Double Materiality Assessment under the ESRS: The Method Step by Step

The 2023 set is Delegated Regulation (EU) 2023/2772, as amended by Delegated Regulation (EU) 2025/1416. The 2026 set is the revised (simplified) ESRS, Delegated Regulation (EU) 2026/1563. Both sets contain 12 standards, and both apply directly as delegated regulations.

The method rests on two provisions of Directive 2013/34/EU, the Accounting Directive: Article 19a(1) for individual undertakings and Article 29a(1) for groups. The Corporate Sustainability Reporting Directive (CSRD), Directive (EU) 2022/2464, inserted both provisions. Directive (EU) 2026/470 (Omnibus I), in force since 18 March 2026, replaced them and kept the double materiality wording. Both directives bind the Member States, and Directive (EU) 2026/470 is due for transposition by 19 March 2027. The reporting duty behind the assessment is set out under the Corporate Sustainability Reporting Directive (CSRD) and the ESRS.

Delegated Regulation (EU) 2026/1563 enters into force on 10 November 2026 and is mandatory for financial years beginning on or after 1 January 2027; for financial years starting in 2026 it is optional. The sections below give the legal root, each step with its paragraph in both sets, the top-down and bottom-up routes, what the 2026 revision changed, the group rules, the review by auditors and supervisors, and the status of EFRAG's IG 1 guidance as of 29 October 2026.

What Is a Double Materiality Assessment?

A double materiality assessment identifies the sustainability matters that are material for an undertaking because of its impacts on people and the environment, because of the risks and opportunities they create for the undertaking, or for both reasons, and its result decides which topical information the undertaking reports under the ESRS. In the 2026 set, ESRS 1 paragraph 2 defines impacts, risks and opportunities (IROs) as material impacts on people and the environment and material sustainability-related risks and opportunities. The same paragraph sets out the double materiality principle that connects them. "Double" refers to the two perspectives that recital 29 of the CSRD names: the impacts of the undertaking and the risks to the undertaking.

The assessment drives the content of the sustainability statement. Under ESRS 1 paragraph 25 of the 2026 set, the undertaking proceeds in two steps: it (a) identifies the topics related to material impacts, risks and opportunities and (b) determines the information to be reported on each topic. Practitioners also call the process a double materiality analysis or a DMA; the terms name the same work, and the method described on this page is the same whatever the label.

The Legal Root: Article 19a(1) and Recital 29

The duty comes from Article 19a(1) of Directive 2013/34/EU, inserted by the CSRD: undertakings report "information necessary to understand the undertaking's impacts on sustainability matters, and information necessary to understand how sustainability matters affect the undertaking's development, performance and position". Article 29a(1) sets the same wording for parent undertakings at group level. Directive (EU) 2026/470 replaced Article 19a(1) by its Article 2(4)(a) and Article 29a(1) by its Article 2(5)(a), and the wording quoted above stayed unchanged.

Recital 29 of Directive (EU) 2022/2464 explains the logic. It describes "the double materiality perspective, in which the risks to the undertaking and the impacts of the undertaking each represent one materiality perspective". Undertakings should consider each perspective "in its own right" and disclose information that is material "from both or from only one perspective". Article 19a(2) adds a process duty: the undertaking reports "the process carried out to identify the information included in the management report", and the information covers short-, medium- and long-term time horizons, as applicable.

Material from One Perspective, the Other or Both

A sustainability matter is material when it meets the criteria for impact materiality or financial materiality, or both (ESRS 1 paragraph 28 of the 2023 set). The wording is "or both": a matter does not have to meet the two sets of criteria together, and one matter can be material from one perspective only.

The 2026 set restates the rule in its glossary. Annex II, Table 2 of Delegated Regulation (EU) 2026/1563 describes double materiality through two dimensions, impact materiality and financial materiality, and a matter is material from the impact perspective, the financial perspective or both.

