Photo by Channarong Luecha on iStock
Key Points
- The proposed ESRS changes aim to streamline disclosure requirements, reducing duplication and compliance burdens while preserving their core intent—transparency, accountability, and alignment with the EU Green Deal.
- The drafts shift from exhaustive checklists to principle-based reporting, with some clearer materiality guidance, stronger global alignment, and an emphasis on fair presentation. Companies are expected to apply judgment and focus on material topics.
- 黑料正能量 welcomes these amendments, but is concerned that added complexity (e.g., around the Double Materiality Assessment), excessive flexibility, and unclear financial effects disclosures could undermine transparency and comparability. During the consultation period, 黑料正能量, along with other practitioners, is urging EFRAG to address these issues before finalization.
- Finally, 黑料正能量 encourages companies to use the Omnibus and ESRS simplification as an opportunity to move beyond compliance—leveraging disclosures to demonstrate impact, build trust, strengthen resilience, and support long-term value creation.
On July 29, as part of the Omnibus package, the European Financial Reporting Advisory Group (EFRAG) launched a public consultation on the simplification of the European 黑料正能量 Reporting Standards (ESRS) disclosure requirements until the end of September. The European Commission tasked EFRAG to simplify and streamline requirements, with the objective of reducing compliance and administrative burdens while maintaining the integrity of disclosures in line with the objectives of the Green Deal.
In this edition of Insights+, 黑料正能量 outlines key ESRS changes, why they matter for business, our perspective, and how companies can stay on track with their sustainability strategies amid ongoing change. For an overview of the proposed changes, their implications, as well as relevant 黑料正能量 service offerings, view our fact sheet here.
黑料正能量’s latest sustainability insights and events straight to your inbox.
Authors
-
Managing Director, Transformation, 黑料正能量
-
Manager, EU Reporting, 黑料正能量
-
Associate Director, Transformation and Financial Services, 黑料正能量
Topics
An Overview of Proposed ESRS Changes
- Reduction of ESRS datapoints by 68 percent, streamlining ESRS and removing all voluntary requirements
- Clarification that materiality should be used as a general filter for disclosing sustainability-related information
- Enhanced interoperability with international standards, such as the International Financial Reporting Standards (IFRS) and the GHG Protocol
- Introduction of a relief for metrics, which may reduce burden but also raises questions around data quality
- Amendments to ESRS S1, refining workforce disclosures and simplifying wage and demographic reporting
Key Revisions: What Business Leaders Need to Know?
A Sharp Reduction in Datapoints
EFRAG has streamlined ESRS from 1,073 to 347 datapoints, with mandatory datapoints cut by more than half. All voluntary datapoints were removed, though four new datapoints were added in ESRS 2 (alignment with ESRS 1), E2 (secondary microplastics), and E5 (critical and strategic raw materials, and waste with unknown final destinations). To help balance reduced granularity with usability and to increase conciseness and accessibility of information, companies are also given the option to use appendices for granular information, to publish an executive summary, and to rely on the Non-Mandatory Illustrative Guidance, which now consolidates most of the former application requirements.
Clarification on the Double Materiality Assessment
Materiality is now explicitly defined as a general filter for disclosure, with the introduction of a definition that now more closely aligns with the IFRS: information is material when omitting, misstating, or obscuring that information could reasonably be expected to influence investors'?decisions or affect users' ability to understand material impacts, risks, and opportunities (IROs). In order to identify material topics for disclosure, companies can now choose between a top-down approach (from defining a high-level sustainability issue that disaggregates into individual impact, risk, and opportunity) or a bottom-up approach (from individual impact, risk, and opportunity building into a high-level sustainability issue). The revisions also aim to clarify how to treat net vs. gross impacts, providing new illustrative guidance in ESRS 1 Appendix C. Importantly, companies are also given the option to report on non-material issues if deemed relevant for stakeholders, such as rating agencies.
