Why Double Materiality Is the Cornerstone of CSRD Reporting – And How to Get It Right
The Corporate Sustainability Reporting Directive (CSRD) is reshaping how companies across Europe — and beyond — approach sustainability disclosures. It introduces a comprehensive framework for environmental, social, and governance (ESG) transparency, pushing companies to think bigger and report smarter.
At the center of this transformation is Double Materiality. Far from being a buzzword, Double Materiality represents a new way of evaluating sustainability risks and opportunities, one that factors in both the financial and societal dimensions of corporate activity. In this article, we explore what Double Materiality means, how to apply it in your reporting process, and how AdeptNova helps organizations turn compliance into competitive advantage.
Double Materiality: What It Means and How to Apply It
To understand Double Materiality, it’s important to first understand the broader context: the CSRD itself.
The CSRD, adopted by the EU in 2022, replaces the Non-Financial Reporting Directive (NFRD) and introduces far more detailed and rigorous sustainability reporting standards. The goal is to standardize ESG disclosures and make them comparable, credible, and useful for stakeholders ranging from investors to regulators.
Following the European Commission’s Omnibus simplification package (Feb 2025), the scope of CSRD reporting is being significantly narrowed — a major shift from initial expectations:
📊Updated Phases & Thresholds
| Wave | Entities Covered | Reporting Year | Submission Year |
|---|---|---|---|
| Wave 1 | Large PIEs (>500 employees) | 2024 | 2025 |
| Wave 2 | Large companies (2 of: >250 employees, €40M+ turnover, €20M+ assets) | 2027 | 2028 |
| Wave 3 | Listed SMEs, certain banks/insurers | 2028 | 2029 |
| Wave 4 | Non-EU companies with €150M+ EU turnover and local presence | 2028 | 2029 |
Proposed threshold change (pending approval): Only companies with >1,000 employees and either €50M+ turnover or €25M+ in assets will be in scope. This would exempt up to 80–85% of companies previously expected to report under Waves 2 and 3.
Additionally, a Voluntary SME Standard (VSME) is being introduced for smaller firms that wish to disclose ESG data without being under obligation.
Double Materiality: Practical Application
Within this framework, Double Materiality is mandatory. It requires companies to assess not only how sustainability issues impact their financial performance (financial materiality), but also how their business impacts society and the environment (impact materiality). This dual lens sets the CSRD apart from other reporting regimes and reflects the EU's ambition to drive sustainable transition across all sectors.
To apply Double Materiality, identify sustainability issues relevant to your operations and stakeholders. Then, evaluate them based on:
- Their potential financial impact on your business.
- The scale, scope, and likelihood of your organization’s impact on people and the planet.
The results are typically visualized in a materiality matrix, which becomes foundational to your sustainability strategy, CSRD report, and internal decision-making.
Getting It Right with AdeptNova
For many companies, navigating Double Materiality is daunting. Common pitfalls include vague materiality thresholds, insufficient stakeholder engagement, and manual workflows that are inefficient and prone to error.
That’s where AdeptNova steps in. Our AI-powered CSRD Reporting Platform simplifies the Double Materiality process through automation, built-in ESRS logic, and guided workflows. It helps you:
- Identify material ESG topics relevant to your industry and business.
- Engage stakeholders efficiently and document input.
- Conduct gap analysis to see where your current data and processes fall short.
- Generate audit-ready reports aligned with CSRD requirements.
Whether you are a consultant working with multiple clients or a compliance officer in a large enterprise, AdeptNova accelerates your readiness and ensures confidence in your disclosures.
Final Word
Double Materiality is here to stay — but the regulatory landscape is evolving. Companies originally in scope for CSRD may find they are now excluded or delayed. However, stakeholders, investors, and supply chain partners will continue to demand ESG transparency. Getting it right is no longer optional. Book a demo with our team today to see how AdeptNova can support your CSRD journey with speed, structure, and insight.
