The short answer
A materiality assessment decides what your company reports, and therefore what it will be held to. For Indian listed companies, it must feed the BRSR material issues table, satisfy GRI’s impact lens, survive an investor’s financial lens and now pass an assurer’s evidence test. Done well, it is eight disciplined steps, one documented evidence trail and one board decision.
Why has materiality become the most scrutinised page in the report?
For a decade, the materiality matrix was the most reproduced and least interrogated graphic in corporate reporting. A scatter of dots, two axes labelled “importance to stakeholders” and “importance to business”, and a top-right quadrant that somehow always held climate, people and governance. Readers skimmed it. Few assurers asked how it was built.
That era is closing and this year’s evidence explains why.
The say-do gap is now measured. EFRAG’s 2026 State of Play report, drawing on 905 assured FY 2025 sustainability statements, found that companies identify 6.4 material topics on average but set measurable targets for only 3.3. When half of what a company calls material has no target, an analyst reads one of two things: an overly generous assessment, or an under-managed business. Neither helps the share price.
India has the same gap, in a different place. IIM Bangalore’s analysis of 982 BRSR filings for FY 2024-25 found that 759 companies (77%) say stakeholder consultation informs how they manage environmental and social issues. Only 48 companies (under 5%) demonstrated best-practice evidence that stakeholder input shaped governance decisions, and 362 claimed influence without evidence. The same study found climate and energy dominating the material issues companies disclose, while data security and privacy remain underweighted relative to their regulatory exposure.
The method itself has been reset. On 3 July 2026, the European Commission adopted revised ESRS that keep double materiality but explicitly endorse a “top-down” assessment, built from strategy, business model, sectors, geographies and value chain, rather than an exhaustive catalogue of every impact, risk and opportunity. The reason is visible in the first wave: KPMG’s review of 270 early ESRS statements found the number of material impacts, risks and opportunities ranging from 9 to 150 per company. Brussels has concluded that volume is not rigour.
Meanwhile, the practice has gone mainstream. WBCSD’s Reporting Matters 2025 found 83% of reviewed reports disclosed a double materiality approach, up from 77% a year earlier.
For Indian companies, the stakes rise further this cycle. BRSR Core assessment or assurance extends to the top 1,000 listed entities in FY 2026-27, and ICAI’s new Standard on Sustainability Assurance (SSA 5000), aligned with the IAASB’s ISSA 5000, applies to financial years beginning on or after 1 April 2027. Assurance engagements built on that architecture look at how a company decided what to report, not only whether the reported numbers add up.
Our reading, as communication advisers who build these reports: the materiality assessment is no longer a sustainability team’s survey. It is the editorial brief for everything the company says about sustainability, and it now has to be defensible line by line.
What does “material” actually mean under BRSR, GRI, ISSB, ESRS and integrated reporting?
Every framework uses the same word. Each asks a different question. Confusing them is the single most common reason assessments fail to satisfy any reader fully.
BRSR asks a financial question inside an impact framework. Section A, Question 26 of the BRSR format asks for material responsible business conduct and sustainability issues that present a risk or an opportunity to the business, the rationale for identifying each, the approach to adapt or mitigate, and the financial implications. That is investor language. Yet the report itself is built on the nine NGRBC principles, which are fundamentally about a company’s conduct towards people and the planet. BRSR prescribes the output, not the method.
GRI asks about impact. GRI 3: Material Topics 2021 sets out four steps: understand the organisation’s context, identify actual and potential impacts, assess their significance, and prioritise the most significant for reporting. GRI expects the process to be systematic, documented and replicable, and requires an organisation to review every topic in its applicable Sector Standard. The outputs are Disclosures 3-1 (process), 3-2 (list) and 3-3 (management of each topic).
ISSB asks about enterprise value. Under IFRS S1, information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions of investors, lenders and other creditors. The ISSB’s educational material sets out a four-step process mirroring the IASB’s Practice Statement 2, and IFRS S1 sets no numerical thresholds. Companies must also refer to and consider the SASB industry standards, which the ISSB is actively revising: a March 2026 exposure draft covers three more priority industries, following amendments proposed for nine others in 2025.
