The Corporate Sustainability Reporting Directive (CSRD) is not just another EU regulation — it’s a seismic shift in how companies must understand, measure, and communicate sustainability. And at the heart of this shift lies one deceptively complex concept: double materiality.
Yet, most businesses are approaching it with the wrong tools. Static spreadsheets. One-off stakeholder workshops. Tick-the-box compliance. That’s not just inefficient — it’s dangerous in a world where ESG performance is as strategic as financial performance.
In this blog, we’re breaking down what double materiality really is, why it matters, and how we’re using cutting-edge tech and AI to turn an overwhelming process into a strategic advantage — at scale.
What is Double Materiality?
Double materiality is a core concept in CSRD and the European Sustainability Reporting Standards (ESRS). It means companies must evaluate and report on:
- Impact materiality – how the company affects the environment and society (inside-out).
- Financial materiality – how environmental and social issues affect the company’s financial position (outside-in).
No more focusing solely on carbon emissions or just climate risks to the balance sheet. The future demands both. And it needs to be done across hundreds of data points laid out in the ESRS framework.
Why is This So Important?
Because materiality isn’t just about compliance — it’s about strategy.
- Systemic Risks Are Now Financial Risks Climate disasters, social inequality, and political instability are no longer “non-financial issues.” They’re real, measurable risks.
- Investors want to know what issues genuinely shape your risk profile.
- Customers want to align with companies that make a real difference.
- Employees want purpose-driven work, not greenwashed mission statements.
- It’s a Legal Requirement Under CSRD Starting in 2024 for large companies (and gradually expanding), double materiality assessment is mandatory.
Get double materiality wrong, and you’ll miss what matters most. Get it right, and you unlock ESG as a competitive edge.
But here’s the problem: the ESRS guidance lays out over 1,000 data points. Manually sorting through them to identify what’s material to your organization is not only slow — it’s obsolete.
How Do You Conduct a Double Materiality Assessment?
Now, for the tough part: the how. According to ESRS guidance and leading sustainability platforms, the process involves six critical steps — each one requiring rigor, structure, and relevance.
1. Understand Your Scope & Stakeholders
Map your entire business footprint: subsidiaries, supply chains, operations. Then, identify relevant stakeholder groups: investors, employees, customers, local communities, regulators, NGOs, etc.
The goal: Capture perspectives on both financial risk and impact responsibility.
2. Screen the Universe of ESG Topics
The ESRS defines 10 topical standards covering 1,000+ potential data points — from climate change and pollution to diversity and consumer protection. Begin with this comprehensive list as your base.
Don’t try to tackle everything. The next steps help narrow this list.
3. Define Assessment Criteria
Choose how you’ll determine materiality. For impact materiality, this includes:
- Scale (how serious is the impact?)
- Scope (how widespread?)
- Irremediability (is it reversible?)
For financial materiality, consider:
- Likelihood
- Magnitude
- Time horizon
Use a scoring matrix to ensure consistency.
4. Gather Data (Internal and External)
This is where manual efforts often break down. You’ll need:
- Internal data: operations, HR, emissions, compliance
- Stakeholder input: surveys, interviews, workshops
- External data: climate risk maps, news trends, regulatory signals, public sentiment
5. Conduct the Assessment
Score each ESG topic along both dimensions: impact and financial relevance. The result is a double materiality matrix — your strategic map of what really matters.
Tip: A topic is considered reportable if it scores high in either or both dimensions.
6. Validate and Document
Materiality is not a one-time checkbox. It must be:
- Approved by senior leadership
- Backed by documentation
- Reassessed regularly as risks and impacts evolve
The outcome feeds directly into your sustainability reporting under ESRS — and into your ESG strategy overall.
How We Do It at Ecostars
At Ecostars, we’ve reimagined the double materiality assessment for hotel chains — with automation, precision, and local intelligence at its core.
Here’s how it works:
🔁 Fully Automated Assessments
Our platform automatically parses the entire ESRS universe and narrows it down using AI models trained on sustainability science, regulatory priorities, and sector-specific data.
🧠 Hyper-Contextual Relevance
We go beyond internal data. Our assessment pulls in:
- Your hotel’s exact geolocation
- Global and local environmental news (e.g., floods, droughts, fires)
- Socioeconomic shifts and government policy changes
- Customer sentiment from reviews and surveys
- External data sets that reflect the real-world context of your hotel’s operations
🌍 Customization at Scale
Whether you manage 10 or 10,000 hotels, we generate materiality assessments:
- Per individual hotel
- By country or region
- By operational model or internal category
And it’s not static. As the world changes, so does your materiality profile. Automatically.
📊 Outputs You Can Act On
The end result? Clear, ranked material topics — with justifications — ready to feed into your CSRD reporting, stakeholder engagement, and strategy decisions.
No fluff. No guesswork. Just relevance.
The Bottom Line
Double materiality isn’t a checkbox. It’s a lens for understanding risk, opportunity, and impact in a turbulent world.
With CSRD deadlines looming, now’s the time to ditch the spreadsheets and static surveys. Instead, turn to technology that adapts, scales, and evolves — like your business does.
At Ecostars, we’re not building sustainability tools for yesterday’s world. We’re engineering clarity for the next decade.
Ready to stop reporting and start understanding?