Which ESG topics are material for our business?

There’s no standard list of material topics. You work out which apply by starting from your business model and value chain, screening the topics and sub-topics in ESRS 1 Appendix A, ruling out what your business model doesn’t support, and documenting the reasoning for each exclusion. Topics that survive that screen move on to impact and financial materiality assessment.

The method flipped

The old approach was bottom-up. Companies worked through every item on the AR 16 list, tested each individual impact, risk and opportunity for materiality, and built up to a conclusion at topic level. It was exhaustive and exhausting.

Under the revised ESRS, adopted by the European Commission on 3 July 2026, the starting point is your business model and strategy.. You identify which topics and sub-topics are relevant, then work down to the IROs that need closer scrutiny, this is referred to as a top-down approach. If the business model analysis supports excluding a topic, you can rule it out at that stage and document why. There’s no obligation to disprove materiality item by item.

The topics list changed too. AR 16, which went down to sub-sub-topic level, is replaced by ESRS 1 Appendix A, which stops at topic and sub-topic. The sub-sub-topics have been folded into their parent, so there’s one less layer to document.

Fix the boundary before you start

Starting a DMA without defined boundaries is the most common way this work goes sideways. Which entities are in, which geographies count, whether joint ventures and minority holdings sit inside the boundary, and where the value chain analysis stops.

Companies assume they’ll work the edges out as they go. Without those boundaries fixed at the outset, every later decision wobbles, and conclusions become hard to defend in assurance because the boundary was never clear when the assessment was made.

One point from our own project work that’s worth saying plainly. Resist the temptation to redraw the boundary when the assessment turns up something inconvenient. That’s the moment the audit trail stops holding together.

Keep the cross-mapping table

Once you’ve got your topics, cross-reference them against ESRS 1 Appendix A as a sanity check. Map each identified impact to its corresponding ESRS topic, then look at what’s left unmapped as a quick gap analysis.

Keep that mapping table in your files. When your auditors arrive it’s immediate proof that you evaluated the standard’s full universe of topics systematically.

If an impact doesn’t fit any standard topic, don’t force it. It’s an entity-specific topic, and it needs a custom disclosure.

The topic most companies miss

Dependencies are what we find missing most often. A dependency is something the business needs to operate but doesn’t control. Reliable water access. Stable climate conditions in growing regions. Intact ecosystems producing the inputs you buy. A workforce with the right skills in the right places.

Most assessments cover impacts reasonably well and cover the risks companies can already see, meaning regulation, reputation and supply chain disruption. The dependencies those risks sit downstream of don’t get looked at. Dependencies are required under the ESRS, so leaving them out is a compliance failure. The bigger cost is that a strategy built on an assessment that never identified them is built on very little.

Kōan has worked on materiality assessments for 9 years, with companies from listed multinationals to first-time reporters across Europe, Asia and the US. If you want a second pair of eyes on your methodology before your auditor finds the gaps, get in touch.

Melina Gkiolma, Sustainability Consultant, Kōan
Published 05 October 2026 · Last reviewed 21 September 2026

Melina Gkiolma is a sustainability consultant at Kōan, specialising in CSRD and ESRS. She previously worked at Deloitte Luxembourg and is a One Young World Ambassador.