Impact Materiality

Impact materiality is one of the two pillars of double materiality under the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) that build on it. It follows the so-called inside-out perspective: the focus is on the impacts that the company itself exerts on people and the environment through its business activities, its products and services, and its business relationships. This fundamentally distinguishes it from financial materiality, which conversely asks how sustainability matters affect the company's economic situation.

A sustainability matter is material from an impact perspective when the company is significantly connected to its effects on the environment or society. Both actual and potential impacts are assessed, positive as well as negative, short-term as well as long-term. Under the ESRS, the decisive assessment criteria are the severity of the impact (scale, scope and, where relevant, irremediability) and, for potential impacts, additionally their likelihood of occurrence. The assessment explicitly covers the entire upstream and downstream value chain, not just the company's own operations.

In practice, identifying and assessing impacts is carried out through the IRO analysis (Impacts, Risks and Opportunities) prescribed in ESRS 2, with the involvement of affected stakeholders. The result directly drives the scope of reporting: topic-specific ESRS data points only have to be reported for material matters. Together with financial materiality, impact materiality therefore determines which environmental, social and governance topics a company must disclose in its sustainability statement, and it is the central starting point of every CSRD materiality assessment.