• As part of its wider Omnibus proposals, the European Commission has asked EFRAG to simplify the European Sustainability Reporting Standards (the “ESRS”), which are the reporting framework used by EU companies in scope of the Corporate Sustainability Reporting Directive (“CSRD”).
• In July 2025, EFRAG published revised drafts of the ESRS for public comment. The revised drafts keep the same structure of the ESRS but reduce the number of reportable datapoints, simplify the double materiality assessment and introduce several new reporting reliefs.
• This note summarises these changes and what they mean for sustainability reporting.

Introduction

As part of its wider Omnibus proposals, in February 2025, the European Commission (the “Commission”) asked EFRAG to simplify the European Sustainability Reporting Standards (the “ESRS”). In July 2025, EFRAG published revised drafts of the ESRS, which were open to public comment until 29 September 2025. This note summarises EFRAG’s proposed changes and what they mean for sustainability reporting.

Background to the ESRS

The ESRS are the reporting framework used by EU companies in scope of the Corporate Sustainability Reporting Directive (“CSRD”) to prepare their annual sustainability reports. A company in scope of CSRD must carry out a “double materiality” assessment to select relevant topics to report on in the context of its own operations and its value chains. In doing so, the company assesses its key impacts on the environment and society and key sustainability risks and opportunities which may affect its financial position.

The ESRS contain two general standards, ESRS 1 and ESRS 2. These set out the requirements and disclosures for all companies under CSRD, including guidance on the double materiality assessment. The ESRS also include 10 topical standards, covering areas such as climate change. A company reports under any topical standard it finds material on the basis of the double materiality assessment. In the current ESRS, the standards include mandatory datapoints (required) and voluntary datapoints (optional for companies willing to provide more context). 

Proposed Changes to the ESRS

To reduce the burden on companies reporting under CSRD, EFRAG has suggested extensive changes to the ESRS:

Reduction and Simplification of Datapoints

The ESRS still cover the same topics, but EFRAG has reduced the number of mandatory datapoints by 57%, removed all voluntary datapoints and eliminated overlaps across standards. This reduces the overall length of the ESRS by over 55%. Some former voluntary content is now in separate Non-Mandatory-Illustrative-Guidance, which companies may use to support their reporting.  

In particular, EFRAG has removed from the topical standards almost all the datapoints requiring qualitative information and has reduced the number of mandatory datapoints on a company’s sustainability-related policies, actions and targets in ESRS 2. If a company has not adopted sustainability-related policies, actions and targets, it no longer must give reasons for this, although it should still disclose the fact.

Simplifying the Double Materiality Assessment

The substance of the double materiality assessment is unchanged, but companies now have greater flexibility. They can choose a “top-down” approach, selecting those topics most relevant to their business model, instead of a more time-consuming “bottom-up” review of all individual impacts, risks and opportunities in consultation with numerous stakeholders. They can also choose whether to report by topic or by individual impact, risk or opportunity, allowing information to be aggregated where this reflects how companies manage risks internally. Similarly, a company can report on its adopted policies, actions and targets in a way that reflects its internal structure, for example when it has a single policy covering several topics.

On whether companies can disregard, for reporting purposes, negative impacts they have addressed, EFRAG proposes a compromise. If remediation is complete, the company need not report the impact. If remediation is ongoing, the company must report both the impact and its remediation measures. Companies will require some judgement as to whether an impact has been or is still being addressed, and arguably reporting companies should not ignore impacts simply because they are well managed where the topic is significant.

New Reporting Reliefs

The draft introduces a general relief for the double materiality assessment, value chain assessment and all datapoints requiring metrics, allowing companies to omit reporting where it causes “undue cost or effort”. A company can also exclude from its metrics activities that are not significant drivers of impacts, risks or opportunities as long as the metrics remain clear. EFRAG has also clarified that, when calculating metrics for its value chain, a company can use estimates instead of “real” data, depending on what is most practical and whether reliable data is available.

EFRAG is considering relief for disclosures on the financial effects of material risks and opportunities, which are often hard to quantify. Depending on consultation responses, it may either require only qualitative information or require quantitative disclosure but allow opt-outs where uncertainty is too high.

Implications for Reporting

If adopted, the simplified ESRS will apply to companies in scope of CSRD. The thresholds for CSRD are still being debated under the Omnibus proposals, to be confirmed once the “Amendment Directive” is adopted, a final vote on which is expected by the end of 2025. Until then, only “first wave” companies—primarily large, EU-listed companies—are in scope, and these should continue to report under the original ESRS for now, albeit with additional relief provided by the Commission’s “Quick Fix” Delegated Act (see our ESG Update on this). EFRAG, however, has indicated that it wishes to finalise the ESRS amendments as early as possible in 2026, in time for 2027 CSRD reporting.

For “fourth wave” companies—non-EU companies with substantial EU operations—which come into scope of CSRD in 2028, EFRAG has drafted a separate set of “Non-EU Reporting Standards”, which will likely also be subject to significant simplification.

A significant topic when developing the ESRS has been the extent to which companies can apply the standards published by the International Sustainability Standards Board (the “ISSB”) to meet the requirements under the ESRS. EFRAG notes that its simplifications generally improve alignment with ISSB standards. Certain measures in the proposed draft ESRS, for example the financial consolidation approach for measuring GHG emissions reporting and the “undue cost or effort relief”, both mentioned above, bring the ESRS closer into line with ISSB standards. However, the ESRS require a double materiality assessment, compared to the ISSB standards which rely on financial materiality only.     

The draft ESRS only slightly reduce coverage of “principal adverse impacts” (“PAIs”) under the Sustainable Finance Disclosure Regulation (“SFDR”). This will reassure financial market participants in scope of SFDR, such as asset managers, which rely on portfolio companies’ ESRS reporting to meet their own PAI-disclosure commitments to investors.

Next Steps