Expert blog: Double Materiality implementation insights

Wednesday 30 August 2023

Double Materiality implementation insights 

Last week, the EFRAG Sustainability Reporting Board convened to discuss, among others, the draft double materiality implementation guidance. 

While the draft is deemed an important document to help companies operationalise double materiality assessment (DMA), there is a call to further simplify the document and improve readability. 

In this blog, we share our insights from the implementation guidance (and simplify text) to make your DMA more practical. We go a step beyond to share our practical experience on the topic.  

If you are new to the topic and are looking to understand the basics, please refer to our in-depth interview with Nishant Parekh, Managing Director 2Impact.

Would you like to learn more about the practicalities of implementing double materiality? Sign up for one of our in-depth trainings on 24 October or 2 November. 


  • Make impact materiality your starting point; financial materiality should consider the outcome of the material impacts (and dependencies)  
  • The double materiality assessment should reflect interlinkages between the impact and financial perspectives as these are often intertwined (e.g., companies which have significant impact on deforestation will likely fall under the scope of the upcoming EU Deforestation Regulation and may face penalties for non-compliance)

Sustainability matters

  • Sustainability matter is defined as environmental, social and human rights and governance factors. The main goal is to identify the material impacts, risks and opportunities related to matters that are to be reported. The level of granularity can vary, from topic level to sub-topic level to sub-sub-topic level (as described in the ESRS).
  • Prepare and disclose entity-specific disclosures in case a sustainability matter is not covered or sufficiently granular in ESRS (refer to ESRS 1 paragraph AR 16 for a full list of matters)  

Organisational context 

Different sources such as the internal business plan, strategy, financial statements, products/services, geographical location can/should be used to define a companies’ activities, business model, business relationships and value chain. 

Stakeholder engagement strategy

  • Existing stakeholder engagement initiatives (e.g., with Investor Relations or Public Affairs team) can/should be used to in your materiality assessment processes.  
  • Define when and how to involve different stakeholders and experts (e.g., interviews in the ‘identification’ and ‘final validation’ phase and survey for the ‘assessment’ phase)
  • AA1000 Stakeholder Engagement standard serves as a good guidance on different forms of engagement  
  • Validating (almost) final outcomes with key stakeholders and experts can be seen as a good practice 

Identify material impacts, risks and opportunities

  • Top-down' or ‘bottom-up approach can be used to identify of potential material sustainability matters 
    • Top-down would mean preparing a list of matters/topics at a ‘high-level’ and then assessing potential impacts, risks and opportunities. Starting point can be either: 1) ESRS list (‘sustainability matter to be included in materiality assessment’) or  2) own list of topics based on internal and external study  
    • Bottom-up would mean identifying impacts, risks and opportunities at a granular level (based on for example due diligence processes). These may then be grouped and mapped to ESRS standards.  
  • The final output here should be a topic list with definitions, boundaries and associated impacts, risks and opportunities  

Assess material impacts, risks and opportunities 

  • Impacts (negative and positive) should be assessed relative to each other; however negative impacts shouldn’t be netted with positive impacts
  • Similar to impacts, like with Enterprise Risk Management and Strategy development practices, risks and opportunities should be assessed relative to each other. Think of setting up a risk and opportunity assessment matrix.  

Stakeholder engagement – a mix of internal and external for impact materiality while internal for financial materiality – can/should inform this step either to assess, validate and/or ensure completeness of the final list of material impacts.  

Define threshold 

  • The thresholds should be quantitative and based on evidence as much as possible. For financial materiality for instance, the company may refer to absolute monetary thresholds to assess the materiality.
  • Appropriate quantitative and/or qualitative thresholds can and should be applied based on severity for actual negative impacts and severity and likelihood for potential negative impacts are used. Severity is based on the scale, scope and irremediable character of negative impacts and the scale and scope of positive impacts. 
  • Leverage GRI guidance while applying thresholds: when setting a threshold, the organization first groups its impacts into a number of topics and ranks them, based on their significance, from highest to lowest priority. The organization then needs to determine how many of the topics it will report on, starting with those that have the highest priority. 

While the implementation guidance is a step in the right direction, there are still several (grey) areas for which limited guidance is provided.  

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