Double materiality explained, and whether your VSME report needs it

What double materiality means

Double materiality is the idea that a sustainability topic matters for a company in two ways. Impact materiality looks from the inside out: how the company affects people and the environment, through its own operations and its value chain. Financial materiality looks from the outside in: how sustainability matters such as climate change, resource scarcity or new regulation create risks and opportunities for the company’s cash flows, financing and value.

A topic is material if it matters in either way, or in both. A company’s emissions can be material because of their impact on the climate, while flooding at its main site can be material because of its financial risk, even if the company itself causes little of it.

Who has to carry out an assessment

A double materiality assessment is part of the European Sustainability Reporting Standards (ESRS), which apply to the large companies that report under the CSRD. Their assessment decides which topics and disclosures their report covers. The GRI Standards use only the impact side.

The EU voluntary standard (VSME) does not require a materiality assessment. During its consultation, smaller companies found the assessment too complex and costly, and banks and investors doubted the reliability of the results. EFRAG replaced it with an “if applicable” test: you report each disclosure that applies to your business and explain briefly when one does not. A customer may still ask for a materiality assessment, but your VSME report is complete without one.

How an assessment works

If you do need one, the steps are broadly the same for every company.

• Map your business, your value chain and the people and places it affects.
• List the sustainability topics, using the ESRS topics as a checklist: climate, pollution, water, biodiversity, resources, own workforce, value chain workers, communities, consumers and business conduct.
• For each topic, assess your impacts by scale, scope, how hard they are to remedy and how likely they are.
• For each topic, assess the financial risks and opportunities by likelihood and size.
• Set thresholds, decide which topics are material and test the result with people who know the business.
• Document the method, the scores and the reasons, so the result can be checked and repeated.

A lighter screening for a VSME report

Even without a formal assessment, a short screening helps you choose which Comprehensive disclosures to add. Write one line per topic: does your company have a real impact here, and could the topic affect your costs, sales or financing? Topics with a yes on either side are the ones your readers will ask about, and the ones to cover well.

Doing it in Greener Ahead

Sustainability reporting in Greener Ahead follows the VSME standard, so it uses the “if applicable” test rather than a materiality assessment: it shows only the disclosures that apply to your business, keeps the evidence beside every answer and records why a disclosure does not apply. It costs €995 per year with unlimited users, and you can try it free for 14 days without a card. Check the pricing page for current details.

Impact and financial materiality side by side

The two perspectives ask different questions about the same topic.

Signs a customer’s request goes beyond VSME

These requests ask for more than the voluntary standard covers. You may provide them, but they are extra work, and from financial year 2027 a customer reporting under the CSRD has to say which extra information it asks for.

• A full double materiality assessment with scores and thresholds.
• A list of material topics with ESRS references.
• Impact, risk and opportunity registers per topic.
• Stakeholder engagement records for the assessment.