CSRD Double Materiality Assessment Guide: ESRS Matrix, Scoring, and 2026 Audit Rules

A CSRD double materiality assessment decides what a company must report under the EU’s Corporate Sustainability Reporting Directive: every sustainability topic is tested for its impact on people and the planet and for its financial effect on the business. The rules changed significantly in 2026. Omnibus I (Directive (EU) 2026/470) narrowed CSRD scope to companies with more than 1,000 employees and €450 million turnover, and the Commission adopted simplified ESRS on 3 July 2026 that endorse a lighter, top-down approach to materiality.

This CSRD double materiality assessment guide covers how impact and financial materiality are scored under ESRS 1, the ten topical standards and what is always mandatory, the new scope and timelines for EU and non-EU groups, and the assurance rules auditors will apply. Short on time? See the 11-slide CSRD web story, or go straight to our free Double Materiality Checker.

• What double materiality means
• Scoring impact and financial materiality
• The ESRS standards and what is always mandatory
• A five-step assessment process
• Worked scoring example
• Who must report after Omnibus I
• Assurance and audit rules
• What the revised ESRS change
• FAQs

What double materiality means under the CSRD

Most reporting frameworks ask one question: how does sustainability affect the company’s finances? That single, financial lens underpins the ISSB’s IFRS S1 and S2. The CSRD adds a second, equally weighted question: how does the company affect people and the environment? A matter is material, and must be reported, if it meets either test.

• Impact materiality (inside-out): the company’s actual or potential, positive or negative impacts on people or the environment across its own operations and value chain.
• Financial materiality (outside-in): sustainability-related risks and opportunities that affect, or could reasonably be expected to affect, the company’s development, financial position, performance, cash flows, access to finance or cost of capital.

The two lenses often overlap. A manufacturer’s greenhouse gas emissions harm the climate (impact) and expose it to carbon pricing such as the EU ETS and CBAM (financial). If you import steel, aluminium, cement or fertiliser into the EU, our CBAM Calculator quantifies that financial exposure.

How impact and financial materiality are scored

ESRS 1 sets the criteria but not the numbers. Each company designs its own scales and thresholds, applies them consistently and documents the reasoning, because auditors test the process as much as the outcome.

Impact materiality: severity first

For a negative impact, severity is built from three factors. Scale is how grave the impact is. Scope is how widespread it is, for example the number of people or the area affected. Irremediable character is whether, and how easily, the harm can be reversed. For a potential impact that has not yet happened, likelihood is added. Where a potential impact concerns human rights, severity takes precedence over likelihood, so a low-probability but grave risk can still be material.

Financial materiality: likelihood and magnitude

A risk or opportunity is financially material when the combination of its likelihood and the potential magnitude of its financial effects crosses the company’s threshold. Most companies align the scales with their enterprise risk management framework, so a sustainability risk is rated on the same basis as any other business risk.

The ESRS standards and what is always mandatory

The ESRS contain two cross-cutting standards and ten topical standards. ESRS 1 and ESRS 2 always apply. The topical standards apply only to topics the double materiality assessment finds material, which is why the assessment drives the size and cost of the whole report.

Because the assessment determines which topical standards apply, expect auditors and investors to scrutinise topics judged not material, especially climate change for any company with meaningful emissions. For deeper guidance on individual topics, see our articles on ESRS E5 and the circular economy and biodiversity accounting with TNFD.

A five-step double materiality assessment process

1. Understand the context. Map the business model, strategy, sectors, geographies and value chain. Under the revised ESRS this context can directly drive which topics you assess.
2. Identify impacts, risks and opportunities (IROs). Start from the ESRS topic list, sector peers and stakeholder input. Most companies now take the top-down route, assessing topics and sub-topics rather than listing every individual impact.
3. Assess and score. Rate each impact on severity (and likelihood if potential) and each risk or opportunity on likelihood and magnitude, over short, medium and long-term horizons.
4. Apply thresholds and decide. Compare scores with documented thresholds. A topic is material if it crosses either one. Record the rationale, especially for borderline and excluded topics.
5. Validate, disclose and refresh. Have management and the board review the results, disclose the process under ESRS 2, and update the assessment when the business or its context changes. Our Double Materiality Checker structures steps 2 to 4 for every ESRS topic.

Worked scoring example

The example below shows how one company might score five topics. Two points stand out: a topic can be material on one axis only, and governance topics such as business conduct often matter more financially than for their direct impact.

Who must report after Omnibus I

Omnibus I, published in the Official Journal on 26 February 2026 and in force since 18 March 2026, removes around 90% of the companies originally in scope (Commonwealth Climate and Law Initiative). It does not change double materiality itself.

