Comprehensive guide to double materiality assessments (DMA)
TL;DR
A double materiality assessment (DMA) is the process that determines what your company actually needs to report on under CSRD.
Following the amended ESRS (December 2025), the double materiality assessment process is significantly simpler. You no longer need to score every topic from scratch. A top-down approach is now valid: start with your business model, sector, and value chain, and go deeper only where it's not obvious. A full DMA is not required annually only when something material changes.
The double materiality assessment has two lenses: how your activities affect the world (impact materiality), and how sustainability topics affect your business (financial materiality). Both are required under CSRD.
If you're in scope (more than 1,000 employees and over €450 million in annual net turnover) this is where your reporting begins.
Understanding CSRD and double materiality
The Corporate Sustainability Reporting Directive (CSRD) is the EU regulation that sets the standard for how companies disclose their sustainability performance. The goal: make reporting consistent, comparable, and credible, so investors, partners, and regulators can actually use it.
Under the CSRD, companies report against the European Sustainability Reporting Standards (ESRS). Following the Omnibus I Directive adopted on 24 February 2026, mandatory ESRS reporting now applies only to companies exceeding both 1,000 employees and €450 million in annual net turnover, reducing the number of companies in scope from approximately 45,000 to around 10,000.
If you're in scope or preparing voluntarily, the double materiality assessment is where your ESRS journey begins.
What is a double materiality assessment?
A double materiality assessment (DMA) is the process through which a company identifies which sustainability topics are material, and therefore required to be disclosed, under the CSRD and ESRS. It is the foundational step of any ESRS sustainability report.
The term "double" refers to the two perspectives the assessment must cover simultaneously:
- Impact materiality — how do your activities affect the environment and society? This covers actual and potential impacts, positive and negative, across your own operations and your value chain.
- Financial materiality — how do sustainability topics affect your business? This includes risks and opportunities that could influence your financial position, performance, or cash flows over the short, medium, and long term.
Both lenses are required under CSRD. Together, they ensure your sustainability statement reflects the full picture: what your company does to the world, and what the world does to your company.
This is what sets ESRS apart from IFRS S1/S2, which covers financial materiality only. It's also what makes the double materiality assessment one of the most useful exercises you can run, not just a compliance checkbox, but a real look at your business from the outside in.
What changed in the simplified DMA (amended ESRS, 2025)
The original ESRS generated significant challenges around the double materiality assessment process. Based on feedback from first-wave reporters, EFRAG published the amended ESRS on 3 December 2025 with substantial simplifications. The EFRAG cost-benefit analysis confirmed that performing the DMA was among the top three cost drivers for Wave 1 companies, alongside interpreting the standards and collecting value chain data. Here's what changed.
From bottom-up to top-down first
Previously, you started with the full list of ESRS topics, scored each one, and filtered downward. The result was often a documentation exercise that produced boilerplate rather than insight.
The amended ESRS introduces a top-down approach as a valid starting point for the double materiality assessment. You begin with your business model, sector, geographies, and value chain, and from there identify which topics are plausibly material. A detailed bottom-up assessment at IRO level is only required where the higher-level analysis doesn't lead to a clear conclusion. You can also combine both approaches where it makes sense.
In the public consultation, this was consistently identified as the single most effective simplification in the entire ESRS revision.
Materiality of information as a general filter
The amended ESRS strengthens information materiality as a filter. Not everything that is impactful needs to be reported in detail. The question is always: would this information be decision-useful to users?
This is now framed explicitly within a fair presentation framework. Your sustainability statement should faithfully represent what matters, without unnecessary granularity or boilerplate. It's designed to reduce the checklist mentality that many Wave 1 reporters fell into, where each datapoint became an item to justify rather than a genuine disclosure decision.
Sub-topic level materiality
If only one sub-topic within a broader ESRS topic is material to your business, you only report on that sub-topic. You no longer trigger full reporting obligations across an entire standard because one element is relevant.
No full DMA required annually
A complete double materiality assessment does not need to be repeated every year. Update your assessment when something significant changes — a new acquisition, a material shift in your business model, or a major change in your operating context. In other years, a lighter update is enough.