The Method Step by Step: From Context to Disclosure

ESRS 1 sets the steps of the assessment without prescribing one process: the undertaking understands its context, maps its value chain, considers stakeholders, identifies impacts, risks and opportunities, assesses them against thresholds, determines the information to report and discloses the process. EFRAG's IG 1 Materiality Assessment Implementation Guidance groups the same work into Steps A to D and states that the "ESRS do not mandate a specific process".

The table gives the paragraph behind each step in the 2023 set and the 2026 set, together with the page that covers the step in depth.

Where the Assessment Starts: Impacts First

The assessment starts in general with impacts: ESRS 1 paragraph 38 of the 2023 set and paragraph 36 of the 2026 set name the assessment of impacts as the starting point. The 2023 wording adds that "there may also be material risks and opportunities not related to the undertaking's impacts". The 2026 wording reads: "the undertaking shall as well evaluate material risks or opportunities not related to its impacts, such as physical risks".

A list of sustainability topics frames the identification. In the 2023 set, ESRS 1 AR 16 lists topics, sub-topics and sub-sub-topics, and the list is "not a substitute" for the undertaking's own process. In the 2026 set, Appendix A to ESRS 1 lists topics and sub-topics only, as non-binding guidance. The impact steps sit in AR 9 of the 2023 set (understanding of the context, identification of actual and potential impacts, assessment of materiality with thresholds) and in AR 20 of the 2026 set (understand activities, business relationships and stakeholders; identify actual and potential impacts; assess materiality and determine the topics to be reported).

Reaching a Conclusion for Each Topic

Each topic is concluded material or not material against thresholds the undertaking sets itself, because the ESRS prescribe "appropriate quantitative and/or qualitative thresholds" and no number (ESRS 1 paragraph 42 of the 2023 set; paragraph 37 and AR 19 of the 2026 set). No percentage threshold, such as a 5 % rule, exists in either set. In the 2026 set, the thresholds are part of the process description that ESRS 2 paragraph 35(a) (IRO-1) asks for.

The 2026 set eases the mechanics of the conclusion. ESRS 1 AR 13 states that quantitative information or quantitative scoring is not necessarily required, that a qualitative analysis may be sufficient and that no exhaustive search is required. AR 15 adds that the undertaking need not analyse each severity characteristic where severity is evident, nor every time horizon for each impact, risk or opportunity, unless further assessment is necessary. Neither set fixes a numeric cut-off value for any topic.

From Material Matters to the Information Reported

A material topic does not make every datapoint reportable: the 2026 set applies information materiality, under which information is material when omitting, misstating or obscuring it could reasonably be expected to influence the decisions of primary users of general-purpose financial reports or the decisions of other users regarding the undertaking's material impacts, risks and opportunities (ESRS 1 paragraph 23). Paragraph 24 of the 2026 set then states that the undertaking "shall not disclose" information prescribed by an ESRS disclosure requirement or datapoint if that information is not material, except supplementary information under section 8.2. Under paragraph 29, the material information comes from (a) ESRS 2, (b) the general disclosure requirements together with the topical disclosure requirements and (c) entity-specific disclosures, and paragraph 30 deals with the sub-topic level.

The ban on non-material information belongs to the 2026 set only. In the 2023 set, paragraphs 30 to 36 of ESRS 1 govern the information to report, and paragraph 31 applies two tests of information materiality to the information of a material topic. The eight reliefs open to an undertaking that applies the 2023 set in FY 2026 do not include paragraphs 23 and 24 of the 2026 set.

Documenting and Disclosing the Process

The ESRS do not prescribe how the assessment is documented, but EFRAG IG 1 FAQ 12 (paragraph 186) states that a certain level of documentation is reasonable to expect, and the process itself is disclosed under ESRS 2 IRO-1. IRO-1 is paragraph 53 of ESRS 2 in the 2023 set, with eight items from methodologies and assumptions to changes and revision dates, and paragraph 35 of ESRS 2 in the 2026 set, with five items from a concise process description to the date of the last update. The list of material impacts, risks and opportunities moved from SBM-3 paragraph 48(a) of the 2023 set to IRO-2 paragraph 37(a) of the 2026 set. ESRS 2 AR 24 of the 2026 set asks the undertaking to avoid boilerplate, such as describing in detail that it applied the ESRS 1 criteria or followed the recommended process.

