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Time is of the essence: From 2025, companies in the EU will have to report in detail on their business activities in the areas of environment, social affairs and corporate governance in accordance with the Corporate Sustainability Reporting Directive (CSRD) - with retroactive effect for the 2024 financial year. Those who fail to comply risk sanctions. The European Sustainability Reporting Standards (ESRS) specify in detail which disclosure obligations must be fulfilled. A central element of the ESRS isdouble materiality, also known as dual materiality. This method helps companies to identify important sustainability issues and forms the basis for CSRD reporting.
The topic in a nutshell:
- 2025 is the first reporting year: companies must already systematically collect relevant data for CSRD reporting.
- The double materiality analysis is mandatory and must be certified by auditors .
- Two perspectives are crucial: inside-out (impact of the company on the environment and society) and outside-in (influence of sustainability factors on the company's success).
- With the ESG management platform from Planted you can carry out the double materiality analysis in accordance with CSRD requirements in a legally compliant manner - without expert knowledge and with 55% time savings.
What is the double materiality analysis?
The double materiality analysis is a central instrument of CSRD reportingthat helps companies to identify their material sustainability issues. In contrast to previous approaches to materiality analysis, dual materiality considers sustainability aspects from two different but equally important perspectives.
How the CSRD defines dual materiality: Inside-Out and Outside-In
Dual materiality introduces a new way of thinking to reporting. The materiality of sustainability aspects is viewed from different perspectives:
- The inside-out perspective, also known as impact materiality, looks at the effects of entrepreneurial activity on people, the environment and society. Both the positive factors and the negative effects are considered. For example, the protection of biodiversity represents a positive impact, while water consumption or the company's emissions represent a negative impact.
- The outside-in perspective, also known as financial materiality, considers the influence of sustainability factors, such as climate change or the scarcity of resources, on the company's success and future cash flow.
An issue is material if it entails financial risks or opportunities for the company. It is also material if it has a major impact on the environment and society. This means that it is already subject to reporting requirements if it is classified as material from one of these two perspectives.
Which companies are affected by double materiality?
The CSRD makes sustainability reporting mandatory for all companies that are listed on an EU-regulated market and fulfill at least two of the following criteria:
- Balance sheet total over 25 million euros,
- Net sales over 50 million euros,
- more than 250 employees.
Companies not based in the EU are also subject to the CSRD if they have EU subsidiaries that are listed SMEs or large companies, or if they generate more than 150 million euros in net sales on a consolidated basis. Third-country companies with branches in the EU are also required to report if they exceed certain turnover and revenue thresholds. In total, this affects around 15,000 companies in Germany and around 50,000 throughout the EU. Micro-enterprises and non-capital-market-oriented companies are exempt.
More than compliance: the added value of dual materiality
For example, the dual materiality analysis shows how strongly rising energy prices affect profitability or which supply chains are at risk due to resource scarcity. These findings make it possible to take measures at an early stage - for example by switching to renewable energies or diversifying suppliers.
Dual materiality also plays a key role for the capital market and other stakeholders: according to a study by Sopra Steria (2024), 56% of German companies are already reporting positive effects of sustainable action on sales and profits. Investors and banks are increasingly using the results of the published materiality analysis as a basis for investment and lending decisions. A well-founded analysis not only improves ESG ratings, but also secures access to capital.
Double materiality: How often must it be carried out?
The CSRD requires companies to carry out and review the dual materiality analysis on an annual basis. For many companies, this regular update requires a considerable amount of time and resources. This is exactly where Planted 's ESG management platform comes in. Our auditor-validated software automates the entire materiality analysis process. Through AI-supported data collection we reduce your time expenditure compared to manual methods.
Our platform guides teams step by step through the annual analysis:
Central data management enables all participants to work together across all locations. Changes and updates are visible to everyone in real time. Particularly valuable: our software automatically documents every step of the analysis - from the initial identification of issues to the final assessment. This creates the necessary transparency for the mandatory audit by auditors.
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Another special feature of the Planted software is the integration of the CSRD expert team. Our experts provide support with questions on materiality analysis and ensure that all regulatory requirements are met. The combination of intuitive software and expert advice makes the annual materiality analysis an efficient process - without you having to build up your own expert knowledge.
Expert tip: Structure the annual materiality analysis systematically from the outset. The Planted ESG management platform supports you by centrally recording all relevant data and automatically documenting each step of the analysis. Thanks to cloud-based collaboration, everyone involved can contribute to the analysis across all locations.
Double materiality analysis CSRD: How companies identify relevant ESG topics for their reports
In order to determine which topics are material for your company, a double materiality analysis must be carried out. This process requires good preparation and the involvement of company management.
To begin with, companies should consider which sustainability aspects could potentially be important. It is helpful to use relevant standards and frameworks, such as the European Sustainability Reporting Standards (ESRS), as a guide. Companies should also consider their supply chain, as sustainability issues may also be relevant there.
In order to identify the key issues, you should include the perspective of your stakeholders. These can be, for example, suppliers, customers, employees and other affected groups.
The challenges and opportunities of dual materiality
The dual materiality analysis presents companies with complex challenges. A simultaneous consideration of the inside-out and outside-in perspective requires not only comprehensive specialist knowledge, but also the involvement of different areas of the company.
But the investment pays off: A professionally conducted materiality analysis helps you to identify sustainability risks and opportunities at an early stage. This enables forward-looking strategy development and strengthens your competitive position. At the same time, you meet the growing expectations of investors for transparent sustainability reporting.
Our ESG management platform turns these challenges into opportunities. Through AI-supported processes and integrated expert knowledge, the software makes materiality analysis manageable even without prior knowledge. The results are automatically compared with other CSRD requirements such as the CO₂ balancing for an efficient overall process from the initial assessment to the finished sustainability report.
Safe and transparent: how to implement dual materiality with Planted
Our software turns the implementation of dual materiality into a structured process. Our software was developed in cooperation with auditors and guarantees that the analysis is carried out in compliance with the law.
In three workshops, our CSRD team of experts will work with your company to develop the basics of the materiality analysis. You then use the AI-supported functions of the platform for efficient implementation:
- Preset provision of all reportable topics and subtopics of the ESG
- Simplified and time-saving generation of impacts, risks and opportunities (IROs)
- Predefined evaluation criteria in accordance with ESRS standards ensure legal compliance.
- Automatic documentation creates transparency for the audit.
- Measures that have already been implemented, such as CO₂ balancing , are seamlessly integrated.
The central data management enables collaboration between all participants across all locations . Changes and updates are visible to all teams in real time. The integrated project management helps you to maintain an overview and meet deadlines.