ESRS asks both questions at once, but now it is more efficient. The revised standards permit the top-down route, apply information materiality as a filter, and state that ESRS-prescribed information that is not material should not be disclosed. Supplementary information is allowed only when clearly identified and when it does not obscure what is material. They apply to financial years beginning on or after 1 January 2027, with early application permitted for 2026.
Integrated Reporting asks about value creation over time. The Integrated Reporting Framework, now maintained by the IFRS Foundation, treats a matter as material if it could substantively affect the organisation’s ability to create value over the short, medium or long term, and expects those charged with governance to be involved in the determination.
Table 1: Five definitions of material, side by side
| Framework | The question it asks | Lens | Whose decisions it serves | Where it shows up |
| BRSR (SEBI) | Which environmental and social issues present a risk or opportunity to the business, and with what financial implications? | Prescribed format; financial-leaning question | Regulator, investors, SEBI-registered ESG rating providers | Section A, Question 26 table |
| GRI 3 | What are our most significant impacts on the economy, environment and people, including human rights? | Impact | Broad stakeholders, including affected communities | Disclosures 3-1, 3-2, 3-3 |
| IFRS S1 / S2 (ISSB) | Which sustainability-related risks and opportunities could reasonably be expected to affect our prospects? | Financial | Investors, lenders and other creditors | Integrated across the disclosures; no matrix required |
| ESRS (revised 2026) | Both of the above, assessed together | Double; top-down permitted | Investors and affected stakeholders | General disclosures on the assessment and its results |
| Integrated Reporting Framework | Which matters substantively affect our ability to create value over time? | Value creation | Providers of financial capital, the board | Material matters section that drives strategy and capitals narrative |
The practical conclusion is simple: run one assessment, then resolve it into the views each reader needs. Running three separate exercises is how companies end up with three different lists of “material” topics in the same annual report. We made the same case for frameworks in BRSR vs GRI vs Integrated Reporting.
What does Indian regulation require from a materiality assessment?
An outcome, not a method. SEBI does not prescribe how to run the assessment. But five regulatory threads now make the quality of that method visible.
- The Question
Five columns: the issue, whether it is a risk or an opportunity, the rationale, the mitigation approach, and the financial implications. In our reading of FY 2024-25 filings, the last column is where Indian disclosures go thinnest, often a single word: “Positive” or “Negative”. A financial implication with no magnitude band, no time horizon and no link to the financial statements is a placeholder, not a disclosure.
- The Principle
BRSR asks companies to describe how they identify key stakeholder groups and, as a Leadership Indicator, whether stakeholder consultation supports the identification and management of environmental and social topics, with instances of how inputs changed policies or activities. This is precisely where IIM Bangalore found the gap between claim and evidence.
- The boundary
BRSR disclosures must follow the same basis, standalone or consolidated, as the financial statements. KPMG India’s review of NIFTY 100 reports for FY 2024-25 found 22 of 94 companies excluded parts of their boundary: seven because the sites or entities were deemed “not material” for BRSR, and eight without any explanation. Boundary exclusions are materiality judgements too, and they need the same documentation as topic decisions.
- The value chain
Value chain disclosures for partners individually representing 2% or more of purchases or sales, with coverage capped at 75%, apply to the top 250 listed entities on a voluntary basis from FY 2025-26, with assessment or assurance following voluntarily from FY 2026-27. A materiality assessment that ignores upstream and downstream impacts will not survive that conversation.
- Assurance
With BRSR Core assessment or assurance reaching the top 1,000 in FY 2026-27 and SSA 5000 taking effect from April 2027, the materiality process moves from presentation to evidence. Expect assurers to ask for the methodology note, the long list, the scoring, the thresholds and the approval minutes.
For banks and NBFCs, a sixth thread applies. RBI’s 2024 draft disclosure framework on climate-related financial risks follows the governance, strategy, risk management and metrics architecture of IFRS S2. Lenders will increasingly ask borrowers questions that only a financial-materiality view can answer.
How do you conduct a materiality assessment, step by step?
This is the eight-step method we use with clients. It satisfies BRSR, maps cleanly to GRI 3 and IFRS S1, adopts the top-down logic of the revised ESRS, and produces the evidence an assurer will ask for.