Documentation also supports the review that follows the statement, because the limited-assurance opinion covers the process itself (Article 34(1) of Directive 2013/34/EU, set out below). The CSRD compliance process places the assessment among the steps of a reporting project. Where the assessment sits among the other steps is shown in the CSRD compliance process after the Omnibus.

Top-Down, Bottom-Up or a Combination

The 2026 set lets an undertaking reach materiality conclusions top-down, from an analysis of its strategy, business model, sectors, geographies and value chain, bottom-up, at the level of individual impacts, risks and opportunities, or by combining both for different topics (ESRS 1 paragraphs 27 and 28 and AR 10 of Delegated Regulation (EU) 2026/1563). Under paragraph 27, the undertaking may derive a conclusion on the materiality or non-materiality of the impacts, risks and opportunities of a topic or sub-topic "without further assessment" from that analysis. Where the conclusion is not evident, a specific assessment follows. Paragraph 28 lets the undertaking rely instead on an assessment conducted only at the level of impacts, risks and opportunities, and AR 10 allows top-down for some topics and bottom-up for others. The 2023 set names neither route; its Appendix E gives a non-binding flowchart illustration of the assessment.

The top-down route is available before the 2026 set becomes mandatory. For financial years starting in 2026, an undertaking that applies the 2023 set may use paragraph 27 as one of the eight reliefs of Article 2(1)(b) of Delegated Regulation (EU) 2026/1563, listed in point (i). The eight reliefs are paragraphs 27, 32 to 33, 74 to 75, 90, 91, 92, 106 and 110 of the 2026 ESRS 1. Under Article 2(2), the statement clearly states which version is applied.

Combining the routes was the most common practice in FY 2025 statements. EFRAG's State of Play 2026 analysed 905 assured FY 2025 sustainability statements published between 1 January and 20 April 2026 and found that 67 % used a hybrid top-down and bottom-up approach. The statements disclosed on average 6.4 material ESRS topics and 30 impacts, risks and opportunities. FY 2025 statements were prepared under the 2023 set (Delegated Regulation (EU) 2023/2772, as amended by Delegated Regulation (EU) 2025/1416), because the 2026 set is only available from financial years starting in 2026 (Article 2(1) of Delegated Regulation (EU) 2026/1563).

What the 2026 Revision Changed in the Materiality Requirements

The 2026 set rewrote chapter 3 of ESRS 1: it adds information materiality and a ban on reporting non-material information, names the top-down and bottom-up routes, limits the evidence base to reasonable and supportable information, and drops the rule that general disclosures apply irrespective of the outcome. Directive (EU) 2026/470 asked for the change. Its recital 18 calls for clear instructions on how to apply the materiality principle so that only material information is required, and to reduce the risk that assurance providers encourage the reporting of unnecessary information or excessive resources for the materiality assessment process. Recital 3 of Delegated Regulation (EU) 2026/1563 lists materiality and the materiality assessment first among the 13 areas in which the Commission changed EFRAG's technical advice.

The revised rules follow the dates of the act. Delegated Regulation (EU) 2026/1563 replaces Annexes I and II of Delegated Regulation (EU) 2023/2772 and does not repeal it. The table compares the materiality rules of both sets, and the other changes of Delegated Regulation (EU) 2026/1563 are covered under what the 2026 revision of the ESRS changes.

Reasonable and Supportable Information without Undue Cost or Effort

Under ESRS 1 paragraph 32 of the 2026 set, the assessment rests on reasonable and supportable information available at the reporting date without undue cost or effort, and the undertaking is not required to assess every possible impact, risk or opportunity across its operations and value chain. Paragraph 33 adds that the value-chain part of the assessment may be carried out without direct input from value-chain actors. Paragraphs 32 and 33 are also among the eight reliefs that an undertaking applying the 2023 set may use for financial years starting in 2026 (Article 2(1)(b) of Delegated Regulation (EU) 2026/1563).

