Narrower CSRD scope strips double materiality of its mandate

Narrow the mandate and a compliance exercise has to start justifying itself. As CSRD's scope shrinks under the Omnibus revisions reported by Sustainable Brands on September 21, the filing deadline that once pushed companies through double materiality assessments disappears for many of them, leaving a process that has to argue for its own existence—a harder pitch than a deadline and, for the companies that keep it, a more useful one.

The assessment spent its early years as a checkbox, completed ahead of a reporting deadline and then set down; with the directive's reach reduced, sustainability teams are left holding an unexpected question—what is the assessment for now that compliance alone is not the reason to run it?

The answer forming inside companies is that materiality moves off a periodic disclosure cycle and becomes a standing input into risk management and strategy, refreshed as markets, supply chains, and operating footprints shift rather than rebuilt from scratch on a reporting calendar. That is a different product with a different cost base: a periodic assessment is scoped, budgeted, delivered, and closed, while a continuous one needs an owner, a steady supply of fresh information, and consumers inside the business, and its output surfaces in decisions rather than in a published report—which is exactly what makes it awkward to defend at budget time.

The shift also redraws the guest list, because if materiality findings are meant to inform business decisions rather than satisfy a disclosure requirement, finance and operations need seats at the table alongside sustainability—and that seating chart is the most reliable measure of whether any of it is real. An assessment that begins and ends inside a sustainability function is a reporting artifact, while one whose findings reach a risk register, or the papers that precede a capital allocation, is a management input. Only the second kind survives the loss of a mandate, because only the second kind has a customer inside the building.

Nick Sanscartier, vice president of partnerships and strategy at Novisto, sees the change mostly in how companies use the output rather than in the rules: regulation has been an important driver, particularly in Europe, he said, but companies increasingly treat the assessment as more than a reporting exercise—a way to see which sustainability issues could affect the business, where the company's most significant impacts lie, and where those issues belong in risk management and strategy.

He makes a narrower version of that argument for CSRD itself: the directive has been an important driver for double materiality, yet the value of the process runs past compliance. Companies still need to establish which topics and data points they owe their stakeholders, and which sustainability-related risks and opportunities could affect the business and where their impacts are greatest. The conversation covers the more continuous, data-driven version of the practice and the points at which human judgment has to override what the data returns.

Sanscartier then turns to organizations outside CSRD's scope, but the conversation cuts off before he says what those companies do. That leaves the more interesting half of the question open: the directive's narrowed reach puts exactly those companies in the position of deciding whether to keep running an assessment nobody requires.

The awkward part of double materiality has always been the word, because the assessment runs in two directions at once—which sustainability issues could affect the business, and where the company's own impacts are most significant—and each direction answers to a different audience; the first speaks the language of risk and finance, while the second speaks to parties outside the company, and it is the half that tends to go quiet first once nothing forces its publication.

Whether a company keeps the process is therefore a question about internal demand rather than regulatory reach, and companies already pulling findings into enterprise risk or capital planning have the easier case to make: for them the deadline was a forcing function, not the reason. Companies that ran the assessment to satisfy a filing, and staffed it to that standard, are the ones most likely to let it lapse—a decision that costs nothing visible until the next supply-chain shock or customer request the company can no longer answer quickly. Whether customers still in scope keep pushing those questions down to suppliers that have fallen out of it is a pressure the article does not address, and it would be a commercial substitute for a statutory one.

The test from here is administrative rather than philosophical: if materiality findings now appear on the same calendar as a company's enterprise risk cycle, carry a finance owner, and generate items that reach budgets, the narrowing cost the process nothing it needed. If the assessment resurfaces a year ahead of the next filing deadline, written and read by the same team, then it was a deliverable all along, and the Omnibus retired a paperwork exercise that had been wearing a strategy label.