Step 1: Fix the purpose, the lenses and the owner
Before anyone builds a topic list, write a one-page methodology note that answers four questions. Which outputs must this assessment feed: BRSR, a GRI report, ISSB-aligned investor disclosures, ESRS if an EU subsidiary is in scope, an integrated report? Which lenses apply? What are your short, medium and long-term horizons, aligned to your planning cycle rather than borrowed from a template? And who owns it, with which board committee approving the result? This note is the first document an assurer reads. It is also the one most companies do not have.
Step 2: Draw the boundary and map the value chain
Align the boundary with the financial statements. List subsidiaries, joint ventures, sites and any exclusions, each with a reason. Then map the value chain upstream and downstream, flagging partners above the 2% BRSR threshold. Materiality lives in the value chain far more often than in the head office: for most companies, Scope 3 emissions, labour conditions at suppliers and product end-of-life sit outside the fence line.
Step 3: Build the long list top-down, then go bottom-up where it matters
Start from what is already known about your sector and business model. Sources include the nine NGRBC principles, the applicable GRI Sector Standard, the relevant SASB industry standard, the nine BRSR Core attributes, peer reports, rating questionnaires, the regulatory pipeline, and, most often missed, your own enterprise risk register, grievance data and incident logs. Define each topic precisely: “water stress at three named plants” is assessable; “environment” is not. Then go bottom-up for high-risk sites, geographies or supplier categories. Aim for 25 to 40 well-defined candidate topics, not 80 vague ones.
Step 4: Engage stakeholders for evidence, not votes
Separate two groups. Affected stakeholders (workers, contract labour, communities, suppliers) tell you about impact. Users of information (investors, lenders, rating providers, customers’ procurement teams) tell you about decision-usefulness. A survey measures awareness and is easily dominated by whichever group answers most. Interviews and focus groups reveal severity. For every group, record what was said and what changed as a result. That record is your Principle 4 disclosure, and it is the evidence most Indian companies currently cannot show.
Step 5: Score impact and financial materiality separately
Set the thresholds before you score, not after you see the results. Score each topic twice, using defined criteria (Table 2), and keep the two scores visible rather than averaging them into one dot. For negative impacts, severity is driven by scale, scope and how irremediable the harm is; for potential impacts, likelihood is added, but for human rights, severity should outweigh likelihood. For financial materiality, calibrate magnitude to the same thresholds your risk function uses, so the sustainability team and the CFO are using one scale.
Table 2: A practical scoring rubric
| Dimension | What it measures | Typical scale | Guidance |
| Scale (impact) | How grave the impact is for people or the environment | 1 to 5 | Use objective anchors: fatalities, legal limits, ecosystem sensitivity |
| Scope (impact) | How widespread the impact is | 1 to 5 | Number of people, sites, or share of value chain affected |
| Irremediability (impact) | How hard the harm is to reverse | 1 to 5 | Applies to negative impacts only; weight heavily for human rights |
| Likelihood (impact and financial) | Probability for potential impacts, risks and opportunities | 1 to 5 | Not applied to actual impacts, which have already occurred |
| Financial magnitude | Effect on cash flows, access to finance or cost of capital | 1 to 5 | Calibrate bands to your ERM thresholds, e.g. as a share of EBITDA |
| Time horizon | When the effect is expected | Short/medium/long | Use your own planning horizons, stated in the methodology note |
Step 6: Validate, consolidate and take it to the board
Test the draft list against three things. First, the enterprise risk register: a topic scored high on financial materiality but absent from ERM is a red flag, in either direction. Second, external experts and information users, which is GRI’s own testing step. Third, peers, to explain any surprising omissions. Merge duplicates, cluster sub-topics and then take the result to the board committee responsible for sustainability. The approval belongs in the minutes.
Step 7: Translate the result into disclosure
Every material topic needs four things attached before it reaches the report: a KPI, a target or a stated reason for not having one, an owner, and a management approach. Then resolve the single assessment into each output. In BRSR, each Question 26 row carries a financial implication with direction, magnitude band and time horizon. In GRI, Disclosure 3-3 describes how each topic is managed. In the integrated report, material matters become the spine of the strategy and capitals narrative. This is where you close the 6.4-versus-3.3 gap.
