunities (financial axis)

For each risk and opportunity, you assess the likelihood and the potential magnitude of the financial effects, over short, medium and long-term horizons. It helps to link the scale to existing risk management thresholds, for example revenue or EBIT bands. That way, sustainability and finance speak the same language.

4. Aggregate from IROs to topics

The matrix usually shows topics, not individual IROs, so you need a rule for combining several IRO scores into one topic score. A proven approach is to take the highest IRO score per topic and dimension. This prevents a single severe IRO from being "averaged away" by several minor ones. Above all, set the rule once and apply it consistently.

5. Set and document the threshold

The ESRS do not prescribe a fixed number. You set the threshold yourself, for example "3 or higher on a scale of 1 to 5", and justify it. Set it before you see the results; otherwise it quickly looks as if the value was tuned to fit. In your report, you describe the materiality assessment process, including how you determined thresholds.

6. Plot the matrix and sense-check it

Now plot the topics: x-value from the financial score, y-value from the impact score. Then comes the most important step: the sense check. Do the results fit your business model, sector and risk register? Do any topics look surprisingly high or low? Comparing with benchmarks from practice and with reports from companies in the same sector helps you spot outliers.

Example: materiality matrix of a machinery manufacturer

The following example is fictional. It shows a mid-sized machinery manufacturer with its own production in Germany, suppliers in Europe and Asia, and business customers only. Scale 1 to 5, threshold 3, topic score = highest IRO score.

How to read the result:

• Material in both dimensions: climate change (energy-intensive production, carbon costs, customer requests for product carbon footprints), circular economy (steel and aluminium as main materials, price risks) and own workforce (occupational safety, skills shortage).
• Impact-material only: workers in the value chain (castings and electronics from high-risk countries) and pollution (cooling lubricants, paint shop). The financial effect on the company is small, but the impact on people and the environment is significant. Still material, and therefore reportable.
• Financially material only: business conduct, for example corruption risks in export business with possible fines and lost orders.
• Not material: water, biodiversity, affected communities and consumers. For a purely B2B business without water-intensive processes this is plausible, but it must be justified and documented just like the material topics.

Important: the matrix does not replace the justification. Behind every dot is a scoring table with the IROs, their scores and sources. We show how such a table is filled in step by step in our materiality assessment example.

Is the matrix mandatory? Presentation and reporting level

No. Neither the CSRD nor the ESRS require a materiality matrix. They require you to disclose the process and outcome of your materiality assessment in a traceable way. The matrix is a common but voluntary way of presenting it. Alternatives include:

• A list or table of material topics with a short justification, often the clearest format in the report itself.
• A heatmap, if you want to show many sub-topics or value chain stages.
• A ranking, if the internal focus is on prioritising actions.

With the revised ESRS (Delegated Regulation (EU) 2026/1563, mandatory from financial year 2027), you can also choose the reporting level: topic, sub-topic or IRO. That is a good reason to show the matrix at the level at which you report. A matrix with 80 IRO dots is unreadable; a matrix with ten topics and a linked detail table works.

Climate change (E1) is a special case: if you assess it as not material, the revised ESRS require a justification. For other topics, marking them as not material is sufficient.

Companies that are no longer within the scope of CSRD reporting also benefit from a matrix: it shows priorities at a glance for management, banks and customers. We describe a lean approach for smaller companies in our article on materiality assessment for SMEs.

Common mistakes with the materiality matrix

• Stakeholder importance as an axis: that is the old, single materiality matrix. For double materiality, impact and finance belong on the axes.
• Only the top-right quadrant counts: wrong. Under double materiality, one dimension is enough. Topics in the top-left or bottom-right are material too.
• Threshold by gut feeling: a threshold set only after looking at the results is hard to defend.
• Average instead of maximum without justification: if you average, explain why severe individual IROs do not disappear as a result.
• Mixing gross and net: assess impacts before mitigating actions. Actions that reduce a negative impact are not a positive impact.
• Matrix without data: workshop sticky dots are a good start, but not an assessment. Back every rating with facts, data or expert judgement.

Conclusion

A good materiality matrix is the visible end of a sound assessment, not a substitute for it. If you score IROs in a structured way, use a fixed aggregation rule and document the threshold up front, the matrix almost builds itself. And it holds up to critical questions from auditors, banks or management.

Frequently asked questions about the materiality matrix