As the EHS environment has grown increasingly complex, the double materiality assessment has shifted from an optional best practice recommendation to a strategic imperative. Companies, especially multinational corporations grappling with exposure in Europe, can no longer rely solely on traditional financial metrics. Impact metrics are equally important.
This relatively new dual-lens approach is forcing organizations to examine and report not only on how sustainability issues affect their bottom line, but also on how their operations affect people and the planet. It's a fundamental shift in perspective that carries major consequences for compliance, investor relations, reputation management, and operational resilience under regulations such as the Corporate Sustainability Reporting Directive (CSRD).
Our experts have compiled this guide to help you leverage double materiality assessments to drive compliance up and fines down. We’ll explain what these assessments are, how they work under CSRD and other regulations, and the practical steps EHS and ESG teams can take to put them into practice across industries.
The idea of double materiality emerged in European policy discussions in the late 2010s as regulators sought to bridge traditional financial reporting with the growing need for sustainability transparency. The phrase was first formalized by the European Commission in its 2019 guidelines on non-financial reporting, which introduced the distinction between financial materiality and impact materiality. Adopting double materiality as a guiding principle in the Corporate Sustainability Reporting Directive (CSRD) in 2022 transformed it from a theoretical idea into a mandatory reporting standard, establishing double materiality as the foundation of modern ESG disclosure in the EU.
Today's double materiality assessments integrate these two complementary perspectives to create a fuller picture of a company’s sustainability landscape.
These perspectives come together to create the double lens required to ensure that companies assess both the sustainability issues that can affect them and those where they themselves have a meaningful impact.
For many global firms, including those headquartered outside Europe, a double materiality assessment is now essential for compliance and continued access to key markets and capital.
The CSRD requires companies to disclose standardized, independently assured information about their environmental, social, and governance performance. This expands the number of companies that must report and introduces stricter rules, including a requirement to conduct a double materiality assessment.
Under the CSRD, companies are required to disclose information about both financial and impact materiality. For example, a manufacturer may need to quantify emissions, waste, or resource use (inside-out/impact), while simultaneously analyzing how regulatory changes, carbon pricing, or climate-related physical risks (outside-in/financial) could affect costs, supply chains, or asset valuations. This dual mandate encourages companies to think broadly about value and responsibility beyond profit, and to build transparency into their decision-making and reporting.
Large EU companies and non-EU firms with significant operations or subsidiaries in the EU are subject to the CSRD’s ESG reporting standards. Those that meet thresholds for staff count, revenue, or asset size face the obligation to produce comprehensive, audited sustainability reports, as do those that have EU-listed securities.
The first companies covered by CSRD had to report fiscal-year 2024 data as early as last year. Because member states are still implementing CSRD and setting enforcement rules, industry data on fines across Europe is not yet available. That said, Salesforce reports that, “Fines range from €5,000 in Ireland to €10 million or 5% of the total annual turnover (or revenues) or twice the total profits made/losses avoided in Germany.”
Ignoring the double materiality requirement is no longer a minor compliance risk. It can trigger report rejection, investor concern, regulatory backlash, and reputational damage.
Many industries face unique and profound convergences of risk factors under double materiality, but perhaps none more so than bio-pharma.
For firms in heavily regulated industries such as bio-pharma, manufacturing, chemicals, or heavy industry, the scope and complexity of disclosures make advanced EHS and ESG data management essential.
On the impact side, operations in pharmaceutical R&D, manufacturing, and distribution generate environmental and social impacts. These include the handling of Active Pharmaceutical Ingredients (APIs), chemical wastes, cleanroom operations, water usage, effluent discharge, and stringent safety protocols. Regulators, investors, and civil society expect transparency into how companies manage these impacts.
On the financial side, bio-pharma firms must account for evolving ESG risks such as regulatory changes, carbon pricing, supply-chain disruptions, climate-related facility risks, and emerging environmental regulations. Failure to do so may affect licensing, investor relations, project viability, and long-term profitability.
The combined effect means bio-pharma companies must embed sustainability and risk management deeply into their compliance, quality, and operations pipelines.
Implementing an effective double materiality assessment can be complex, often requiring cross-functional collaboration across EHS, quality, compliance, operations, legal, and finance. Many companies discover that spreadsheets, siloed systems, disparate audit logs, and other manual processes are simply inadequate for comprehensive reporting.
To meet CSRD and other EHS/ESG regulatory demands while preserving operational efficiency, companies should:
This structured, systemic approach helps companies stay audit-ready and adapt quickly to evolving regulations.
Purpose built to handle environmental, health, safety, quality, and sustainability data from a unified platform, the EHS-Dashboard™ from Higher Elevation Software helps EHS teams support double materiality assessment efficiently and at scale.
The system tracks core impact materiality impact indicators, including emissions, waste, water use, hazardous materials, incidents, safety performance, compliance findings, and corrective actions. Because the data is structured, auditable, and centralized, it becomes much easier to quantify and demonstrate the organization’s environmental and social footprint.
Platform support of financial materiality is more indirect but still essential. The EHS-Dashboard™ captures leading indicators of regulatory risk, operational disruptions, safety vulnerabilities, and non-compliance trends that may create financial consequences under CSRD. By consolidating incident histories, audit findings, and risk assessments, the platform helps identify which sustainability topics could realistically translate into financial exposure.
Teams who use the EHS-Dashboard™ can leverage its EHS and sustainability features to:
By integrating EHS, quality, and ESG data into a single system of record, companies can reduce administrative burden, minimize risk, and focus on sustainable growth rather than the manual compliance tasks required for audits and assessments.
See how Higher Elevation Software’s EHS-Dashboard supports double materiality assessment, improves compliance, and creates a safer workplace for all. Schedule a demo today.
What triggers the requirement for a double materiality assessment under CSRD?
Double materiality becomes mandatory for EU-listed firms, large EU companies, non-EU companies with substantial EU operations or subsidiaries, and other companies covered by CSRD criteria. Once covered, firms must report both financial and impact materiality.
How does a double materiality assessment differ from traditional ESG reporting?
Traditional ESG reporting focuses primarily on how ESG issues affect the company (financial risks/opportunities). Double materiality adds the requirement to also disclose how the company affects the environment and society.
Is double materiality only relevant for EU companies?
No. Non-EU companies with EU subsidiaries or significant EU revenues may be subject to CSRD and thus must comply with double materiality requirements. Multinational firms with global operations must therefore assess applicability carefully.
What kinds of data are needed for a double materiality assessment?
Relevant data may include emissions and resource use, waste and effluent data, energy consumption, chemical usage, safety incidents, labor conditions, social impacts, regulatory risk factors, compliance records, and operational disruptions. Both quantitative and qualitative metrics often apply.
Can software like EHS-Dashboard™ really simplify the burden of double materiality?
Yes. Tools like EHS-Dashboard™ unify EHS, ESG, quality, and compliance data across locations and departments. They offer automation, real-time reporting, and audit-ready documentation that make dual-lens assessments manageable and scalable.