Step 8: Monitor, refresh and keep the log
Review the assessment annually and reassess fully on trigger events: an acquisition, a new geography, a major incident, a regulatory change such as India’s data protection rules. EFRAG found 82% of European companies updated their assessment in the second reporting year, and two-thirds now combine top-down and bottom-up methods. Keep a materiality log: sources, scores, decisions, changes and the reasons for them. It is the single document that turns a judgement into an auditable process.
Table 3: The eight steps, and the evidence each one leaves behind
| Step | What good looks like | Evidence an assurer will ask for | Framework hook |
| 1. Purpose and owner | Methodology notes naming lenses, horizons, owner, approver | Approved methodology notes | GRI 3-1; IFRS S1 |
| 2. Boundary and value chain | Boundary matches financial statements; value chain mapped | Entity list, exclusions with reasons, value chain map | BRSR Section A; value chain thresholds |
| 3. Long list | 25 to 40 precisely defined topics from sector and internal sources | Source register, topic definitions | GRI Sector Standards; SASB; revised ESRS top-down |
| 4. Stakeholders | Affected stakeholders and users engaged separately | Engagement log showing inputs and resulting changes | BRSR Principle 4; GRI 3 |
| 5. Scoring | Two scores per topic against pre-set thresholds | Scoring sheets, threshold rationale | GRI 3; IFRS S1; ESRS |
| 6. Validation and approval | Cross-checked against ERM, experts, peers | ERM reconciliation, board minutes | Integrated Reporting Framework governance |
| 7. Disclosure | Each topic tied to KPI, target, owner, management approach | Mapping from list to BRSR Q26, GRI 3-3, report sections | BRSR Q26; GRI 3-3; IFRS S1 |
| 8. Refresh | Annual review; trigger-based reassessment | Materiality log with change history | ESRS; SSA 5000 readiness |
How should materiality analysis in sustainability and integrated reports be presented?
This is where a reporting team needs a communication adviser as much as a methodologist. The assessment can be excellent and still be presented in a way that undermines it.
Retire the unlabelled matrix or label it honestly.
A two-axis chart compresses two different lenses onto axes that rarely say which lens they represent, hides the thresholds, and implies a precision the scoring cannot support. We increasingly recommend a ranked list in which every topic is tagged impact, financial or both, with its KPI, target and owner alongside. If the board prefers the matrix, keep it, but label the axes with lens, draw the threshold lines, and add a short note on what moved since last year and why.
Make the material matter the spine of the integrated report.
In integrated reporting, materiality is not a page; it is architecture. Each material matter should connect visibly to the business model, the capital it draws on, the principal risks, the strategy and the KPIs. If a reader cannot trace a material matter from the materiality section to a strategic priority and a performance number, the integrated report is decoration. (We explore structure in [our annual report layout guide.
Explain the change, not just the result.
The most credible line in any materiality disclosure is the one that says what moved and why: data privacy rising because new rules arrived, a topic falling away because an asset was divested. Readers trust a process that visibly responds to the world.
Keep one list across every channel.
The topics in BRSR Question 26, the sustainability report, the integrated report, the investor presentation and the website should be the same list, in the same words.
Say which lens you used.
One paragraph naming the lens, the stakeholders consulted and the approving body pre-empts most misreadings and gives AI answer engines a clean, quotable description of your process.
What are the most common mistakes we see?
Treating the survey as the assessment.
A survey is one input. Without severity analysis, financial scoring and governance review, it is a popularity contest.
One dot for two lenses.
Averaging impact and financial scores hides exactly the topics boards most need to see those that matter greatly to people but not yet to the balance sheet, and the reverse.
Calling everything material.
A list of 30 material topics signals an assessment that could not decide. The revised ESRS now explicitly discourages over-reporting; investors have discouraged it for years.
“Negative” as a financial implication.
One word is not a disclosure. Give direction, a magnitude band and a time horizon.
Refreshing the graphic, not the assessment.
Re-colouring last year’s matrix is visible to anyone who compares two reports. It is also visible to an assurer.
