EFRAG Simplification of Double Materiality Application

Many stakeholders have turned their attention to a relatively new element of corporate sustainability reporting in Europe – double materiality. But the requirements have been a moving target, with questions remaining about how to apply double materiality in practice.

This article reviews the latest changes proposed for stakeholders to consider, as the EU works to ensure double materiality is both realistic for companies and a useful tool for raising the bar on corporate accountability.

Double Materiality Perspective Remains Intact

The concept of double materiality was first introduced by the European Commission in 2019 through its Guidelines on Non-Financial Reporting: Supplement on Reporting Climate-related Information. This guidance has since been enshrined as a central element of sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD), and it has remained intact amid other revisions to CSRD currently underway as part of the simplification effort proposed under the Omnibus Package. The European Commission has confirmed that “The omnibus proposal does not change the ‘double materiality perspective’, meaning that companies remaining in scope will have to report about how sustainability risks affect their business and about their own impact on people and the environment.”

Revisions Underway for Practical Application

While the concept itself remains intact, the practical application of double materiality is currently being revised. A streamlining effort is underway by the European Financial Reporting Advisory Group (EFRAG), which is responsible for the European Sustainability Reporting Standards (ESRS), the reporting standards used to comply with the CSRD. In April 2025, EFRAG indicated that the first cohort of reporters under CSRD found double materiality assessments (DMAs) to be overly burdensome:

“The Materiality Assessment process is critical to establish the perimeter of the sustainability statement and pivotal to ensure that undertakings only report material information, that they do not report unnecessary information nor dedicate excessive resources to the materiality assessment process. Initial feedback seems to suggest that required disclosures on the process may be too detailed and the outcome of the process may lead to disclose too many/too detailed IROs. The Omnibus proposals have identified this area as to be clarified.” (excerpt from a questionnaire on ERSR released for public feedback)

To remedy this issue with the DMA – which remains crucial to sustainability reporting under CSRD – EFRAG has proposed several revisions. These are contained in the draft ESRS Amendments Exposure Drafts released on 15 July, ahead of a planned public consultation in late July 2025.

Change 1 – Practical Considerations (draft pgs. 11-12)

A new section has been added to the ESRS 1 draft: 3.5 Practical considerations in determining the material impacts, risks and opportunities and their associated topics to be reported. This section includes additional clarity on what is and is not expected for a DMA, as well as recommendations for how companies can avoid unnecessary complication in the process. Changes include specific guidance to consider the following (not an all inclusive list):

• Focus assessment on areas in the value chain where material impacts, risks, and opportunities are most likely to arise
• Use reasonable and supportable evidence to estimate 1) severity & likelihood for impacts and 2) likelihood & magnitude of financial effects from risks/opportunities
• Avoid unnecessary complexity by starting with topics that are clearly material based on the business model, value chain, peer analysis, and strategic/business priorities

Change 2 – Material Information (draft pg. 6)

Additional clarity has been included to better describe material information, and the description is highly aligned with IFRS S1. The language on this topic also has been simplified to increase understandability.

Change 3 – Fair Presentation (draft pg. 5)

Particular emphasis on “fair presentation” has been added, including explicit reference to how it applies to materiality. This approach prioritizes the relevance and faithful representation of information, which is aligned with the approach under the ISSB Standards.

Change 4 – Level of Granularity (draft pgs. 25-26)

Instead of the three topic levels previously included in Application Requirement 16 (topic, sub-topic, and sub-sub-topic), there are now only two (eliminating the level of sub-sub-topic). More flexibility has also been included to allow companies to decide which level to report on (i.e. topic vs. sub-topic), and it has also been clarified that the materiality of a sub-topic does not automatically trigger reporting on all the datapoints in the relevant topical standard. In other words, companies would only need to report on the datapoints relevant to the material sub-topic.

Change 5 – Assessing Impacts (draft pgs. 7-8)

New paragraphs have been added specifically addressing how to assess impacts when the company has implemented mitigation, prevention, or remediation policies and actions. This new guidance helps clarify how companies should think about the materiality of actual impacts, and provides details on how companies can account for existing or future policies and actions. For example there is increased clarity in how to assess actual negative impacts:

• Materiality of actual negative impacts will be based on the severity of the impact after considering any mitigation and prevention policies and actions that were implemented prior to the impact 
• Policies and actions implemented after the impact (remediation measures) will not be considered in assessing the materiality of an impact

Balancing Competing Goals

These drafts are not finalized and are still subject to change before public consultation is officially opened at the end of July. However, the changes made thus far offer some indication of the direction EFRAG is taking with its revisions.

These changes show EFRAG is seriously considering and incorporating stakeholder feedback during the revision process. As the lynchpin underlying effective sustainability reporting under CSRD, it is critical that the DMA process is both thorough and not overly complex. The revisions made thus far help balance these competing goals and should reduce the overall reporting burden on companies. G&A will continue monitoring as these revisions go through public consultation and finalization.

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Founded in 2006, Governance & Accountability Institute (G&A) is a New York–based sustainability consulting and research firm advising corporate leaders and investors at the intersection of strategy, governance, and regulation. For two decades, we have partnered with executive teams and boards to translate sustainability strategy into durable enterprise value — helping organizations navigate shifting market expectations, evolving policy landscapes, and increasing capital markets scrutiny. Set up a call to learn more about how we can help your company.

Christina Carlton

Christina Carlton is a Senior Sustainability & Climate Analyst at Governance & Accountability Institute. She supports both sustainability and climate engagements, and her work bridges sustainability planning and reporting with targeted climate initiatives, helping companies enhance their ESG performance and integrate resilience into their overall sustainability frameworks.