Streamlined topic list
The list of topics and sub-topics in Appendix A of ESRS 1 is no longer mandatory to work through in full. It's now non-binding guidance to support your assessment. The most granular sub-sub-topic layer has been removed.
The double materiality matrix
.avif)
A double materiality matrix maps your material topics by plotting impact significance on one axis and financial significance on the other. It's a useful communication tool (for boards, auditors, and stakeholders) that shows both what you identified and why.
One thing to keep in mind: the matrix is an output of the double materiality assessment process, not the process itself. Treating it as the primary deliverable leads to exactly the scoring-heavy, documentation-first DMA that the amended ESRS is designed to move away from.
How to conduct a double materiality assessment: the five-step process
At Karomia, we follow a structured five-step process for conducting a double materiality assessment, thorough without being burdensome, and fully aligned with the simplified ESRS framework.
Step 1: IRO analysis
Start by identifying potential impacts, risks, and opportunities (IROs) across sustainability topics relevant to your business. Under the amended ESRS, you can use a top-down starting point: begin with your sector, geographies, and value chain structure to narrow down the topics most likely to be material before going deeper.
Key inputs for your double materiality assessment:
- Your business plan, strategy, and financial statements
- Your activities, products, services, and geographic footprint
- Your upstream and downstream value chain relationships
- Sector benchmarks and peer reporting practices
Karomia's AI draws on an extensive knowledge base (environmental and social impact data, industry-specific insights, and your company's own information) to map your operations against all ESRS topics and sub-topics. The result: a focused long list of plausibly material IROs, without the exhaustive manual mapping that slowed down Wave 1 implementations.
Under the amended ESRS, you can assess at topic, sub-topic, or IRO level depending on the nature of what you're looking at and how it's managed internally. Karomia automatically maintains IRO-to-PAT traceability — one of the most important structural improvements in the simplified standards.
Step 2: Stakeholder mapping
After scoping your IROs, identify the stakeholders whose interests are or could be affected by your activities. Stakeholder engagement is a required element of the CSRD double materiality assessment process.
In practice:
- Group similar stakeholder types unless they have genuinely different perspectives, engagement methods, or levels of relevance
- Prioritise stakeholders with direct exposure to your material impacts
- Workers' representatives have a specific role in the engagement process under the amended ESRS
Karomia helps you map and organise stakeholder groups, and supports documentation of the engagement process for audit purposes.
Step 3: Data collection
Engage stakeholders to score and provide qualitative input on the IROs you've identified from both an impact and financial materiality perspective.
The right method depends on the stakeholder group:
- Surveys collect broad quantitative data efficiently but may lack nuance
- Individual interviews provide depth and reasoning — useful for senior stakeholders or complex topics
- Focus groups facilitate discussion and consensus across diverse perspectives
Aim for representative samples. Document what you did, who participated, and how you weighted their input. This matters increasingly for limited assurance.
Step 4: Materiality calculation
With stakeholder input in hand, assess the materiality of each IRO. The amended ESRS provides clearer criteria for the double materiality assessment:
For impact materiality, the key parameters are:
- Severity (scale, scope, irremediability for negative impacts; scale and scope for positive impacts)
- Likelihood (for potential impacts)
- Note: for human rights impacts, severity takes precedence over likelihood
For financial materiality, assess the likelihood and potential magnitude of financial effects — on revenues, costs, assets, liabilities, or access to capital — over relevant time horizons.
The amended ESRS also clarifies that information materiality applies on top of these assessments: even if an IRO is technically material, it only needs to be reported if the information would be decision-useful to users.
At Karomia, the materiality calculation applies weighted averaging across stakeholder groups, MinMax normalisation for fair comparison across sub-topics, and automatic aggregation at the right level — whether topic, sub-topic, or IRO — based on how you've structured your assessment.
