SBM-3 — Material impacts, risks and opportunities and their interaction with strategy and business model
ESRS 2 disclosure requirement that connects the material impacts, risks and opportunities with the company's strategy, business model and value chain under CSRD.
Context
SBM-3 is the disclosure that connects double materiality with strategy and the business model. While IRO-1 documents the process, SBM-3 reports the outcome: which impacts, risks and opportunities turned out to be material and how they affect the company's strategy, business model and value chain.
Regulatory origin
Cross-cutting disclosure requirement of ESRS 2 §60-67 (Delegated Regulation (EU) 2023/2772, Annex I). Together with IRO-1 and IRO-2, it forms the mandatory triple traceability of the materiality analysis under CSRD.
«The undertaking shall describe the material impacts, risks and opportunities resulting from its materiality assessment and the interaction with its strategy and business model.»
View verbatim quote in English
“The undertaking shall describe the material impacts, risks and opportunities resulting from its materiality assessment and the interaction with its strategy and business model”
Mandatory content (¶60-67)
Brief list of the material impacts, risks and opportunities identified.
Type of each: impact (on people/environment), risk (financial) or opportunity.
Time horizon: short (≤1 year), medium (1-5 years), long (>5 years).
Location in the value chain: own operations, upstream or downstream.
The company's strategic response to each impact, risk or opportunity.
Resilience of the business model to the material risks identified.
Differences with IRO-1 and IRO-2
| Disclosure | Reports | ESRS 2 anchor |
|---|---|---|
| IRO-1 | The process (how the analysis was done) | ¶51-53 |
| SBM-3 | The outcome (what turned out material and its strategic impact) | ¶60-67 |
| IRO-2 | The inventory (which disclosure requirements are covered) | ¶54-59 |
Application timeline
ESRS publication
Delegated Regulation (EU) 2023/2772 with SBM-3 in ESRS 2 §60-67.
CSRD wave 1
First sustainability statement with mandatory SBM-3 for large listed companies.
Omnibus I published
Directive (EU) 2026/470 simplifies thresholds and shifts first application to 1 Jan 2027.
Post-Omnibus application
Companies with >1,000 employees AND >€450M report SBM-3 in accordance with the revised ESRS.
Applied case
A textile brand with B Corp certification reports its SBM-3, connecting the outcomes of IRO-1 with its declared sustainability strategy. For each material IRO identified, it declares type, horizon, location in the chain and strategic response.
Material impact #1 · Plastic microfibres in oceans from the use of recycled polyester. Long horizon. Location: downstream (consumer use plus washing). Response: research with ECNC into washing-machine filters plus a progressive transition to natural fibres.
Material risk #2 · Disruption of organic cotton supply due to drought in India. Medium horizon. Location: upstream tier 4. Response: geographical diversification (Pakistan and Turkey) plus multi-year contracts.
Material opportunity #3 · Preferential access to EU textile transition funds in 2027 thanks to pioneer status in textile DPP. Short horizon. Location: own operations. Response: early DPP implementation via a technology partner (TraceWeave).
Common mistakes
SBM-3 is not the materiality process: it is its reportable outcome.
ESRS 2 ¶48(a) in faithful paraphrase requires including a brief description of the material impacts, risks and opportunities resulting from the materiality assessment (see disclosure requirement IRO-1 of this standard). The explicit reference to IRO-1 indicates that SBM-3 reports the OUTCOME of the process documented in IRO-1. The company cannot skip IRO-1 by drafting only SBM-3, nor collapse both into a single disclosure — ESRS 1 ¶29 requires both as cross-cutting disclosures of ESRS 2.
SBM-3 covers negative AND positive IROs, actual AND potential — not just risks.
ESRS 1 ¶43 on impact materiality in faithful paraphrase: actual or potential, positive or negative impacts on people or the environment in the short, medium or long term. ESRS 2 ¶48(c) sub-letter (i) in faithful paraphrase: how the company's material negative and positive impacts affect (or, in the case of potential impacts, are likely to affect) people or the environment. Reporting only risks and omitting material opportunities (where they exist) or reporting only negative impacts and omitting positive ones (where they are material) breaches SBM-3.
SBM-3 requires location in the value chain — listing topicals is not enough.
ESRS 2 ¶48(a) in faithful paraphrase requires including a description of where in the business model, own operations and upstream and downstream value chain the material impacts, risks and opportunities are concentrated. ESRS 2 AR 17 in faithful paraphrase specifies: the company shall consider geographical areas, facilities or types of assets, inputs, outputs and distribution channels. A list of topicals without geographical or operational location breaches SBM-3 — particularly critical for textiles, where cultivation and spinning are tier 3-4 with risks concentrated in specific geographies.
Letter (e) of SBM-3 on anticipated financial effects is subject to a phase-in in the first 3 years.
Appendix C of ESRS 1 (List of phased-in Disclosure Requirements) in faithful paraphrase on SBM-3: the company may omit the information prescribed by ESRS 2 SBM-3 ¶48(e) (anticipated financial effects) during the first year of preparation of the sustainability statement. The company may comply with ESRS 2 SBM-3 ¶48(e) by reporting only qualitative disclosures during the first three years of preparation if it is impracticable to prepare quantitative disclosures. This is the only exception to SBM-3 — the remaining letters (a)(b)(c)(d)(f)(g)(h) are reported from the first financial year.
SBM-3 includes a mandatory qualitative resilience analysis and a quantitative one where applicable.
ESRS 2 ¶48(f) in faithful paraphrase: information on the resilience of the company's strategy and business model regarding its capacity to address the material impacts and risks and to take advantage of the material opportunities. The company shall disclose a qualitative and, where appropriate, quantitative analysis of resilience, including how the analysis was carried out and the time horizons applied in accordance with ESRS 1 (see ESRS 1 chapter 6 Time horizons). This goes beyond the topical ESRS E1-9 (anticipated financial effects from climate-related risks) — the SBM-3 resilience analysis covers the capacity of the strategy and business model against the full set of material IROs, not just climate-related ones.
Frequently asked questions
What is SBM-3?
Strategy, business model and value chain — Material impacts, risks and opportunities. Cross-cutting disclosure requirement of ESRS 2 §60-67. It connects the material IROs (impacts, risks and opportunities) identified with the company's strategy, business model and value chain.
Who must apply SBM-3?
Any company subject to CSRD documents SBM-3 as part of the sustainability statement. It is one of the disclosures most scrutinised by the external auditor because it connects the IROs with the strategic narrative — the point where "double materiality" becomes operational for the business.
How is SBM-3 applied in practice?
In accordance with ESRS 2 §60-67: (i) list the material matters from the SBM-3 cross-table, (ii) for each one indicate type (impact/risk/opportunity), time horizon (short/medium/long), location in the value chain (own operations / upstream / downstream), (iii) the company's strategic response.
What is the difference between SBM-3 and IRO-1?
IRO-1 documents the PROCESS of the materiality assessment (how impacts/risks/opportunities were identified and assessed). SBM-3 documents the OUTCOME connected with strategy (which ones are material and how they affect the business model). IRO-1 is methodology; SBM-3 is the strategic outcome.
Fuentes oficiales
- European Commission · Delegated Regulation (EU) 2023/2772 · Annex II31 jul 2023Delegated act in force
- European Commission · Delegated Regulation (EU) 2023/2772 · Annex I31 jul 2023Delegated act in force
- European Financial Reporting Advisory Groupmayo 2024Non-binding technical guidance
- European Commission · Delegated Regulation (EU) 2023/2772 · Annex II31 jul 2023Delegated act in force
