M
Materiality Assessment
Definition
A materiality assessment is the process by which a company identifies and prioritises the sustainability topics most relevant to its business, stakeholders, and impacts. Under the CSRD/ESRS framework, companies must conduct a Double Materiality Assessment (DMA) covering both financial materiality (impact on the company) and impact materiality (the company’s impact on people and the environment). GRI Standards use an impact-only materiality concept. IFRS S1/S2 use financial materiality only (the ‘outside-in’ perspective). The EFRAG revised ESRS (July 2025 EDs) simplify the DMA process, making it more principles-based and less prescriptive.
Source
ESRS 1 General Requirements; CSRD (EU) 2022/2464; IFRS S1; GRI 3 (Material Topics, 2021).
Practical Explanation (Compliance Context)
The materiality assessment is the first and most consequential step in ESG reporting. It determines which ESRS disclosure requirements apply and shapes the entire sustainability statement. Companies must document the materiality assessment methodology, evidence base, and stakeholder engagement process. Regulators and external assurance providers will scrutinise DMA rigour. Boards must formally approve the materiality assessment outcomes before publication.