How to Identify Your Material Sustainability Topics for CSRD

Introduction

Under the Corporate Sustainability Reporting Directive (CSRD), every company must determine which sustainability topics are material — that is, which environmental, social, and governance (ESG) issues are most relevant to their impacts and financial risks. For small and growing businesses (SMEs), this step can seem daunting, but the process can be made practical and efficient.

This guide explains how to identify and prioritise your company’s material topics using the double materiality approach defined in the CSRD and simplified under the VSME Standard. You’ll learn how to focus your efforts on what truly matters to your business and stakeholders, avoiding unnecessary complexity.

Understanding Material Topics

Material topics are the foundation of your sustainability report. They determine what you measure, manage, and disclose. Under the CSRD, a topic is considered material if it meets at least one of two conditions:

1. Impact Materiality: Your company’s activities have a significant positive or negative effect on people or the environment.
2. Financial Materiality: The topic affects (or could affect) your financial performance, position, or future resilience.

For small and growing businesses (SMEs), this principle applies in a proportional way: you only need to assess and report on the issues that are most relevant to your size, sector, and business model. The VSME Standard explicitly recognises this flexibility and provides templates to support you.

Step-by-Step Process for SMEs

Step 1: Start with a Topic List

Begin with a structured list of potential topics. The VSME Standard (Appendix B) and the European Sustainability Reporting Standards (ESRS) include common areas such as:

• Environmental: Energy and GHG emissions, water use, pollution, waste, biodiversity.
• Social: Workforce health and safety, diversity, training, community impact, human rights.
• Governance: Anti-corruption, business conduct, transparency, board diversity.

You can adapt this list to your sector. For instance, a logistics company might prioritise fuel use and safety, while a retailer might focus on supply chain ethics.

Step 2: Engage Stakeholders

Materiality is about what matters — and that depends on who’s affected. Hold short discussions or surveys with employees, key customers, suppliers, and local community representatives. Ask questions such as:

• Which sustainability issues are most important to you?
• What risks or opportunities do you see for our business?
• Where could we make the biggest positive impact?

This step helps you capture external expectations and build credibility in your assessment.

Step 3: Evaluate Each Topic

Create a table or matrix to assess both impact and financial relevance for each topic. Rate each as High, Medium, or Low for both dimensions.

A topic is material if it scores high on either dimension. This simple approach aligns with the CSRD’s double materiality concept.

Learn how to apply double materiality for SMEs →

Step 4: Prioritise and Document

Once you’ve identified your material topics, document how you made the decision:

• Who participated in the process
• When the assessment took place
• The criteria used for “high” or “medium” ratings
• Any assumptions or data sources

This record forms the evidence behind your sustainability report and demonstrates that your approach is transparent and reasoned.

Step 5: Review Regularly

Revisit your materiality analysis each year, or when significant changes occur — such as new products, supply chain risks, or client sustainability requests. The CSRD Directive (Article 19a) encourages ongoing review to keep disclosures accurate and relevant.

See how SMEs update CSRD data and reports efficiently →

Practical Tips for SMEs

• Use existing data — Many “material” issues are already monitored for quality, safety, or HR purposes.
• Keep it visual — A simple two-axis chart (impact vs. financial) helps communicate results clearly.
• Start small — You don’t need to assess 100 topics. Focus on 10–15 that really matter.
• Leverage VSME templates — They are purpose-built for SMEs and save time on formatting and alignment.

For additional support, explore the VSME topic hub to see how these standards can simplify your reporting journey.

Frequently Asked Questions

How many material topics should a small and growing business report?

There’s no fixed number. Most small and growing businesses identify between 5 and 12 material topics that reflect their most significant impacts or risks. The key is relevance, not volume.

Do I need stakeholder interviews for CSRD compliance?

Formal interviews are not mandatory, but stakeholder input strengthens your assessment and shows good governance. Even informal discussions or quick surveys are sufficient.

See stakeholder engagement best practices →

What if I’m part of a larger company’s supply chain?

Many large clients now request sustainability data from suppliers to meet their own CSRD obligations. Conducting a simple materiality assessment prepares you to respond confidently and demonstrate proactive sustainability management.

Understand how SMEs fit into CSRD supply chains →

Can I reuse my ISO 14001 or ESG data?

Yes. Data collected for ISO 14001, GRI, or other sustainability frameworks can directly support your CSRD topics — particularly for environmental and workforce metrics.

See how to align existing systems with CSRD →

Key Terms

• Material Topic: An ESG issue significant in impact or financial risk.
• Double Materiality: Evaluating both impact and financial perspectives.
• Stakeholder Engagement: Process of gathering views from affected parties.
• VSME Standard: Voluntary reporting framework for non-listed SMEs.
• ESRS: EU-wide reporting standards aligned with CSRD.

Conclusion

Identifying your material sustainability topics is not about ticking boxes — it’s about focusing on the issues that genuinely shape your company’s success and impact. By using a proportional, well-documented approach, small and growing businesses can meet CSRD expectations, support business relationships, and strengthen their sustainability strategy.

Start simple, involve your team, and build consistency year by year. That’s the heart of effective, credible CSRD reporting for small and growing businesses.

To help you identify which sustainability topics are most relevant to your business, use our industry topic selector:

This tool will help you determine which topics are most material to your business operations and stakeholders based on your industry and business model.