What could the simplified ESRS Exposure Drafts mean for sustainability reporting strategies?

Additonal authors - Katya Porotnikova, Jonty Genders, Joost van Kommer, Wim Bartels 

Key takeaway

• Following a request from the European Commission, EFRAG has developed and published for consultation revised ESRS Exposure Drafts (EDs). The proposals aim to simplify EU sustainability reporting requirements, including by reducing the number of data points to be reported. The intention is that the revised ESRS would simplify reporting under the CSRD, and enhance the focus on decision-useful information that reflects the way sustainability matters are managed by companies.
• To support this, proposed modifications to the double materiality assessment (DMA) are intended to enable companies to align the exercise more closely to their strategy and business model, reducing the overall complexity of the process and the extent of unnecessary scoring. Revisions to reporting on metrics focus on relevance and meaningful performance, aiming to remove the need to report data from low-impact parts of the business and on actions that do not improve management effectiveness.
• The consultation closes on 29 September 2025. The deadline for EFRAG to deliver its technical advice on the revision and simplification to the Commission is 30 November 2025. The Commission will consider EFRAG’s advice when adopting the delegated act that amends the ESRS.
• Companies should review the proposed changes and are encouraged to respond to the consultation to provide practical insight into the proposals. As stated, it will be some time before any changes to the ESRS are finalized and issued by the European Commission. However, companies, can gain an early understanding of the implications for their reporting readiness programs; re-think the link to their overall sustainability strategy; and continue addressing strategic data gaps. This can help position them to apply future revisions more effectively.

As part of the EU Simplification Omnibus Package, EFRAG was tasked by the European Commission to propose revisions to the ESRS to simplify and reduce what companies are required to report. The EDs for the amended ESRS were published on 31 July and are open for public consultation until 29 September. EFRAG will submit its revisions as technical advice to the Commission at the end of November.

The EDs can be found here: EFRAG – Amended ESRS.

Key observations on the proposed amendments

1. Companies would need to consider significantly fewer data points: a 55%+ cut in mandatory disclosures, consistent with the direction of travel previously indicated by EFRAG, is intended to reduce the reporting burden for companies. Taking into account removal of the voluntary data points, the overall reduction in possible data points would add up to over two thirds.
2. The proposals emphasise that all data points would be subject to an assessment of the materiality of information, with the decision-usefulness of information for the users of the report being the key factor.
3. Companies would be able to report on material IROs at the level at which they are managed, bringing greater flexibility to group IROs according to the overall approach taken by the company in its strategy and management.
4. The DMA process is simplified by encouraging a more pragmatic, top-down approach aligned to a company’s business model and strategy and where impacts, risks and opportunities are therefore most likely to arise.
5. Fair presentation is explicitly referenced, emphasising disclosure of relevant, comparable, verifiable and understandable information relevant to the users of the sustainability statement.
6. Relief in respect of undue cost or effort is included. Companies would be able to use reasonable and supportable information that is available without undue cost of effort to assess material IROs, the scope of upstream and downstream value chain and prepare information on metrics.
7. The proposals seek to enhance interoperability through harmonised language with the ISSB. This is intended to help companies to utilise reporting readiness efforts across both ESRS and ISSB sustainability reporting requirements.

Taken together, these changes are aimed at improving clarity, relevance, and efficiency, with the intent to enable companies to align their reporting and compliance efforts more closely with their broader sustainability strategies. 

Important areas for attention

We highlight below further details on four important areas for your attention and share our perspective on how to consider the next steps.

1. Simplification of sustainability disclosures
   
   The amended ESRS are intended to support a more concise approach to disclosures under the CSRD. For example, companies could include an executive summary in their sustainability statement, group policies and action plans according to the way they are managed in the business, and make cross-references to avoid repetition. More detailed information could be included in appendices to the sustainability statement (including EU Taxonomy disclosures). These changes are intended to make disclosures more accessible to investors, customers, employees and other stakeholders, and to better position companies to tell their sustainability story.
2. Simplification of the DMA
   
   In the proposed amendments, the DMA process has been simplified by permitting a more pragmatic top-down approach that is driven by the business model, the strategy and the sector a company operates in. Assessments can be done at the level of topics where it can be concluded whether or not they would lead to material impacts, risks and opportunities on the basis of the company’s business model, and where quantitative data or scoring is not therefore necessary. In these areas, a qualitative analysis can suffice for companies to determine materiality. The list of sustainability matters in AR16 would no longer be mandatory for consideration. AR16 has been simplified and would now serve as a reference list for guidance.
   
   Additional guidance is provided on the assessment of actual and potential impacts and how to consider pre- or post-mitigation actions during the assessment.
   
