What Is Double Materiality in Sustainability Reporting?

Double materiality means companies must report in two directions: how sustainability issues affect their financial position, and how their activities affect people and the planet. The EU's Corporate Sustainability Reporting Directive (CSRD) made this a legal requirement. Our analysis of 50,000+ sustainability reports shows materiality assessments went from appearing in just 9% of reports in 2001 to over 81% by 2023, one of the most significant shifts in corporate disclosure practice this century.

Two Questions, Not One

In traditional financial reporting, materiality is simple: would this information change an investor's decision? If yes, disclose it. If not, leave it out. For decades, companies applied this same investor-focused filter to sustainability topics. A factory's carbon emissions were material only if they threatened earnings. Community water pollution was background noise unless it triggered a lawsuit.

Double materiality adds a second question. Under the CSRD's European Sustainability Reporting Standards (ESRS), a sustainability topic is material if it clears either of two thresholds.

This makes double materiality more demanding than either lens alone, and it is why the concept is both more useful and more controversial than the single-materiality approach used by the ISSB and most non-EU jurisdictions.¹

The Data: 25 Years of Materiality Going Mainstream

To understand how materiality practice has actually evolved, we analyzed 53,036 sustainability reports published between 2001 and 2024 from the SustainabilityReports.com archive.

The trend is striking. In 2001, fewer than 9% of sustainability reports included any form of materiality assessment. By 2023, that figure had reached 81.3%. The adoption curve follows a classic S-shape: slow uptake through the early 2000s, rapid acceleration from 2006 onward as GRI's G3 guidelines gained traction, and a plateau above 75% from 2018 as materiality became standard practice.

Switch to the By Region view and three very different stories emerge. Europe led from the start, crossing 70% adoption by 2009 and stabilizing in the low 80s. China started later but climbed faster than anywhere else, going from negligible adoption in 2008 to over 90% by 2020 once stock exchange rules began requiring sustainability disclosures. The United States plateaued earlier and lower, at around 70%, reflecting the absence of a federal sustainability reporting mandate.

The materiality matrix tells a different story. This visual tool, typically a scatter plot mapping topics by importance to stakeholders and significance to the company, peaked at around 43% adoption in 2021 and has since leveled off. Many companies conduct materiality assessments without producing the formal matrix. Some have moved to tables, heat maps, or narrative descriptions instead, suggesting the underlying process has become more widespread than any single format.

These numbers align with KPMG's 2024 global survey, which found that over 80% of the world's largest 250 companies perform materiality assessments, and 50% of G250 companies now use double materiality frameworks.²

The Global Picture

As of early 2026, only the EU and China have formally adopted double materiality. China's Ministry of Finance issued standards in late 2024 requiring both financial and impact assessment, with stock exchange rules mandating reports from roughly 280 companies starting April 2025.

The rest of the world is moving toward the ISSB's single (financial) materiality framework. Thirty-seven jurisdictions representing approximately 60% of global GDP are adopting ISSB-aligned standards.³ The emerging consensus is a "building blocks" approach: ISSB provides a global investor-focused baseline, GRI covers impact materiality for broader stakeholders, and ESRS combines both. A company reporting under ESRS substantially satisfies ISSB requirements; the reverse is not true.

Why It Matters Beyond Compliance

The EU retained double materiality as a principle even while cutting CSRD scope by roughly 80% through its 2026 Omnibus package.⁴ That decision reflects a recognition that today's impact-only issues can become tomorrow's financial risks. Climate change is the paradigm case: environmental externalities crystallized into stranded assets and regulatory costs over less than a decade.⁵ Water scarcity, biodiversity loss, and labor practices in supply chains are following similar trajectories.

For sustainability professionals, the practical message is straightforward: materiality assessment is no longer optional, and the direction globally is toward dual-perspective analysis even where it is not yet legally required. Our data shows this is already the reality on the ground: four out of five sustainability reports now include some form of materiality assessment, and the share continues to grow.

References

1. Baumuller, J., & Sopp, K. (2021). Double materiality and the shift from non-financial to European sustainability reporting. Journal of Applied Accounting Research, 23(1), 8-28.

2. KPMG (2024). Survey of Sustainability Reporting 2024. 13th edition, 5,800 companies across 58 countries.

3. IFRS Foundation (2024). Jurisdictional adoption of ISSB Standards. International Sustainability Standards Board.

4. European Commission (2026). Directive (EU) 2026/470 (Omnibus I), published in Official Journal 26 February 2026. Revised CSRD scope: >1,000 employees and >EUR 450 million net turnover.

5. Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate Sustainability: First Evidence on Materiality. The Accounting Review, 91(6), 1697-1724.