What does double materiality mean under the CSRD and ESRS?

**Double materiality** requires assessing a sustainability matter from **two directions**. **Impact materiality** (inside-out) captures the actual and potential, positive and negative **effects of the undertaking on people and the environment** — emissions, working conditions in the value chain, effects on communities. **Financial materiality** (outside-in) captures how sustainability matters create **risks and opportunities** that affect the undertaking's development, position, performance, cash flows or cost of capital ^[1][2].

The decisive point is the **either/or test**: a matter is material — and therefore reportable — as soon as it meets **one** of the two perspectives, not only when both apply. That fundamentally distinguishes the CSRD approach from a purely **financial** materiality of the kind classic accounting knows.

The duty flows from the **CSRD (Directive (EU) 2022/2464)** via the inserted **Art. 19a of the Accounting Directive 2013/34/EU**, which expressly refers to the double-materiality perspective. It is made concrete in **ESRS 1, Section 3.3** (Annex I to Delegated Regulation (EU) 2023/2772), which defines the two dimensions and governs the materiality assessment ^[1][2].

The materiality assessment is the **lever that determines the scope of your report**: which standards and data points have to be disclosed at all follows from it. It is also the touch-point to the SFDR world — for example the **principal adverse impacts (PAI)** — because both rest on the same idea of impact.

Even after the Omnibus package, which slims the ESRS down, **double materiality is retained** — the disclosures are simplified, not the principle. Anyone managing the scope of their reporting has to follow the ongoing EFRAG and Commission clarifications on the materiality assessment.