Step 5: Reporting and validation
Document the outcome of your double materiality assessment and integrate it into your sustainability statement. Under the amended ESRS, this means:
- Disclosing the approach you took (top-down, bottom-up, or combined) and how you considered prevention, mitigation, and remediation actions in the impact assessment
- Reporting on the material sub-topics identified — not necessarily the entire topic
- Ensuring your sustainability statement reflects the qualitative characteristics of information: relevance, faithful representation, comparability, verifiability, and understandability
- Including only what is material — the fair presentation principle explicitly allows omitting datapoints that aren't
ESRS 2 IRO-2 is where your DMA outcome is reported, covering the list of material IROs and the disclosure requirements your report addresses.
The DMA as a strategic tool
A well-executed double materiality assessment does more than feed your sustainability statement. It surfaces where your business is genuinely exposed, identifies where you're creating value beyond your financials, and builds the strategic foundation for your policies, actions, and targets.
The amended ESRS is designed to make this possible. By reducing the documentation burden and shifting emphasis toward the outcome — what actually matters to your business and to the world — it creates space for the DMA to be a real management tool rather than a reporting exercise.
We've seen this in practice. In a Karomia client case study with a manufacturing company, the simplified double materiality assessment approach delivered the same outcome — five material topics — with 30% fewer thematic standards evaluated, 50% fewer IROs assessed internally, and 75% fewer stakeholder responses to collect.
Same result. Dramatically less effort.
The EFRAG cost-benefit analysis confirms this at scale: the amended ESRS is projected to deliver overall cost savings of around 44% compared to the original ESRS, with DMA simplifications among the most significant drivers.
Frequently asked questions
What is a double materiality assessment under CSRD?
A double materiality assessment (DMA) is the process a company uses to identify which sustainability topics are material to its CSRD report. It covers two perspectives: impact materiality (how the company affects the environment and society) and financial materiality (how sustainability topics affect the company's finances). Both are required under CSRD, and the outcome of the DMA determines what a company must report on.
What are the benefits of conducting a double materiality assessment?
Beyond meeting your CSRD reporting obligations, the DMA tells you which sustainability topics genuinely affect your business and where your business genuinely affects the world. That insight underpins better risk management, stronger stakeholder relationships, and more credible sustainability communication, and increasingly, better access to financing and procurement.
How often should a double materiality assessment be conducted?
Under the amended ESRS, a full double materiality assessment is not required annually. Update it when something significant changes: a new acquisition, a material shift in your business model, or a major change in your operating context. In other years, a lighter review is enough.
Is stakeholder engagement required in a double materiality assessment?
Yes. Stakeholder engagement is a required part of the CSRD double materiality assessment process. It is how you ensure your assessment reflects the actual concerns and expectations of those affected by your business. The amended ESRS clarifies expectations here, including the specific role of workers' representatives.
Which stakeholders should be included in a double materiality assessment?
All stakeholders whose interests are or could be affected by your activities, including those indirectly affected through your value chain. This includes investors, lenders, employees, workers' representatives, suppliers, customers, affected communities, and civil society. Primary users (investors, lenders, creditors) play a specific role in shaping what information materiality means in practice.
Do I need to redo my double materiality assessment under the amended ESRS?
Not from scratch. The simplified approach (top-down first, sub-topic level materiality, no annual full reassessment) changes the process but usually arrives at the same material topics. Your existing DMA is a useful starting point. The effort of updating it is typically much lower than the original exercise.
What is the difference between impact materiality and financial materiality?
Impact materiality refers to how a company's activities affect the environment and society. It assesses the significance of those effects based on severity and likelihood. Financial materiality refers to how sustainability topics create risks or opportunities that affect the company's financial performance. CSRD requires both, which is what makes it a "double" materiality framework as opposed to IFRS S1/S2, which covers financial materiality only.
How will the double materiality assessment be audited?
Auditors assess accuracy, completeness, and verifiability. Key areas of scrutiny include: how you determined materiality thresholds, how you factored prevention and mitigation actions into your impact assessment, whether your top-down conclusions are supported by evidence, and whether your reported information faithfully represents your material IROs. Karomia's documentation features are specifically designed to make this process traceable and audit-ready.