Double materiality is now firmly embedded in the European sustainability reporting landscape. Under the Corporate Sustainability Reporting Directive (CSRD), companies are required to assess both how sustainability issues affect financial performance and how their activities impact people and the environment. In theory, this should drive better decisions and greater accountability.
One of the most common issues we see is that double materiality is treated primarily as a reporting exercise. Ownership often sits with sustainability or reporting teams, the assessment is completed to meet CSRD expectations, and then largely set aside once disclosures are finalised. When materiality is approached in this way, it delivers limited value. It rarely informs strategy, investment decisions or risk management, despite CSRD’s explicit intention that materiality should underpin how companies identify and manage sustainability-related risks and impacts.
In practice, many of the shortcomings in double materiality assessments reflect a reluctance to exercise judgement. Decisions are deferred, diluted or obscured through process. Long lists of impacts, risks and opportunities can give the impression of rigour, but they often mask an underlying unwillingness to make and defend clear choices about what truly matters most.
More is not better
Another recurring problem is an overemphasis on completeness at the expense of clarity. Faced with detailed ESRS requirements and concerns about regulatory scrutiny, many companies err on the side of caution by identifying a very large number of material topics. This is not new. Similar patterns emerged under GRI, where organisations reluctant to drop issues from their materiality assessment ended up with long and unwieldy disclosure obligations.
The result is a crowded materiality outcome that makes it difficult for readers, and for management, to understand priorities. CSRD does not require companies to report everything; it requires them to justify their judgements. Robust thresholds, clear prioritisation and transparent explanations are far more valuable than exhaustive lists.
The limits of generic inputs
Many materiality assessments also rely too heavily on generic inputs. Desktop research, peer benchmarking and ESG ratings are often used as the primary evidence base. While these sources provide useful context, they are no substitute for company-specific insight. Impact materiality under CSRD requires an understanding of where impacts actually occur, across operations, products and value chains. Without this level of detail, assessments risk reflecting sector-wide assumptions rather than a company’s real-world footprint.
There is growing interest in how technology, including AI, could support this challenge, for example by helping to synthesise large volumes of stakeholder input, identify patterns across geographies and value-chain segments, and reduce the risk of over-weighting a narrow set of voices. Used well, this kind of support could strengthen, rather than replace, human judgement.
Stakeholders without substance
Stakeholder engagement is another area where practice frequently falls short of expectations. CSRD places clear emphasis on understanding the perspectives of affected stakeholders, yet engagement is often limited, poorly targeted or insufficiently integrated into decision-making. Generic surveys or high-level consultations rarely surface the most significant impacts, particularly for vulnerable or less visible groups.
Just as importantly, companies often fail to explain how stakeholder input has influenced their conclusions. When this link is missing, credibility suffers, regardless of how extensive the engagement exercise appears on paper.
Artificial separation of impacts and risks
Although CSRD distinguishes between impact and financial materiality, many organisations assess them in isolation, using separate teams, methodologies and timelines. This separation misses a critical point: over time, impacts on people and the environment frequently translate into financial risks or opportunities. Treating the two lenses as disconnected exercises limits the usefulness of both and runs counter to the directive’s intent.
From compliance to capability
Done well, double materiality is not a compliance burden but a strategic tool. It helps organisations understand where they create their most significant impacts, where they are most exposed to sustainability-related risks, and where action, or inaction, could affect long-term value.
As CSRD reporting moves from first-time implementation towards greater regulatory scrutiny, the quality of materiality assessments will matter more than ever. Companies that are willing to apply judgement, explain their reasoning and refine their approach over time will be better placed not only to meet regulatory expectations, but to stay focused on what really matters.