The five most common mistakes in double materiality assessments

Double materiality is a cornerstone of sustainability reporting. It assesses a topic from two perspectives: the company's impacts on the environment and society, known as impact materiality, and the topic's effects on the company's financial performance, known as financial materiality. Under the European Sustainability Reporting Standards (ESRS), this assessment determines which matters must be reported. TSRS focuses on financial materiality. However, today's impacts often become tomorrow's financial risks, making a double materiality perspective a sound foundation for TSRS reporting too. In practice, several recurring mistakes undermine both the credibility and the strategic value of the assessment.

Reducing the assessment to a survey

The most common mistake is to send stakeholders a survey, calculate average scores and consider the work complete. Surveys capture opinions; they do not establish evidence. A robust double materiality assessment examines the actual and potential impacts of business activities on people and the environment, the company's dependencies, and its financial risks and opportunities as distinct considerations. An assessment based solely on surveys will not stand up to assurance scrutiny.

Leaving out the value chain

An assessment focused only on the company's own operations can miss significant impacts and risks. The supply chain, customers, local communities and geographical context must also be considered. This is particularly important for emissions, human rights, biodiversity and supplier practices, where overlooking the value chain leaves the assessment incomplete.

Keeping the analysis too broad

Assessing broad topics such as “climate” or “own workforce” is not enough. Subtopics and the associated impacts, risks and opportunities (IROs) need to be defined in detail. Relying exclusively on the topic lists in the standards is another mistake; company-specific matters and sector frameworks must also be considered.

Failing to document the process adequately

The outcome may be presented as a matrix, but it cannot be defended in an assurance engagement unless the process behind it is explained. Companies need to record how thresholds were set, what evidence was used, which stakeholders were consulted and why certain topics were considered immaterial. Concluding that a matter is “not material” also requires a rationale. Insufficient documentation is one of the most frequent sources of difficulty in independent assurance.

Treating the assessment as a one-off exercise detached from strategy

Double materiality should be reviewed annually and updated when the business model, regulatory environment or stakeholder expectations change. Its findings should also inform strategy, risk management, target setting and performance indicators. A matrix placed in a report and then forgotten leaves the assessment's potential unrealised. The problem deepens when finance, risk, operations and sustainability teams do not work together.

These five mistakes can turn double materiality into a box-ticking exercise.

Done well, the assessment gives a company a clearer view of its impacts and financial risks, turning reporting into a strategic tool. A robust assessment is evidence-based, covers the value chain, examines subtopics, is well documented and connects to strategy. This approach strengthens ESRS and TSRS compliance while improving the quality of long-term business decisions.