Revised ESRS: Using Human Rights Risk Assessments as the Basis for Double Materiality

Written by focusright

For many companies, double materiality assessments (DMAs) have become a tick-the-box exercise. At the same time, companies with established human rights due diligence (HRDD) processes may already have something highly relevant at hand: a Human Rights Risk Assessment (HRRA). The revised European Sustainability Reporting Standards (ESRS) create an opportunity to connect these processes more systematically. Under the revised ESRS, a well-designed HRRA is not just an input to the social negative impact dimension of a DMA, but it can carry a company all the way to a top-down materiality conclusion at social topic level.

WHAT IS THIS ABOUT?

A DMA decides which sustainability topics a company reports about under the ESRS. Each topic is assessed twice: are the company's impacts on people and the environment material, and does the topic create material risks or opportunities for the company?

For social topics, the first assessment is close to what a HRRA already does. Both ask where a company can cause, contribute to or be directly linked to severe impacts on people – and how severe those impacts are. The overlap is not a coincidence. The ESRS impact assessment was built on the UNGPs and the OECD Guidelines, and the revised ESRS keep it that way:

  • Same severity and likelihood criteria. The ESRS assess a negative impact by its severity based on scale, scope and irremediability, and potential impacts by their likelihood.

  • Same starting point. The analysis begins with strategy, business model, sectors, geographies and value chain. That is where a serious HRRA also starts.

  • Same evidence base. Engagement with affected stakeholders through ongoing due diligence is treated as a key input to the impact assessment, and a company that already engages them within their HRRA process does not need a separate process for its DMA.

The standards even go a step further: companies must disclose whether due diligence informed their materiality assessment. The link is not just permitted – it is something the regulator asks about.

WHY DOES IT MATTER?

The revised ESRS are now final. The European Commission adopted them on 3 July 2026, and they entered into force on 10 November 2026, applying to financial years beginning on or after 1 January 2027.

With the revised ESRS, mandatory datapoints fall by around 61%, and the DMA itself becomes lighter. But most importantly, the revised ESRS changed how a materiality conclusion may be reached – and the new route plays to the strengths of an HRRA.

Three provisions matter most:

  • Under the revised ESRS a company may conclude that a topic is material or not material based on an analysis of its strategy and business model, including sectors, geographies and value chain – without assessing each impact, risk and opportunity individually. If an HRRA has already prioritised a human rights topic based on severity and likelihood, impact materiality is already established: the topic is material, no matter how big the financial risks and opportunities are. Only where the answer is not evident it must assess specific impacts, risks or opportunities.

  • Quantitative information or scoring is not necessarily required, and companies need not search exhaustively for every possible impact.

  • The top-down approach can be used for the topics where the picture is clear, the bottom-up approach for the borderline ones.

This is exactly the kind of evidence an HRRA produces. A company whose HRRA maps its value chain by country and commodity, identifies heightened risks of forced labour, unsafe working conditions or impacts on communities, and documents why – already holds the analysis the ESRS ask for in a DMA. The HRRA is not only an input to the social impact materiality of the DMA. It can carry the topic-level conclusion in the social dimension itself.

The practical gain is threefold: a consistent understanding of impacts across reporting and due diligence, no duplicated value-chain analysis, and material topics that mean something for management rather than only for the report.

WHAT IS OFTEN OVERLOOKED?

The two exercises are close, but they are not the same. The main differences include:

  • Materiality dimensions: An HRRA assesses the adverse impacts on people a company might cause, contribute to or be directly linked to through its business activities. The DMA brings in another materiality dimension: the financial materiality, looking at the risks and opportunities for the company.

  • Impact dimension: The DMA looks at positive and negative impacts and even adds them up, while HRRA often cover only adverse impacts on people.

  • Topics: A DMA covers environmental, social and governance topics, while HRRAs often cover only social and, less common, environmental topics.

This means that an HRRA can carry a large part of the social impact conclusion, but it cannot deliver the DMA.

WHAT IS FOCUSRIGHT’S TAKE?

Companies should connect due diligence and ESRS processes instead of running two parallel sustainability architectures. For the social impact side of double materiality, the HRRA is the obvious bridge – provided it is designed with that in mind from the start.

In our experience, an HRRA should adhere to the following principles to be able to carry materiality conclusions:

  • Business model, sectors, geographies, operations and the whole value chain - this is the same analysis the ESRS require, so it should be documented accordingly.

  • Severity and likelihood assessments for impacts, with severity taking precedence over likelihood, and no netting of positive against negative impacts.

  • Severity before mitigation, with existing measures recorded separately and only credited where they are implemented and demonstrably working.

  • So a due diligence finding can be connected to ESRS’ social standards without being re-translated, and so entity-specific issues that the ESRS list does not cover remain visible.

 

FURTHER RESOURCES

focusright
Next

Just Transition: Why Companies Need to Connect Climate Action and Human Rights