Most of the questions we get about ESG reporting are really one question asked in different ways: where do we even start? The honest answer is that you do not start by writing a report, and you do not start by collecting every data point you can find. You start by working out what is actually worth reporting. That exercise has a name, the materiality assessment, and it is the single most important step, because it decides everything that follows.

Here is what it is, the three forms it can take, and how to run one without either overcomplicating it or skipping it.

What a materiality assessment is, and why it comes first

A materiality assessment is the process of deciding which environmental, social, and governance topics are significant enough that they belong in your report, and which are not. Out of the dozens of possible ESG topics, only some are material to any given business. A logistics company and a bank have very different material issues, and reporting on the wrong ones wastes effort and tells the reader nothing.

It comes first for a simple reason: it sets the scope. Every later decision, what data to collect, what to measure, what to disclose, and what to leave out, flows from the list of material topics. Do it properly and the report writes itself around a focused set of issues. Skip it and you end up either reporting on everything at a shallow level, or reporting on whatever data happened to be easy to find, neither of which convinces a regulator, an investor, or a board.

The three kinds of materiality

This is where most of the confusion sits, because “materiality” means different things in different frameworks. There are three versions, and the difference is about whose perspective you take.

  • Financial, or single, materiality asks: how does this ESG issue affect the company’s own financial position, its cash flows, or its value? It is the investor’s lens. Climate risk matters here because it could damage assets or raise costs, not because of its effect on the planet in the abstract.
  • Impact materiality asks the opposite: how does the company affect the outside world, its people, its community, and the environment, regardless of whether that rebounds on the company financially?
  • Double materiality combines the two. A topic is material if it matters to the company’s value or to the company’s impact on the world. Financial materiality is one of its two halves, so a double-materiality assessment includes the financial view and adds the impact view on top.

The frameworks line up along exactly this split:

  • The ISSB standards (IFRS S1 and S2) use financial materiality. They are built for investors and capital markets.
  • The Global Reporting Initiative (GRI) uses impact materiality. It has always taken the wider, outward-looking view.
  • The EU’s ESRS, under the CSRD, use double materiality, and make it mandatory for the companies in scope.

Which one applies to you

The version you need depends on who is going to read the report, and this is the question to settle before you do anything else.

  • If you are reporting under Bahrain’s CBB ESG module, note that the CBB guidelines are referenced to GRI, TCFD, SASB and related standards rather than to IFRS S1 and S2. That points you toward the impact view, in the GRI tradition. Our explainer on what the CBB ESG module requires, and why it is not IFRS S1 and S2 covers the module in detail.
  • If an investor, lender, or parent company has asked for ESG data, they are almost always asking the financial materiality question, because they are assessing risk to value. The ISSB direction is the relevant one, and it is where the wider GCC is heading: Qatar has mandated IFRS S1 and S2 for its regulated banks and insurers from 2026, and mandatory sustainability reporting is spreading across the region even where the ISSB standards themselves are recommended rather than required.
  • If any entity in your group has EU exposure through the CSRD, you are into double materiality, which is the most demanding of the three.

The practical trap is assuming these are interchangeable. They are not. A report built for the CBB module on an impact basis does not automatically answer an investor’s financial-materiality questions, and a business that needs both has to plan for both from the start rather than rebuilding later.

How to actually run one

The method is more straightforward than the terminology suggests.

  1. Build a longlist of topics from a recognised framework rather than from a blank page. GRI, SASB, and the ISSB standards all provide topic lists, and starting from one means you are comprehensive and comparable rather than guessing.
  2. Gather two inputs. The internal view: what management, and where relevant the board, consider significant to the business. And the stakeholder view: what customers, employees, regulators, investors, and communities actually care about. Impact and double materiality both require the outward, stakeholder input; financial materiality leans more on the internal risk view.
  3. Assess and rank. Score each topic for significance on the dimension that applies to you, financial, impact, or both, and separate the material few from the immaterial many. A short, defensible list beats a long, hedged one.
  4. Set the reporting boundary. Decide which parts of the business and which entities the report covers. A group report that quietly excludes a major subsidiary is a problem waiting to be found.
  5. Assign an owner and a data source to each material topic. This is the step that turns the assessment into something usable. A material topic with no owner and no reliable data is a gap, not a disclosure.

That last point is worth dwelling on. The expensive part of ESG reporting is rarely the writing; it is collecting reliable, documented data on things like energy use, greenhouse gas emissions across Scope 1, 2, and 3, workforce metrics, and governance. The materiality assessment tells you which of those data sets you actually need to build, so you build the ones that matter once, properly, instead of everything, badly.

The mistakes that undo the exercise

A few patterns turn a materiality assessment into wasted effort:

  • Reporting on everything. A report that covers every possible topic at a shallow level is not thorough, it is unfocused, and it buries the issues that matter.
  • No stakeholder input. An impact or double-materiality assessment that only reflects the internal view is not really an impact assessment. It has to include the outside perspective it is meant to capture.
  • Treating it as a one-off. What is material shifts as the business, the risks, and the standards change. An assessment done once and never revisited goes stale, and the report drifts from what actually matters.
  • Skipping the data layer. Concluding that a topic is material and then having no way to measure it leaves a disclosure you cannot support. Materiality and data have to be planned together.

A note on scope and sources

The materiality concepts above reflect the ISSB standards (IFRS S1 and S2), the GRI standards, and the EU’s ESRS under the CSRD as they currently stand, and the Bahrain position reflects the CBB’s ESG reporting guidelines. Which framework and which materiality basis apply to a particular company depend on its regulatory status, its ownership, and who is asking for the report, and should be confirmed against the current standards and CBB guidance for your own entity rather than assumed from a general guide.

SRR provides ESG and sustainability advisory in Bahrain, starting with exactly this: working out which requirements apply, running the materiality assessment, and building the report and the governance around the topics that matter. It is part of our wider advisory and assurance practice for businesses and institutions across the GCC.