Our take on EFRAG’s proposals for simplified EU Sustainability Reporting Standards

Although the number of datapoints has been drastically reduced, the standards maintain the core integrity necessary to fulfil CSRD obligations and uphold the EU’s climate neutrality objective for 2050 and other EU goals such as in the Clean Industrial Deal. 

However, rollbacks of the legislation (as part of the Omnibus negotiations) or further cuts in the standards would seriously undermine the EU's credibility and risk compromising these foundational goals.

The simplification has primarily targeted unclear or duplicative requirements whilst retaining core disclosures

The revised ESRS retain essential disclosures on:

• Climate transition plans aligned with EU legislation
• Environmental metrics which broadly reflect the core global disclosure indicators of the TNFD (although they are generally less granular and stop short of prescribing specific measurement methodologies)
• Own workforce indicators aligned with EU and international law, albeit more limited in scope than those found in the GRI Standards
• Sustainability diligence aligned with UN Guiding Principles on Business and Human Rights and OECD Guidelines 

The simplifications are substantial but targeted:

• The reduction in data points focused on duplicative or overly detailed elements that didn't lead to useful disclosures in the first ESRS reports this year.
• Disclosure requirements on strategy, policies, actions and targets are streamlined and concentrated in the ESRS 2 (crosscutting standard). Their duplications and extensions in topical standards—originally intended to create linkages and provide guidance—were removed. 
• Disclosures on static policies and processes are now more focused and limited.
• ESRS clarify that companies are not expected to apply overly complex or formalistic materiality assessments.
• Application of materiality filter, and connections between disclosures were clarified to avoid excessive, boilerplate, and duplicative disclosures. 
• These adjustments, along with a simpler structure, offer companies greater flexibility in presenting a coherent account of how they manage sustainability matters.

But the simplification has also removed guidance and important sustainability information

• Most guidance has been removed, significantly reducing the ESRS volume and complexity —but requiring preparers to seek examples and interpretations elsewhere.
• Some important metrics were dropped, including specification of biodiversity metrics, use of family-related leave by employees, or invoice payment times (relevant for SME relationships). 
• Datapoints and guidance on identification of local impacts related to pollution, water resources and biodiversity and ecosystems were removed. These impacts are typically linked to specific sites.
• Disclosures on marine resources were removed

New significant reliefs were introduced, which rely on the expectation that they will not be misused. Excessive use of these reliefs would significantly undermine comparability and relevance of sustainability disclosures.

• The revised ESRS significantly limits required disclosures on anticipated financial effects—a core principle of financial materiality and IFRS. 
• The revised ESRS also allows companies to omit KPIs from their own operations if data collection is deemed too difficult. While intended to reduce burden, this flexibility could be misused if not applied in good faith.

Click here for the technical review and commentary of the changes

Conclusion: the revised ESRS reflect the maximum simplification achievable

Any further simplification or cuts to the standards risks compromising Europe’s green transition climate goals.

Some MEPs in the EPP or ECR groups, as well certain pressure groups and lobbyists are arbitrarily proposing caps on the number of data points in the ESRS, without a clear understanding of how sustainability standards are constructed. The ESRS use a highly granular method for counting data points—for example, a single disclosure requirement to describe the “content, objective, and scope of the policy” is counted as three distinct data points. These elements, however, are essential in ensuring the reported information is meaningful and complete.

Despite the politicised nature of the debate, there is broad agreement across all political groups in the European Parliament and among EU Member States on the need for alignment with global sustainability reporting frameworks—particularly the IFRS Sustainability Standards. For context, the IFRS includes over 200 data points, covering only general and climate-related information relevant to financial performance, whereas the revised ESRS have been streamlined to 350 data points, while encompassing the full range of ESG topics and addressing both impact and financial materiality.

Overall, the revised ESRS presented by EFRAG on Wednesday has succeeded in simplifying the EU sustainability reporting standards into a manageable but still effective framework for the EU’s climate goals. 

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