Impact Materiality

Impact materiality (also called ‘inside-out’ materiality) is one of the two dimensions of the CSRD’s double materiality concept. A sustainability topic is impact-material when the company’s own activities or value chain relationships cause, contribute to, or are directly linked to significant actual or potential adverse or positive impacts on people or the environment. Under ESRS 1, impact materiality assessment considers: the severity of the impact (scale, scope, irremediability for actual impacts; severity and likelihood for potential impacts); the company’s ability to influence the impact; and whether the impact is actual or potential.

ESRS 1 General Requirements, Commission Delegated Regulation (EU) 2023/2772, Appendix A; CSRD (EU) 2022/2464.

Impact materiality assessment requires companies to consult affected stakeholders — workers, communities, civil society — to identify impacts relevant to the sustainability statement. Companies with complex supply chains must assess impact materiality across tier 1 and upstream suppliers, particularly for social and biodiversity topics. The EFRAG revised ESRS (July 2025) simplifies impact materiality assessment procedures while maintaining the concept as the core materiality framework.