CSRD double materiality workflow

Start by defining the reporting undertaking, consolidation perimeter, business model, geographies, activities, products, services, and value-chain segments that the assessment will cover. ESRS value-chain information is not a request to document every supplier or customer; it is a requirement to include material upstream and downstream information where it is needed to understand material impacts, risks, and opportunities.

Create a source register before scoring begins. It should include ESRS 1 and ESRS 2 references, the EFRAG materiality and value-chain guidance used by the team, previous sustainability assessments, due diligence outputs, enterprise risk materials, stakeholder engagement evidence, and any sector or country data used for value-chain estimates.

Build the candidate IRO list from the undertaking's actual business context, not from a generic topic checklist. Use ESRS sustainability matters, prior assessments, due diligence findings, enterprise risk registers, incidents, complaints, workforce and community engagement, supplier information, customer-use information, regulatory changes, and sector/geography exposure to identify where IROs may arise.

For value-chain IROs, record where the matter may arise: own operations, upstream suppliers, materials and services, distribution, customer use, end-of-life, financing, or other business relationships. If primary value-chain data is not available after reasonable efforts, record the secondary data, sector averages, proxies, or indirect sources used and why they are reasonable for screening.

Score each candidate matter for impact materiality and financial materiality before consolidating the result. A matter can be material from the impact perspective, the financial perspective, or both. Treat the two dimensions as connected but not interchangeable.

For impact materiality, record severity and likelihood using the ESRS concepts of scale, scope, and irremediable character for negative impacts. For financial materiality, record likelihood and potential magnitude of effects on development, financial position, financial performance, cash flows, access to finance, or cost of capital. Keep the thresholds qualitative, quantitative, or mixed, but make them explicit enough that management and assurance providers can understand the judgement.

Before governance approval, run a challenge session on the IRO register. The purpose is to test whether the assessment reflects the undertaking's real activities, business relationships, affected stakeholders, geographies, and products rather than the easiest data sources.

Challenge questions should focus on completeness and supportability: which affected stakeholder groups were considered, where direct engagement was not possible, which credible proxies or scientific sources were used, which value-chain estimates rely on sector averages, and whether missing data could change the materiality conclusion.

The approval gate should confirm the material IRO list, the thresholds and methodology used, changes from the prior period, and the ESRS disclosure requirements covered by the sustainability statement. Approval should not be a broad sign-off on a slide deck; it should be tied to named records that can be updated, reviewed, and challenged.

After approval, map each material matter to the relevant ESRS topical disclosure requirements, ESRS 2 IRO-1, ESRS 2 SBM-3, ESRS 2 IRO-2, and any policies, actions, targets, or metrics required because the matter is material. If climate change is assessed as not material, ESRS requires a more detailed explanation than for other omitted topical standards.

Close the workflow by preserving the record of how the assessment was performed, not just the final matrix. EFRAG guidance notes that documentation can support governance of sustainability reporting and help assurance providers understand the materiality assessment process and results.

The audit trail should be versioned and reproducible. A reviewer should be able to see the source used, the evidence collected, the judgement applied, the stakeholder or value-chain limitation, the owner who approved the conclusion, and the disclosure consequence.