EFRAG's IG 1, written for the 2023 set, words the evidence question differently. FAQ 10 (paragraph 179) says that, where possible, quantitative measures serve as objective evidence, and that qualitative information is also valuable. In the 2023 set, ESRS 1 paragraph 39 addresses the value chain through a focus on value-chain areas.

General Disclosures and the Outcome of the Assessment

In the 2023 set, all disclosure requirements of ESRS 2 and the topical disclosures linked to IRO-1 listed in ESRS 2 Appendix C are reported irrespective of the outcome of the assessment (ESRS 1 paragraph 29). ESMA repeated the point under priority 1 of its 2024 European Common Enforcement Priorities (ESMA32-193237008-8369): all ESRS 2 disclosure requirements and datapoints are mandatory irrespective of materiality, including the topical IRO-1 disclosures.

The 2026 set has no such clause and no Appendix C. ESRS 1 AR 12 of the 2026 set calls the ESRS 2 disclosure requirements "fundamental in nature and therefore likely to result in material information for all undertakings". The requirements themselves are set out under ESRS 2 General disclosures.

When Climate Change Is Assessed as Not Material

An undertaking that concludes climate change is not material explains why in both sets, but the depth differs: the 2023 set requires a detailed explanation, including a forward-looking analysis of the conditions that could make climate change material in future (ESRS 1 paragraph 32, ESRS 2 paragraph 57), and the 2026 set requires the undertaking to disclose "the basis for concluding that climate change is not material, if the undertaking has reached this conclusion and therefore omits all DRs in ESRS E1 Climate Change" (ESRS 2 paragraph 37(b) (IRO-2) of Delegated Regulation (EU) 2026/1563). The forward-looking analysis wording does not appear in the 2026 text. EFRAG's State of Play 2026 found climate change (E1) and own workforce (S1) material in 99 % of the FY 2025 statements it analysed, and business conduct (G1) in 95 %.

Groups, Acquisitions and Fiduciary Mandates

At consolidated level the 2026 set requires the assessment to be carried out for the consolidated group, regardless of its legal structure, with disaggregation where subsidiaries differ significantly (ESRS 1 paragraph 55 of Delegated Regulation (EU) 2026/1563). The aggregation rules sit in paragraphs 52 to 55 of the 2026 ESRS 1. A parent undertaking reports at this level under Article 29a(1) of Directive 2013/34/EU.

Paragraphs 74 and 75 of the 2026 set ease the treatment of changes in the group. An acquired subsidiary may be included in the materiality assessment and the statement from the following reporting period, and a disposed subsidiary may be removed from the beginning of the current period; significant events are still disclosed. Both paragraphs are among the eight reliefs of Article 2(1)(b) of Delegated Regulation (EU) 2026/1563 for financial years starting in 2026. Investments, including associates and joint ventures, are business relationships of the undertaking under paragraph 69 of the 2026 set.

AR 17 of the 2026 set addresses fiduciary mandates. Undertakings that manage investments under a fiduciary mandate without retaining the risks or rewards of ownership are not expected to assess the impacts, risks and opportunities related to those investments.

How Auditors and Supervisors Review the Assessment

The assessment is inside the limited-assurance opinion: Article 34(1), second subparagraph, point (aa) of Directive 2013/34/EU, as replaced by Article 2(12) of Directive (EU) 2026/470, covers the process carried out by the undertaking to identify the information reported pursuant to the sustainability reporting standards. The opinion is limited assurance only: Directive (EU) 2026/470 deleted the reasonable-assurance step. The EU limited-assurance standard is not adopted as of 29 October 2026 (due by 1 July 2027).

