Double materiality explained simply: meaning, procedure, and examples
Double materiality is one of the central concepts of the CSRD (Corporate Sustainability Reporting Directive) – and at the same time one of the most frequently misunderstood. Many companies are asking themselves:
What exactly does double materiality mean? How does it differ from the previous materiality analysis? And how can it be implemented in practice?
In this article, we explain double materiality in a simple, step-by-step manner.
What does double materiality mean?
Double materiality considers sustainability from two perspectives simultaneously:
→ What impact does the company have on the environment and society?
- Financial materiality
→ Which sustainability issues have a financial impact on the company?
A topic is considered essential if it fulfills one or both perspectives.
Why is double materiality so important?
With the CSRD, the EU is taking a clear step beyond previous reporting requirements. Sustainability should not only be described, but also systematically assessed, documented, and audited.
The dual materiality is crucial here because it:
- forms the basis for ESRS reporting
- determines which topics must be reported on
- relevant for auditing (auditability!)
- Strategically linking sustainability with risks, opportunities, and management
In short: without clean double materiality, there can be no CSRD-compliant reporting.
The two dimensions explained in detail
1. Impact materiality (inside-out perspective)
This concerns the question: "
" How does the company influence the environment and society?
Examples:
- CO₂ emissions and climate impact
- Working conditions in the supply chain
- resource consumption
- Impact on biodiversity
An issue is considered to have a significant impact if the effects are serious, affect many people or a large area, and are irreversible.
2. Financial materiality (outside-in perspective)
The question here is:
How do sustainability issues influence the economic success of the company?
Examples:
- Climate risks (e.g., rising energy costs)
- Regulatory risks (e.g., EU ETS)
- reputational risks
- supply chain disruptions
An issue is financially significant if it can affect revenue, costs, assets, or financing. The assessment must be quantified in EUR and assigned probabilities as in the risk analysis.
Double materiality vs. classic materiality analysis
Classic materiality
- Focus on stakeholder expectations
- Often qualitative
- Hardly relevant to the exam
- Voluntary
Double materiality
- Focus on impact and finances
- Strongly data- and process-based
- Audit-relevant
- Obligation under CSRD
How do you perform a double materiality analysis?
1. Identify relevant sustainability issues
- Focus on ESRS topics
- Consider industry and company context
2. Assess impacts
- Extent and severity of the impact
- Scope of affected stakeholders and area
- probability of occurrence
3. Analyze financial risks and opportunities
- Short-, medium-, and long-term financial effects
- Connection to strategy and business model
4. Evaluation & Prioritization
- Scoring models according to ESRS specifications
- Set thresholds
- Documentation of decisions
5. Document and validate results
- Traceability for auditors
- Internal approval processes
Typical errors in double materiality
In practice, it has been shown that many companies make similar mistakes when implementing double materiality. These not only lead to incomplete results, but can also become relevant for auditing in the CSRD context.
Focus solely on financial risks
Many companies continue to view sustainability primarily from a financial perspective—for example, in terms of costs, regulatory risks, or reputational damage. In doing so, they neglect the materiality of their impact. However, the CSRD explicitly requires companies to systematically assess the impact of their own actions on the environment and society. Those who omit this perspective do not fully meet the requirements.
No clear separation between the two dimensions
A common mistake is to confuse or jointly assess impact and financial materiality. This makes it difficult for companies to understand why an issue is considered material —and from what perspective. Auditors then lack a clear line of argumentation. The two dimensions must be assessed separately and then combined in a transparent manner.
Lack of documentation of the evaluation logic
In many companies, assessments are made informally—for example, in workshops or meetings—without clearly documenting the underlying logic. Under CSRD, a result alone is not enough. Companies must be able to explain in a comprehensible manner how assessments were made, what criteria were applied, and who was involved. Without this documentation, auditability is lacking.
Excel-based individual analyses without audit trail
Excel is often used as a central tool—distributed across different departments and versions. This leads to inconsistencies, a lack of traceability, and a high level of manual effort. Above all, there is no consistent audit trail showing when data was changed and by whom. This makes it difficult for companies to manage double materiality in a permanent and audit-proof manner.
No involvement of relevant departments
Double materiality is not purely a sustainability project. If only individual teams (e.g., sustainability or compliance) are involved, important perspectives are overlooked—such as those from purchasing, HR, risk management, or finance. Companies thus run the risk of overlooking relevant impacts or risks and setting up their analysis incompletely.
Why Software is crucial Software the case of double materiality
Double materiality is not a one-off workshop, but a structured, repeatable process. This is precisely where manual solutions quickly reach their limits.
With Software cubemos , companies can:
- Structured recording of sustainability issues
- Clearly separate impact and financial materiality
- Document evaluations, scores, and decisions
- Involve stakeholders and departments
- Create audit-proof evidence for CSRD audits
This turns a complex obligation into a clearly controllable process.
Conclusion: Double materiality understandable & implementable
Double materiality is at the heart of the CSRD. Those who implement it properly will achieve:
- Clarity on relevant sustainability issues
- Security for reporting
- A solid basis for strategic decisions
Companies that rely on structured processes and suitable tools early on save time and money in the long term.
