Common DMA Mistakes: Why SMEs Fail Their Double Materiality Assessment

Under the Corporate Sustainability Reporting Directive (CSRD), the Double Materiality Assessment (DMA) is the foundational step that determines your entire sustainability reporting scope. If a topic is material, you must disclose it; if it is not, you can omit it.

Because of this gatekeeping role, external auditors scrutinize the DMA more than any other document. For small and medium-sized enterprises (SMEs), running a DMA for the first time is highly challenging, and simple errors can lead to auditor rejection.

Here are the four most common DMA mistakes SMEs make and how you can avoid them.

1. Scope Creep (The "Everything is Material" Trap)

The most common failure is allowing too many topics to cross the materiality threshold.

This usually happens when companies use standard 1-to-5 Likert scale surveys. Stakeholders rate every issue (from climate change to data protection) as highly important. Fearing they will look unsustainable, managers mark all these issues as material.

• The Consequences: You get locked into reporting on hundreds of data points, requiring massive data collection efforts that waste internal resources.
• The Solution: Use pairwise comparisons (like ExecutESG's AHP survey module) that force relative choices. This mathematically separates critical strategic topics from secondary ones, keeping your reporting scope manageable.

2. No Audit Trail for Scoring Decisions

When auditing your report, the auditor will not just look at your final matrix. They will check the raw data:

• Why did you score the likelihood of water scarcity as a 4?
• What evidence supported the scale of your carbon impact as a 5?
• Which stakeholders did you consult, and how did you resolve scoring differences?

If these decisions are stored in separate emails, chats, or unlinked spreadsheets, you will struggle to provide answers.

• The Consequences: The auditor may reject your materiality boundaries, forcing you to re-run the assessment.
• The Solution: Keep a persistent scoring log where every IRO (Impact, Risk, or Opportunity) has a documented rationale and data source directly linked to the score.

3. Treating the DMA as a One-Off Consulting Project

Many SMEs hire an external consulting firm to run their DMA. The consultants deliver a slide deck and a PDF report, charge a high fee, and leave.

• The Consequences: The moment your business model changes (e.g., you open a new warehouse or launch a new product line), your DMA becomes obsolete. Because the process lives inside the consultant's proprietary models, you cannot update it yourself.
• The Solution: Conduct your DMA inside a persistent database. Sustainability is an ongoing process, not a one-off project. Your software should allow you to adjust scores, add new risks, and refine thresholds as your business grows.

4. Confusing "Impact" with "Financial" Materiality

SMEs often confuse the direction of the two materiality vectors:

• They mark a topic as financially material because they have a great green product that could win new customers (which is a business opportunity, not a regulatory risk).

• They mark a topic as impact material because a new climate tax will cost them €50,000/yr (which is a financial risk, not an environmental impact).

• The Consequences: Inaccurate mapping leads to confusing disclosures that raise flags during audit reviews.

• The Solution: Use EFRAG's strict definitions: Impact is your company's effect on the world (Scale, Scope, Irremediability); Financial is the world's effect on your company's balance sheet (Likelyhood, Magnitude).

Take the Pain Out of Materiality

ExecutESG's Double Materiality Module is structured to prevent these exact mistakes. By guiding your team through a step-by-step scoring workflow and providing automated pairwise consensus math, the platform builds an audit-ready, defensible materiality matrix.

Ready to execute your DMA correctly? Start your assessment with ExecutESG.