Status of ESRS simplification
A Green MEP is denounced in the European Parliament for suggesting the CSRD remain unchanged (dramatised).
In my career I have read (and contributed to) thousands of annual financial reports. I think I have become quite good at efficiently getting the information I want out of them. I could not be as quick and efficient with the current EU sustainability reports. Luckily help is on the way.
The new CSRD sustainability reports are problematic. They often are too burdensome on the reporting entity and too irrelevant for the reader. This spring, the European Parliament decided to take another look at the sustainability reporting requirements with the goal of simplifying them.
This decision was broadly welcomed by the corporate world. The Greens/European Free Alliance voted against it, with understandable worry that the requirements would be watered down.
Current status
The European Commission asked EFRAG to make recommendations how to reduce the sustainability reporting burden on companies without compromising the core goal. At the end of June 2025 EFRAG sent a progress report to the Commission. Here is my brief summary based on EFRAG’s list of goals:
I. Simplification of the Double Materiality Assessment
There are too many ambiguities and uncertainties when companies do their assessments. It is becoming a compliance exercise, a checklist to follow and a process, with less focus on the outcome.
Proposed solutions
- Reduce complexity
- Clarify information materiality
- Emphasise usefulness to decision-making
II. Better readability and inclusion into corporate reporting
Currently, the ESRS are too granular, too focused on a myriad of tiny details. There can be dozens of pages of irrelevant EU Taxonomy disclosures in a report. Also, companies can’t tell their own sustainability story because they have to focus on the tiny details.
Proposed solutions
- Allow executive summary as introduction
- Option to disclose most granular information in appendices
- EU Taxonomy information in specific appendix
- Reducing duplication of information
III. Modification of Minimum Disclosure Requirements and topical specifications
Again, the requirements are too burdensome, too granular and too ambiguous. There are too many overlapping disclosure requirements from different sections and topics.
Proposed solutions
- Reduce mandatory datapoints
- Clarify when disclosures are necessary and when they are voluntary
IV. Improved understandability, clarity and accessibility
- Reduce voluntary disclosures
- Clearly separate mandatory and non-mandatory content, restructure standards
V. Miscellaneous burden reductions and clarifications
- How to account for M&A
- IFRS relief
- Commercially sensitive information
- Non-relevant datapoints from other EU regulations
- Forced to report information even when it is irrelevant or unavailable; Reduce ‘undue cost and effort’
- Exclude non-material activities from calculations
- Clarify boundaries and responsibilities (leasing, pension funds; operational control approach; value chain estimates or direct data collection)
- Forward-looking statements, anticipated financial effects
VI. Enhanced interoperability between standards
- ESRS and ISSB standards
Cut by half?
EFRAG hopes to reduce the number of mandatory datapoints by 50 per cent (some whispers say they are aiming for 66 per cent), which would be great if they can pull it off without reducing the usefulness of sustainability reports. Another goal is to reduce granularity and ‘boilerplate text’ to promote narrative disclosures, which is something I’m personally looking forward to.
What’s next? Here is an updated timeline which takes into account the Commission’s pushing back their deadline for EFRAG’s suggestions by a month.
14 April 2025: Legislation postpones reporting requirements
May-July 2025: EFRAG works on Exposure Drafts to amend the ESRS
11 July 2025: Commission adopts ‘quick fix’ act so wave one companies don’t have additional reporting in 2025 and 2026, compared to 2024
August-September 2025: Publishing Exposure Drafts and public consultation
30 November 2025: EFRAG delivers advice to EU Commission on revision and simplification
31 December 2025: Unofficial goal to finalise simplification packages
Early 2026: Conceivable time for final adoption
Want to talk green?
I can help you to stay compliant with changing sustainability reporting requirements, communicate what’s important, and find added value in the process.
info at davidjcord.com