FAR057 – ESG Assurance Processes during Implementation of CSRD – Double Materiality Focus

What?

ESG assurance is becoming a core component of corporate reporting as the CSRD and ESRS place double materiality (i.e., covering both financial and impact materiality) at the heart of sustainability disclosures. This shift creates a fundamentally new assurance domain characterized by heightened professional judgment, evolving audit methodologies, and expanding auditor–client interaction.

This project aims to open the “black box” of ESG assurance by examining how auditors and their clients interpret, operationalize, and provide assurance over double materiality assessments in both voluntary and mandatory reporting settings. We conceptualize double materiality as the regulatory and conceptual lens through which key audit challenges—judgment, assurance scope, innovation, and consistency—can be observed in practice.

Specifically, we investigate how auditors apply emerging CSRD and ESRS guidance when assessing financial and impact materiality; how these judgments shape engagement acceptance, planning, evidence gathering, and the development of new assurance methods; and how audit firms strive for consistency and credibility across engagements and offices. We further examine how double materiality assessments integrate sustainability and financial considerations and how they influence perceptions of firm-wide risk exposure and future prospects. A central focus is auditor–client and stakeholder interaction. We study how auditors engage clients around double materiality judgments, how these interactions affect reporting processes and governance structures, how differences of opinion are resolved, how ESG and financial assurance engagements influence one another, and how emerging practices are institutionalized within audit firms.

We will conduct semi-structured interviews with audit partners and managers involved in CSRD-related engagements, as well as selected audit firm leaders, to provide in-depth insight into the challenges, innovations, and emerging best practices shaping double materiality assurance.

Why?

Double materiality represents one of the most significant conceptual and practical shifts in the history of auditing. Yet regulators, audit firms, and companies currently have limited empirical insight into how double materiality judgments are actually made, how assurance processes are evolving, and which emerging practices enhance credibility and consistency. This project responds directly to that gap.

The findings will inform auditors, companies, standard setters, and regulators about how double materiality is being operationalized in practice, the challenges encountered, and the innovations emerging under CSRD implementation. We expect the study to help audit firms refine ESG assurance methodologies, support companies in designing robust reporting and governance processes, and assist regulators and standard setters in evaluating and improving sustainability reporting and assurance requirements.

The study advances auditing research by extending core theories of audit judgment, assurance scope, and auditor–client interaction into the novel context of double materiality. It offers a unique setting to examine how new regulatory concepts reshape professional judgment, innovation processes, and the boundaries of assurance. By opening the black box of ESG assurance, the project contributes to broader theories of audit quality, institutional change, and professional adaptation, while laying a foundation for future research streams on sustainability assurance, risk integration, and the evolving role of auditors in technology-enabled and multi-stakeholder reporting environments.