Our view.
Materiality analysis in sustainability and integrated reports is the editorial decision on which all ESG and sustainability reporting rests. Get it right and every downstream document, from BRSR to the investor deck, becomes easier to write and harder to challenge. Get it wrong and no amount of design will make the report credible.
Frequently asked questions
What is a materiality assessment in ESG reporting?
A materiality assessment is the structured process a company uses to decide which environmental, social and governance topics matter enough to manage and report. It weighs the company’s impacts on people and the environment and the sustainability risks and opportunities that affect its financial prospects, using stakeholder input, data and documented judgement, and ends in a board-approved list.
Is a materiality assessment mandatory under BRSR?
SEBI does not prescribe a method, but the BRSR format requires companies to disclose their material responsible business conduct issues in Section A, Question 26, with rationale, mitigation and financial implications. In practice, those disclosures cannot be credible without a documented assessment, and BRSR Core assurance for the top 1,000 companies from FY 2026-27 raises the evidence bar.
What is the difference between impact, financial and double materiality?
Impact materiality looks at a company’s effects on the economy, environment and people, as in GRI. Financial materiality looks at sustainability matters that could affect cash flows, access to finance or cost of capital, as in IFRS S1. Double materiality, used in the EU’s ESRS, requires both views, and a topic is material if it meets either.
How often should a company conduct a materiality assessment?
Review it every year and reassess it fully when something significant changes: an acquisition, a new market, a major incident or a new regulation. Many companies run a full reassessment every two to three years with annual updates. EFRAG found 82% of European reporters updated their assessment in the second year of ESRS reporting.
How many material topics should a company report?
There is no correct number, but fewer and better defined is almost always stronger. EFRAG’s 2026 review found an average of 6.4 material ESRS topics per company, with measurable targets for only 3.3. A shorter list with a KPI, target and owner for every topic is more credible than a long list with gaps.
How does materiality work in integrated reporting?
Under the Integrated Reporting Framework, a matter is material if it could substantively affect the organisation’s ability to create value over the short, medium or long term. Those charged with governance should be involved. Material matters then shape the report’s structure, linking to the business model, the capitals, risks, strategy and performance.
Who should approve the materiality assessment?
The board, usually through the committee responsible for sustainability, such as a Sustainability and CSR or Risk Management committee. Management owns the process; the board owns the outcome. Minuted approval matters because it shows the material topics are a governance decision, and assurers and investors increasingly look for that evidence.
Will auditors or assurers review the materiality process?
Increasingly, yes. BRSR Core assessment or assurance reaches the top 1,000 listed entities in FY 2026-27, and ICAI’s SSA 5000 applies from financial years beginning on or after 1 April 2027. Engagements under that architecture consider how a company identified what to report, so the methodology, scoring and approvals need to be documented.
Bringing advisory expertise and technology together
A well-documented materiality assessment depends on clear methodology, reliable data and a traceable link between identified topics and reported performance. Technology can support this process by helping organisations structure ESG data, manage reporting workflows and maintain a digital record of the information behind their disclosures.
In this context, K&A’s ESG advisory and reporting expertise is complemented by its partnership with Travanleo Info Solutions. K&A is Travanleo’s exclusive partner in India for implementing Ecodrisil ESG Xpress, its AI-powered sustainability reporting platform. The platform supports ESG data management, Scope 1, 2 and 3 emissions tracking, and the preparation of ESG reports aligned with local and global reporting frameworks.
For organisations conducting a materiality assessment, such capabilities can help reduce reliance on fragmented spreadsheets and connect data more efficiently to reporting requirements. The assessment itself, however, still depends on appropriate stakeholder engagement, defined scoring criteria, professional judgement and governance approval.
This combination of advisory expertise and technology can help companies move from identifying material topics to managing the supporting data and translating the results into clear, consistent disclosures.
Where K&A comes in
A materiality assessment is where sustainability strategy and corporate communication meet. K&A runs the process end to end, from the methodology note and stakeholder engagement to scoring, board approval and the materiality log, and then turns the result into BRSR, GRI and integrated reporting disclosures that tell one consistent story.
