Sustainability reporting has become increasingly important for companies as stakeholders demand greater transparency and accountability on ESG metrics. Materiality is a key concept in sustainability reporting, as it helps companies identify the most important sustainability issues to report on, and provides stakeholders with more meaningful and relevant information. Materiality is based on the idea that not all sustainability issues are equally important and that companies should focus their reporting efforts on the issues that are most material to their business and stakeholders.
There are different types of materiality, including single materiality, impact materiality, and double materiality, each with their own benefits and limitations. In this article, we will explore the concept of materiality in sustainability reporting and discuss the different types of materiality and how they are used in different reporting standards.
What is single materiality?
Single materiality is a type of materiality that considers the impact of sustainability issues on a company’s financial performance. Sustainability issues are considered material only if they have a significant financial impact on the company. Single materiality is often used in traditional financial reporting frameworks and is still commonly used in sustainability reporting by some companies and reporting standards.
Benefits: single materiality provides a clear and straightforward way to determine which sustainability issues to report on, and it helps companies prioritize their reporting efforts on the issues that are most important for their financial performance.
Limitations: single materiality may overlook sustainability issues that are important to stakeholders but do not have a direct financial impact on the company.
What is impact materiality?
Impact materiality is a type of materiality that considers the impact of sustainability issues on a company’s stakeholders and the broader society. It recognizes that sustainability issues can have significant social and environmental impacts that are not always reflected in a company’s financial statements.
Benefits: impact materiality provides a more holistic view of sustainability performance, and it helps companies identify and prioritize sustainability issues that are important to their stakeholders and society.
Limitations: impact materiality can be difficult to measure the impact of sustainability issues accurately, and it may be subjective and open to interpretation.
What is double materiality?
Double materiality is a type of materiality that considers the impact of sustainability issues on a company’s financial performance, as well as the impact of the company’s activities on the broader economy and society. It recognizes that a company’s sustainability performance can affect not only its own financial performance but also the broader economic and social systems in which it operates.
Benefits: double materiality provides a more comprehensive and transparent view of sustainability performance, and it helps companies and stakeholders understand the broader implications of sustainability issues beyond the company’s immediate financial performance.
Limitations: double materiality can be more complex to apply than single or impact materiality, and it may require more extensive data collection and analysis.
Materiality and the Current Sustainability Reporting Standards Landscape
The sustainability reporting landscape has evolved significantly, driven by the implementation of new standards that shape how companies assess and disclose material sustainability issues.
One key development is the rollout of the European Sustainability Reporting Standards (ESRS), a key component of the Corporate Sustainability Reporting Directive (CSRD). These standards, developed by EFRAG and aligned with International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) principles, are grounded in double materiality and require companies to report how sustainability issues impact both their financial performance and environmental and social footprint. The ESRS were officially adopted in 2023, entered into force in January 2024, and became applicable in reports published in 2025. They are designed for a multi‑stakeholder audience, including investors, employees, regulators, and civil society.
Another key development is the release of global standards by the ISSB under the IFRS Foundation. The ISSB’s IFRS S1 and S2 standards are finalized and increasingly adopted globally, focusing on financial materiality, meaning sustainability information is material if it could reasonably influence investor decisions.
How does materiality connect to CSRD?
The Corporate Sustainability Reporting Directive (CSRD), in effect since 2024 and first applied in reports published in 2025, mandates robust sustainability disclosures based on double materiality, meaning companies must report:
- How sustainability topics impact their financial position (financial materiality), and
- How their business affects people and the environment (impact materiality).
To support implementation, the EU adopted two key measures:
- The “Stop‑the‑Clock” Directive (in force from 14 April 2025) postpones reporting by two years for Wave 2 and Wave 3 companies, those set to report in 2026 and 2027 respectively.
- A “Quick‑Fix” amendment (adopted 11 July 2025) allows Wave 1 companies to maintain their reporting scope for FY 2025 and FY 2026 as they did for FY 2024, easing the burden on first-time reporters.
Meanwhile, the Omnibus Simplification Package (proposed 26 February 2025) seeks broader simplification of CSRD, ESRS, and related sustainability regulation, through higher thresholds and streamlined reporting. In response, EFRAG has produced simplified ESRS exposure drafts in June and July 2025, proposing around a 66 % reduction in datapoints, with public consultations continuing through September 2025 and a final revision expected in October 2025.
Cority & CSRD
Cority can help your organization focus on the essentials. We assist many corporate customers with sustainability advisory and reporting software implementation, organizations with advanced reporting to companies new to the process.
We know that embedding the right software needs subject-matter expertise to make sure time and resources are used most effectively. Cority’s award-winning Sustainability software integrates carbon management and global standards with pre-defined ESRS data aligned with the CSRD requirements.
This software + advisory approach to CSRD ensures that customers are prepared for CSRD and beyond. Contact us to learn more about our customized support based on the challenges and the level of maturity of your company.
