A composite material includes a structural material and a shape-memory alloy embedded in the structural material. The shape-memory alloy changes crystallographic phase from austenite to martensite in response to a predefined critical macroscopic average strain of the composite material. In a second embodiment, the composite material includes a plurality of particles of a ferromagnetic shape-memory alloy embedded in the structural material. The ferromagnetic shape-memory alloy changes crystallographic phase from austenite to martensite and changes magnetic phase in response to the predefined critical macroscopic average strain of the composite material. A method of forming a composite material for sensing the predefined critical macroscopic average strain includes providing the shape-memory alloy having an austenite crystallographic phase, changing a size and shape of the shape-memory alloy to thereby form a plurality of particles, and combining the structural material and the particles at a temperature of from about 100-700° C. to form the composite material.