Proposed revisions to the ESRS Environmental Standards: key observations
Additional authors: Wim Bartels, Katja Porotnikova, Jonty Genders and Joost van Kommer
Key points:
- As part of the EU Sustainability Omnibus Package, EFRAG was tasked by the European Commission to propose revisions to the ESRS to simplify and reduce what companies in scope of the CSRD are required to report.
- The proposed amendments to the Environmental Standards follow the same approach as for the other standards and would reduce narrative disclosure requirements by more than half. For example, under the proposals, companies would be required to report only on material biodiversity-sensitive locations within their operations. The revised E5 (Resource Use and Circular Economy) standard focuses on reporting on resource inflows and outflows for key materials only.
- Despite the overall simplification effort, some additional disclosure requirements would be introduced and the scope extended for some specific topics, including secondary microplastics and water. The scope of E5 reporting has expanded beyond only those materials used in manufacturing to include those placed on the market or part of a company’s product and service delivery.
- In addition to the revisions proposed by EFRAG, points on key aspects of the Environmental Standards have been raised during discussions of legislative changes under the Omnibus package, and under the European Climate Law and Fit for 55 package – for example, clarification of what constitutes a transition plan “compatible with 1.5°C”, and the precise boundaries and treatment of value chain reporting.
- Whilst it will be some time before any changes to the ESRS are finalised by the European Commission, companies can review the proposals from EFRAG to gain an early understanding of the potential implications. Although the overall direction of change is for the requirements to be simplified, companies should also note areas where requirements are being extended. Moreover, companies that have already reported under the existing ESRS will need to assess how their systems will need to be upgraded.
As part of the EU Sustainability Omnibus Package, EFRAG was tasked by the European Commission to propose revisions to the European Sustainability Reporting Standards (ESRS) to simplify and reduce what companies in scope of the Corporate Sustainability Reporting Directive (CSRD) are required to report. In our previous blogs we looked at what the simplified ESRS Exposure Drafts could mean for sustainability reporting strategies, and at proposed revisions to the ESRS Social Standards. We also discussed these topics in a webinar on Understanding CSRD: Simplified ESRS drafts & impact on sustainability reporting. In this blog, we examine more closely the proposed revisions to the Environmental Standards (E1-E5).
The proposed amendments to the Environmental Standards follow the same approach as was taken for the other standards: reducing narrative disclosure requirements by more than half by using more of a principles-based approach, moving optional (“may”) disclosures to non-mandatory illustrative guidance (NMIG) and removing duplicative information. The proposed disclosure requirements for polices, actions and targets (PAT) now refer back to ESRS 2 (General Disclosures) for core structure and content, with topic-specific elements retained only when deemed essential.
Climate change reporting on risks and opportunities has in part been further aligned with international standards, with clearer guidance on greenhouse gas (GHG) reporting boundaries. On biodiversity topics, companies are now required to report only on material biodiversity-sensitive locations within their operations, focusing specifically on areas with significant biodiversity impacts or dependencies, which is more aligned with the Sustainable Finance Disclosure Regulation (SFDR) and the EU Biodiversity Strategy. E5 now focuses on reporting on resource inflows and outflows for key materials only.
Disclosures on water have been streamlined to focus on the full water cycle within company operations and prioritize material disclosures on areas of water risk. To avoid duplication and enhance regulatory alignment, disclosures on marine resource use and impacts are moved to other environmental standards.
There are new definitions in the revised Annex II - acronyms and glossary terms, which provide clearer explanations, and the text has been refined with the aim of improving understanding of disclosure requirements. Some metrics have been added to the Environmental Standards, while others have been removed or simplified. Reporting for all metrics remains subject to materiality.
Some proposed changes are designed to improve reporting accuracy. e.g. for E1 on GHG emissions, energy consumption and significant CapEx invested in coal, oil and gas activities. Under the proposals in E2, companies would be required to disclose secondary microplastics (those generated from the breakdown of larger plastics) as a mandatory qualitative pollution disclosure. This reflects increased regulatory scrutiny and the expanded scope of E2.
Regarding circularity, the scope of E5 has been expanded under the proposals, meaning resource inflows would include materials not only used in manufacturing but also those placed on the market or part of a company’s product and service delivery.
For other notable changes for individual Environmental ESRS and for new, removed or simplified data points and items under Level 1 (EU Legislative) discussion, please refer to the appendix below.
Implications for companies:
It will be some time before any changes to the ESRS are finalised by the European Commission. In the meantime, companies can review the proposals from EFRAG to gain an early understanding of the potential implications for their reporting readiness programs; re-consider the link to their overall sustainability strategy; and continue addressing strategic data gaps. Those companies that have already reported under the existing ESRS should assess how their systems may need to be upgraded in light of the revised standards.
Table: Percentage reduction in data points and word count
The table summarises the reduction in the number of data points and word count resulting from the amendments to the ESRS standards. However, it should not be expected that these reductions would lead to a proportionate reduction in cost or effort.
|
Standard |
% Reduction in data points |
% Reduction in word count |
|---|---|---|
|
ESRS E1: Climate Change (E1) |
53% |
65% |
|
ESRS E2: Pollution (E2) |
61% |
68% |
|
ESRS E3: Water (E3) |
70% |
82% |
|
ESRS E4: Biodiversity and Ecosystems (E4) |
78% |
78% |
|
ESRS E5: Resource Use and Circular Economy (E5) |
60% |
72% |
Source: Basis for Conclusion for the draft amended ESRS, EFRAG, July 2025.
