On July 31, 2025, the European Financial Reporting Advisory Group (EFRAG) published drafts for the revision of the European Sustainability Reporting Standards (ESRS) with a central focus on the adjustments to the Double Materiality Assessment (DMA) according to ESRS 1. The aim of the changes is to make the analysis more practical, strategic, and less complex.
Background on Double Materiality
Double Materiality is a central concept of ESRS and CSRD. It combines two perspectives:
Impact Materiality: Company’s impact on environment and society
Financial Materiality: Impact of sustainability-related factors on the company
Companies must systematically examine both perspectives to identify relevant topics, so-called IROs (Impacts, Risks and Opportunities).
Criticism of Previous Practice
In the first implementation round of the ESRS, it became clear: The DMA was difficult to implement for many companies. Specific criticisms included:
High focus on the process instead of the outcome in the context of the company strategy
Lack of clarity in applying scoring methods
Disproportionate level of detail without added value, especially when the DMA was carried out purely for compliance
Unclear requirements for reporting on mitigated risks or positive impacts
Key Points of the ESRS Adjustments to the Double Materiality Assessment
The changes in the draft for ESRS 1 and the update of the Double Materiality Assessment respond to this feedback with several systemic simplifications:
1. Top-down Instead of Bottom-up
In addition to the bottom-up approach, the ESRS will in future also offer the option of a top-down approach for conducting the DMA. This begins with an analysis of the business model, strategy, value chain, and stakeholders. Relevant topics and IROs are derived from this.
2. Establishment of an Information Filter
Only IROs that are expected to lead to material disclosures in the sustainability report should be examined in depth. This “Information Materiality Filter” is intended to prevent resources from being tied up in irrelevant topics.
3. New Framework
EFRAG emphasizes that the ESRS represent a “Fair Presentation Framework”. Relevance and faithful representation are prioritized over mere compliance. Non-material topics may also be reported if necessary, e.g., at the request of external stakeholders.
4. Flexibility in Reporting
Companies may decide whether to report at the topic, sub-topic, or IRO level. This reduces excessive granularity and strengthens alignment with management logic. Not every IRO must necessarily be assigned to a topic. If only one sub-topic in a standard is material, not all data points of the standard need to be reported, but only those relevant to the sub-topic.
5. Consideration of Mitigated Risks & Positive Impacts
It is explicitly clarified that risks already mitigated by measures, as well as positive impacts, are also subject to reporting, provided they are material.
6. Clarification of Terminology
The term “material matter” is dropped. Instead, a topic is only subject to reporting if material IROs exist.
The list of topics in ESRS 1 AR 16 is now purely illustrative.
A non-binding appendix (NMIG6) illustrates what targeted reporting at the sub-topic level can look like.
7. Aggregation and Location Logic
Companies should report information not for each individual site, but aggregated at an appropriate level. The goal is a focused and meaningful presentation.
The requirements for value chain reporting are also slightly relaxed: companies should first work with available information and be allowed to use estimates or assumptions.
Conclusion: less Obligation, more Responsibility
With the ESRS adjustments to the Double Materiality Assessment, EFRAG aims to make sustainability reporting more targeted, comparable, and strategically sound. Companies gain more leeway for self-responsibility, but at the same time must provide sound reasons for what they report and what they do not.
Further Information
The public consultation on the amendment runs until September 29, 2025.
EFRAG plans further outreach events in the autumn.
The final adoption of the changes is planned for the end of November.
