Double Materiality Assessment: Examples of Impacts, Risks and Opportunities (IROs)

Die European Sustainability Reporting Standards (ESRS) are a forward-looking development in non-financial reporting and a core standard of the Corporate Sustainability Reporting Directive (CSRD). Companies must provide relevant, comparable, and reliable information about their sustainability-related impacts, risks, and opportunities. The ESRS include detailed and standardised disclosure requirements so that companies can report on environmental, social, and governance topics (ESG). On 3 July 2026, the European Commission adopted revised ESRS that cut the number of mandatory datapoints by 61% – these become mandatory from financial year 2027 onward.

What is the double materiality assessment under ESRS?

Before reporting on sustainability matters, companies subject to the CSRD are required to carry out a double materiality assessment. This assessment requires companies to identify and evaluate their positive and negative impacts on the environment and society, taking both potential and actual effects into account. It also requires companies to consider external factors that could affect their financial performance. This approach supports a comprehensive and transparent assessment of a company's sustainability performance. The criteria for the double materiality assessment are defined in the European Sustainability Reporting Standards ESRS 1, and the results must be reported in accordance with ESRS 2.

With the ESRS revision of 3 July 2026, the methodology was simplified: a "top-down" approach reduces the effort involved in assessing individual IROs, while the principle of double materiality itself remains unchanged. For financial year 2026, companies may choose to report under either the old or the new ESRS.

ESRS requirements: Structure and composition of the standards

The ESRS provide an overarching framework for all affected company types and sizes. They consist of two cross-cutting standards (ESRS 1 and ESRS 2) and 10 topical standards covering the so-called Environmental, Social, and Governance topics (ESG).

While ESRS 1 ("General Requirements") sets out general rules for reporting under the ESRS without specifying individual disclosures, ESRS 2 ("General Disclosures") describes fundamental information that must be published regardless of the sustainability matter in question and is mandatory for all companies within the scope of the CSRD.

The remaining standards, along with the specific disclosure requirements and datapoints, depend on the outcome of the double materiality assessment, which must take into account both the inside-out perspective (impact materiality) and the outside-in perspective (financial materiality). These two perspectives are fundamental to identifying strategically relevant sustainability topics and their corresponding reporting obligations, with ESRS E1 and ESRS S1 typically forming the basis for industrial companies.

IRO Examples: Impact Materiality vs. Financial Materiality

Conducting a double materiality assessment requires a comprehensive review that covers not only the ten topical standards but also additional subject areas. With the ESRS revision of July 3, 2026, the previous list of topics, sub-topics, and sub-sub-topics (ESRS 1, Appendix AR 16) was replaced with a simplified, non-binding list of topics and sub-topics (ESRS 1, Appendix A). Companies must identify their material impacts, risks, and opportunities relating to these topics. Material impacts include both positive and negative effects of business activity on the environment and stakeholders (impact materiality), while material risks and opportunities cover the financial aspects arising from dependence on resources such as natural, human, and social factors (financial materiality).

Below, you'll find one example each for ESRS E1, ESRS S1, and ESRS G1.