Impact materiality: how a company affects people and the environment

Impact materiality is the inside-out lens: a sustainability matter is material from an impact perspective when it relates to the undertaking’s material actual or potential, positive or negative impacts on people or the environment over the short, medium or long term, through its own operations or its value chain (revised ESRS 1 ¶39).

It is the impact half of the double materiality the CSRD requires through the ESRS.

The Accounting Directive Art 19a(1) asks for information necessary to understand the undertaking’s impacts on sustainability matters, and the revised ESRS 1 ¶¶38–44 set out how those impacts are assessed.

On three factors: scale, how serious a negative impact is (or how beneficial a positive one); scope, how widespread it is; and irremediable character, whether and to what extent the harm could be remediated (revised ESRS 1 AR 22).

Any one of the three can make a negative impact severe.

No. Likelihood is a separate factor that applies to potential impacts only.

Actual negative impacts are assessed on severity; potential negative impacts on a combination of severity and likelihood (¶40).

For a potential negative human rights impact, the severity of the impact takes precedence over its likelihood (revised ESRS 1 ¶40).

GRI 3 states the same rule.

Actual positive impacts on scale and scope; potential positive impacts on scale, scope and likelihood (¶41).

They are assessed on their own, never netted against negative impacts, and compliance with law and regulation is not a positive impact (¶44).

It depends on the kind of impact.

Actual negative impacts are assessed as they manifested in the reporting year, without taking account of remediation in that year.

Potential negative impacts take account of prevention and mitigation only if the policies and actions are implemented and can reasonably be assumed to work; plans not yet implemented are not considered (¶43, AR 27).

No. Revised ESRS 1 AR 15 says the undertaking need not analyse each characteristic of severity separately if it can conclude that an impact is severe without doing so, nor every time horizon unless the impact is expected to evolve.

No. Engagement with affected stakeholders carried out in ongoing due diligence is a key input (¶42), and AR 24 says it serves the materiality assessment “without the need to put in place a separate engagement process”.

An undertaking may still seek direct input if it chooses.

Revised ESRS 1 AR 23 lists workers in the own workforce and value chain, communities affected by operations or the value chain, and consumers and end-users, with particular attention to those in vulnerable situations. It adds that nature may be considered a silent affected stakeholder.

In substance it is close.

GRI 3 defines material topics as an organisation’s most significant impacts on the economy, environment and people, with the same severity factors.

The GRI Standards themselves use the words material topics and most significant impacts; GRI the organisation uses the phrase impact materiality in its commentary.

The 2023 EFRAG–GRI joint statement says the ESRS “adopted the same definition for impact materiality as GRI”.

Both it and the 2024 interoperability index describe the 2023 ESRS, so check revised paragraph numbers against Delegated Regulation (EU) 2026/1563.

No. UK SRS S1 applies single (financial) materiality.

Impacts matter only as a source of sustainability-related risks and opportunities: S1 ¶2 says the entity’s dependencies on resources and relationships and its impacts on them give rise to those risks and opportunities.

GRI, and the draft ESRS-40a for third-country groups.

EFRAG’s exposure draft of 23 July 2026 removes risks, opportunities, resilience and dependencies and covers impacts only; its consultation runs to 31 October 2026 and technical advice is expected in January 2027.