3. Alignment of reporting on metrics with business practice
   
   The proposals would permit reasonable estimates, proxies, or sector averages to be used for calculating metrics as an alternative to direct data, without the need to move to direct data over time if doing so is not feasible. Where data are unavailable, companies would disclose that fact without the need to estimate or define a proxy, whilst also being required to explain how they are going to increase data coverage over time. It would be possible to exclude data for non-material activities that do not drive a company’s IROs. New reliefs would allow companies to exclude joint operations without operational control from certain environmental metrics (E2-E5) and align sustainability reporting boundaries with financial consolidation. For reporting on GHG emissions in E1, the default boundary would be the consolidated financial statements, requiring use of the financial control approach, with a requirement for additional disclosure of Scope 1 and Scope 2 GHG emissions following the operational control approach when needed to achieve fair presentation. Metrics in topical ESRS would not require inclusion of upstream and downstream value chain data (with the exception of GHG emissions Scope 3). For acquisitions, companies would have a one-year relief period to reporting on applicable metrics, and for disposals they could elect to stop reporting from the year of disposal due to inaccessible data.
4. Aggregated reporting on Policies, Action plans and Targets (PATs)
   
   The proposals place emphasis on information on PATs reflecting the level at which a company is addressing its material IROs. Reporting would be done at the level at which companies are addressing their material IROs, which could be at a topic or sub-topic level and companies are permitted to aggregate reporting on PATs across material IROs when appropriate to how they are managed.  Requirements for disclosures on PATs have been reduced and are now set out as General Disclosure Requirements (GDRs) - to emphasise that they are subject to information materiality considerations. Finally, reporting on PATs would need to include information about the value chain only to the extent it relates to material IROs.
   
   The aggregated level of reporting envisaged under the revised ESRS is intended to enable more concise reporting that is more consistent with how companies commonly address their sustainability IROs.

What can you do now?

Companies should review the proposed changes and are encouraged to respond to the consultation to provide practical insight into the proposals.

It will be some time before any changes to the ESRS are finalised and issued by the European Commission. However, companies can gain an early understanding of the implications for their reporting readiness programs; re-think the link to their overall sustainability strategy; and continue addressing strategic data gaps. This can help position them to apply future revisions more effectively.

Below we set out a few aspects that we believe could be considered now. For all the steps you take to prepare for the amended requirements, it is important to engage your own Board and auditor early.

Introducing an efficient DMA

The simplified, top-down approach as proposed in the ESRS is intended to allow for a more efficient and business-focused approach to the DMA. Focusing on topics, starting from the business model, strategy and peer analysis and narrowing down deeper analysis to where this is really needed. Linking materiality outputs to sustainability strategy and the management of key topics is a crucial step. The materiality assessment would then drive how the ESRS are implemented.

Reporting

If you have already reported under CSRD:

• Continue reporting under the current ESRS, including using of any phase-in reliefs as deemed appropriate. Under the ‘Quick-fix’ Delegated Act adopted by the Commission, companies with over 750 employees can benefit from phase-in provisions for 2025 and 2026 similar to those available to smaller companies, once effective;
• Consider opportunities for enhancing the process for refreshing the DMA, including whether it could be further informed by top-down approaches.

If you have yet to report under the CSRD:

• Continue to identify and measure impacts, risks and opportunities in a way that supports alignment with the overall strategy for sustainability in the business;
• When planning, refreshing or getting ready to perform the DMA, consider how best to employ a strategic, top-down approach;
• Consider the relevant sustainability metrics that would be needed on the topics related to your material IROs and set an appropriate scope and boundaries for the data;
• Review gaps, including against the proposed amended ESRS, and focus your readiness efforts on areas that are strategically important.

Focusing data collection on decision-useful metrics

It remains important to ensure that data collection is fit-for-purpose and decision-useful. Consider in your planning how the proposals could affect how you define and collect data – for example, in the measurement of areas that drive performance in relation to material IROs, and the use of estimates. For relevant value chain data, consider the implications of the proposals, including the effect of the provision on ‘reasonable and supportable information without undue cost or effort’.

Monitoring regulatory developments

EFRAG has confirmed that some revisions were not made as they are subject to ongoing developments on the Level 1 CSRD legislation. These include clarifications on the definition of value chain for financial institutions; reliefs for omitting confidential or sensitive information; phasing-in provisions as set out in the 2023 Delegated Act; and clarification on what ‘compatibility with 1.5 degrees’ means for Transition Plan disclosures. Moreover, the consultation feedback on the EDs will likely result in further clarifications and/or changes to the standards. Once they are delivered to the European Commission by the end of November, they are still subject to agreement through the political process and therefore may change further. However, to complete the review of your sustainability reporting needs and capabilities, we suggest that you monitor any further regulatory developments closely and factor them in once they are finalised.