Materiality Assessment
A materiality assessment is the structured process by which a company determines which sustainability topics are significant enough to warrant reporting and management action. Under the CSRD, the materiality assessment follows the double materiality principle, evaluating topics from both impact and financial perspectives.
The typical materiality assessment process involves:
1. Identification of potential topics
- Map all ESRS topics and sub-topics (E1–E5, S1–S4, G1)
- Consider sector-specific topics and company-specific issues
- Review peer reports, regulations, and stakeholder expectations
2. Stakeholder engagement
- Survey or interview key stakeholder groups: employees, customers, investors, suppliers, communities
- Gather perspectives on which topics matter most from both impact and financial angles
3. Scoring and threshold setting
- Assess each topic against impact materiality criteria (scale, scope, irremediability, likelihood)
- Assess each topic against financial materiality criteria (magnitude of financial effect, likelihood)
- Apply defined thresholds to determine which topics are material
4. Validation and documentation
- Present results to management and governance bodies for approval
- Document methodology, data sources, and decisions in sufficient detail for audit
5. Materiality matrix
- Visualise results , often as a matrix plotting impact materiality against financial materiality
- Topics in the upper-right quadrant are highest priority
The materiality assessment must be reviewed and updated at least annually. Under the CSRD, it must also be subject to the same limited assurance engagement as the rest of the sustainability report.
Dcycle’s platform guides companies through the materiality assessment process, from stakeholder surveys to automated matrix generation.
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