Double Materiality Assessment
for Professional Services

Double materiality assessment for Professional Services

Professional services firms (audit, legal, consulting, engineering consultancy, IT services) have one of the narrowest materiality profiles under CSRD. With limited physical operations, minimal manufacturing, and a workforce-intensive business model, most topics score below the materiality threshold on the environmental dimension. The exceptions are E1 Climate change (driven by business travel and office energy consumption) and, for firms with significant data centre or IT infrastructure, E5 Resource use for electronic equipment lifecycle. The materiality weight falls heavily on S1 Own workforce and G1 Business conduct.

E1 Climate change is typically the only environmental topic that crosses the materiality threshold. Scope 1 comes from company vehicles (partner cars, fleet vehicles). Scope 2 from office electricity and heating. Scope 3 is dominated by category 6 (business travel), which for a consulting firm with 500 professionals can represent 60-80% of total emissions if the firm serves international clients. Financial materiality under E1 is lower than for energy or manufacturing but still relevant: rising travel costs, client procurement requirements for carbon footprint data, and reputational risk from perceived greenwashing if the firm advises on sustainability without managing its own emissions. S1 Own workforce is the dominant topic. Professional services firms depend entirely on human capital. Working hours (particularly in audit, legal, and consulting during peak seasons), mental health, gender pay equity, diversity in senior leadership, and talent retention all carry both impact and financial materiality. Burnout and turnover in audit firms have received regulatory attention: the FRC's 2023 report on audit firm culture highlighted workload pressures as a risk to audit quality. G1 Business conduct covers independence requirements (for audit firms), conflicts of interest, client acceptance procedures, anti-money laundering obligations (for legal and accounting firms), and ethical conduct in client engagements. For firms providing sustainability assurance under CSRD, G1 also covers the integrity of the assurance engagement process itself.

Assurance providers reviewing professional services assessments flag two patterns. First, firms dismiss all environmental topics except E1, sometimes without documenting the assessment for E2 through E5 as required by ESRS 1.28. Even if the conclusion is "not material," the process must be documented. Second, firms underassess S1 by focusing on headcount and diversity metrics while ignoring working conditions. ESRS S1 covers adequate wages, working time, health and safety, and work-life balance. For a sector where 60-hour weeks during busy season are normalised, impact materiality on working time is difficult to dismiss.

Professional services firms should structure the assessment around two axes: the firm's own operations (offices, travel, workforce) and the firm's client portfolio (ethics, independence, market conduct). For own operations, collect business travel data from expense systems, office energy data from utility bills, and HR data on working hours, turnover, absence rates, and pay equity. For client-related governance, use client acceptance records, independence checks, complaints and disciplinary data, and regulatory inspection findings. The assessment will typically conclude that E1, S1, and G1 are material, with all other topics documented as assessed but not material.