Non-EU multinationals should note that the old test of €150 million EU turnover no longer applies. A US or Asian group now falls in scope only if its EU turnover exceeds €450 million and it has an EU subsidiary or branch with more than €200 million turnover. The first non-EU reports cover financial year 2028 and are due in 2029.

Omnibus I also caps what in-scope companies can demand from smaller value-chain partners. Companies with fewer than 1,000 employees may decline requests that go beyond the voluntary VSME standard. For the first three years, in-scope companies that cannot obtain value-chain data may explain why, describe their efforts and set out how they will obtain it.

Assurance and audit rules

• Limited assurance only. Omnibus I removed the planned move to reasonable assurance. Sustainability statements require a limited assurance engagement.
• EU assurance standard by 1 July 2027. The Commission must adopt a harmonised limited assurance standard by that date; until then, national standards and practices apply.
• Who signs off. The statutory auditor or audit firm, or, where a Member State allows it, an accredited independent assurance services provider. It need not be a Big 4 firm.
• What the assurer tests. The double materiality process itself, the ESRS disclosures, compliance with EU Taxonomy reporting and the digital tagging of the report.

In practice, the DMA is where assurance providers spend the most time. Keep an evidence file for each topic: sources, scores, thresholds, stakeholder input and sign-off. The same discipline helps with US rules such as California SB 253, which phases in third-party assurance of emissions data from 2027.

What the revised ESRS change for 2026 and 2027

The Commission adopted the simplified ESRS on 3 July 2026 as Delegated Regulation (EU) 2026/1563 (European Commission). They apply to financial years beginning on or after 1 January 2027, with an option to apply them for 2026 (Debevoise, 8 Oct 2026).

• Top-down DMA endorsed. Companies may determine material topics by reference to strategy, business model, sectors, geographies and value chain, instead of building up from every individual impact.
• Fewer datapoints. Mandatory datapoints are down by more than 60% and total datapoints by more than 70%.
• No reporting of immaterial information. ESRS-prescribed information that is not material should not be disclosed; clearly labelled supplementary information is allowed.
• Value-chain estimates. Assessments can use regional or sector averages rather than direct supplier input.
• No sector-specific ESRS. Omnibus I withdrew the mandate for sector standards; the Commission may issue sector guidance instead.
• Mix-and-match for 2026. Companies staying on the original ESRS for financial year 2026 may still use selected new reliefs, including the top-down DMA.

Companies reporting under several regimes should align their materiality work once: the CSRD’s impact lens extends, rather than replaces, the financial lens used by the ISSB. Our IFRS S2 implementation roadmap explains the financial-materiality side in depth.

Frequently asked questions

What is a CSRD double materiality assessment?

It is the process companies in scope of the CSRD use to decide which sustainability topics to report. A topic is material if the company has significant impacts on people or the environment (impact materiality), or if the topic creates financial risks or opportunities for the company (financial materiality), or both.

Which companies must report under the CSRD after Omnibus I?

From financial year 2027, EU companies with more than 1,000 employees and more than 450 million euros net turnover. Non-EU groups report from financial year 2028 if they have more than 450 million euros EU turnover and an EU subsidiary or branch with more than 200 million euros turnover. First-wave companies have reported since financial year 2024.

How is impact materiality scored?

Negative impacts are scored on severity, which combines scale, scope and irremediable character. Potential impacts are also weighted by likelihood, although severity takes precedence for potential human rights impacts. Companies set and document their own scales and thresholds.

Is reasonable assurance required for CSRD reports?

No. Omnibus I removed the planned move to reasonable assurance. CSRD sustainability statements require limited assurance, and the Commission must adopt an EU limited assurance standard by 1 July 2027.

When do the revised ESRS apply?

The revised ESRS adopted on 3 July 2026 apply to financial years beginning on or after 1 January 2027. Companies may choose to apply them for financial years beginning in 2026.

Sources

• Directive (EU) 2026/470 (Omnibus I), EUR-Lex
• Commission Delegated Regulation (EU) 2026/1563 (revised ESRS), EUR-Lex
• European Commission, Commission adopts revised sustainability reporting standards, 3 July 2026
• Debevoise & Plimpton, European Commission Adopts Revised ESRS and Voluntary VSME Standard, 8 October 2026
• Commonwealth Climate and Law Initiative, CSRD reporting post-Omnibus I: what directors need to know in 2026
• ESRS 1 General requirements (Delegated Regulation (EU) 2023/2772), for impact and financial materiality criteria.

This guide is for information only and is not legal or audit advice. National transposition of Omnibus I may vary; confirm requirements with your advisers.