The CEAOB has set out how such an engagement could be carried out. Its technical advice CEAOB 2026-026, adopted on 25 September 2026, covers limited assurance engagements on sustainability reporting required by Article 34(1)(aa) of the Accounting Directive; it is advice, not law. Paragraph 4 M of the advice states that the ESRS require a process to identify sustainability matters, including the application of double materiality. Who gives the opinion and what it covers is set out under limited assurance of CSRD reporting by auditors.

Supervisors set their own focus. ESMA's 2026 European Common Enforcement Priorities (13 October 2026) focus FY2026 enforcement of connected information on ESRS E1 Climate change and S1 Own workforce, because these topics are more mature; the first priority is continued progress in applying the materiality assessment. Under that priority, "continuing the progress along the materiality learning curve" in the ESMA statement ESMA32-2064178921-9738, ESMA asks issuers for the four points listed below.

• Rigour: assess positive and negative impacts with the same rigour.
• Thresholds: disclose the impact thresholds applied.
• Coverage: cover own operations and the value chain.
• Description: give a concise, company-specific description of the process.

The statement also says that issuers must disclose which ESRS version they use for FY 2026.

The IG 1 Guidance and Its Status in October 2026

EFRAG's IG 1 Materiality Assessment Implementation Guidance, final since 31 May 2024 (draft 22 December 2023), runs to 55 pages with 25 FAQs and is non-authoritative: where it contradicts the ESRS, the ESRS take precedence. IG 1 organises the work in the four illustrative steps listed below.

• Step A: understanding the context.
• Step B: identification of the actual and potential impacts, risks and opportunities related to sustainability matters.
• Step C: assessment and determination of the material impacts, risks and opportunities.
• Step D: reporting.

IG 1 was written for the 2023 set. As of 29 October 2026, EFRAG has not updated its implementation guidance to reflect the revised ESRS, and its ESRS Q&A Platform has been on hold since the end of 2025. IG 1 predates the top-down route of paragraph 27 and the ban of paragraph 24 of the 2026 set. Where IG 1 and the 2026 text differ, the ESRS take precedence, as the guidance itself states.

What a Double Materiality Assessment Is Not

A double materiality assessment is not a matrix, not a scoring exercise required by law and not the investor-only materiality of other frameworks: it is the process that ESRS 1 chapter 3 sets for deciding what an undertaking reports. The ISSB's IFRS S1 uses investor-focused materiality: information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users of general purpose financial reports make (paragraph 18 of IFRS S1). The ESRS use double materiality, and how the two concepts compare is set out under materiality under the ESRS and the ISSB standards.

No matrix is required or mentioned in either set: in the English Official Journal texts, the word "matrix" appears once in the 2023 set, in a biodiversity definition of habitat fragmentation, and not at all in the 2026 set. AR 13 of the 2026 set states that quantitative scoring is not necessarily required.

Does Every Company Have to Run One?

No: the assessment is required of undertakings that report under Articles 19a and 29a of Directive 2013/34/EU and apply the ESRS, not of companies that report voluntarily. The duty attaches to the undertaking that prepares the sustainability statement, for itself under Article 19a or for its group under Article 29a.

The voluntary standard (VS, formerly VSME), Annex I of Delegated Regulation (EU) 2026/1560, contains no double materiality assessment. It uses an "if applicable" principle: an item of "if applicable" disclosure is reported only if the circumstances specified apply, and an omitted item is assumed not applicable (Annex I paragraph 15). Its modules are set out under the voluntary standard (VSME) for companies.

Can Last Year's Assessment Be Reused?

Yes, where nothing significant has changed: under ESRS 1 paragraph 34 of the 2026 set, the undertaking considers at each reporting date whether significant changes have occurred that could affect its previous conclusions, and reviews and updates the assessment if so.

EFRAG's IG 1 FAQ 7 (paragraphs 170 and 171), written for the 2023 set and non-authoritative, says that material impacts, risks and opportunities are determined at each reporting date and that prior conclusions may be used where there are no material changes. In practice, 82 % of the FY 2025 statements in EFRAG's State of Play 2026 updated the assessment against FY 2024.