Material that is wrapped around small twig (7)
I believe the answer is:
realise
'twig' is the definition.
(I know that twig is a more specific form of the action realise)
'material that is wrapped around small' is the wordplay.
'material' becomes 'real' (associated in meaning).
'that is' becomes 'ie' (abbreviation for id est, 'that is' in Latin).
'wrapped around' means one lot of letters goes inside another.
'small' becomes 's' (abbreviation - e.g. clothes size).
'ie' going around 's' is 'ise'.
'real'+'ise'='REALISE'
(Other definitions for realise that I've seen before include "Twig" , "catch on" , "Come to understand - see liar (anag)" , "Tumble" , "Come to conclusion" .)