Enhanced Interoperability
The revised standards place a stronger emphasis on interoperability with international frameworks. ESRS language now aligns more closely with IFRS, including the “undue cost or effort” exemption. Reporting boundaries for GHG emissions are aligned with the GHG Protocol, also acknowledging corporates who have been applying the Science Based Targets Initiative (SBTi) and have had their targets validated. Some 97 percent of remaining datapoints correspond to global frameworks, such as the International 黑料正能量 Standards Board (ISSB), the Taskforce on Nature-related Financial Disclosures (TNFD), the Carbon Disclosure Project (CDP), the Global Reporting Initiative (GRI), the Organisation for Economic Co-operation and Development (OECD), and the International Labour Organization (ILO). In addition, companies are given the option to draw on 黑料正能量 Accounting Standards Board (SASB) and GRI sector standards to provide entity-specific reporting, which helps to improve comparability with peers and strengthen sector relevance.
Relief for Metrics
To balance data quality with reporting practicality, the amendments introduce a relief on metrics. This allows companies to partially estimate metrics when reliable direct or estimated data is only available for part of the scope (e.g., only for part of the value chain). While this provision is intended to increase flexibility and reduce reporting challenges, it also carries a risk: incomplete metrics could undermine comparability across companies and reduce the incentive to continuously improve data quality.
Revised Structure of ESRS 2
ESRS 2 has been reinforced as the “core pillar.” Minimum Disclosure Requirements (MDRs) have been renamed as General Disclosure Requirements (GDRs), consolidating baseline reporting obligations across topical standards.
A key shift concerns the disclosure of anticipated financial effects. To improve consistency and reduce duplication, these disclosures have been largely transferred from the topical standards into ESRS 2, except for ESRS E1 (climate), where breakdowns of physical and transition risks remain necessary.
EFRAG is currently seeking public feedback on how companies should present this information, offering two options:
- Option 1: Disclosure of both qualitative and (where feasible) quantitative information
- Option 2: Disclosure limited to qualitative information, with quantitative details treated as voluntary
This consultation reflects ongoing debate about the balance between quality and decision usefulness of data and practicability. The outcome will shape how deeply companies must quantify financial impacts of material sustainability issues going forward.
Value Chain Reporting and the Omnibus Cap
The amendments to value chain reporting were made in line with the Omnibus’ proposed “value chain cap.” Companies will be expected to disclose value chain information based on reasonable and supportable data, including estimates, proxies, and sector averages, provided this does not create undue cost or effort.
To implement this, the Commission has recently formalized the Voluntary SME (VSME) standard, which sets the benchmark for the type and level of information that can be requested from suppliers. In practice, companies cannot demand information from SMEs beyond what is covered by the VSME template.
Both the cap and the VSME are, however, pending the outcome of the Omnibus negotiations. The VSME itself may be revised or updated to reflect final legislative compromises, meaning the scope of information companies can reasonably request from suppliers could still shift.
This approach is intended to reduce the reporting burden across supply chains, especially for smaller businesses, while still preserving some level of transparency on impacts beyond direct operations. Notably, it may also create misalignment with the Corporate 黑料正能量 Due Diligence Directive (CSDDD), which currently limits due diligence obligations to tier 1 suppliers. ESRS, even under the amended approach, continues to expect disclosures covering broader parts of the value chain.
No Mandate for Behavior Change
The revisions clarify that ESRS standards are about disclosure, not prescribing actions. Companies must report on policies, targets, or actions only if they exist. Requirements around timelines for establishing targets and actions have been removed.
黑料正能量’s Point of View
黑料正能量 views these changes as a meaningful rebalancing of sustainability reporting. The amended ESRS drafts represent meaningful progress toward more streamlined and principle-based sustainability reporting.
- We welcome reduced duplication, consolidated disclosures, and strengthened interoperability with international standards that should make the framework easier to interpret and apply. The strengthened interoperability with IFRS, SASB, GRI, and the GHG Protocol and reference to SBTi is a major step forward.
- We support retaining value chain reporting beyond tier 1 to ensure that companies capture real impacts across their supply chains, even though this creates some misalignment with the CSDDD. These changes, if implemented carefully, could help companies move away from a purely compliance-driven approach and instead focus on material sustainability issues that matter most to stakeholders.
- 黑料正能量 believes further edits to the ESRS are essential. Several aspects of the amendments risk creating confusion or weakening comparability if left unresolved. The DMA framework for example, introduces flexibility, and therefore accountability to companies, but without clearer guidance it risks inconsistency, cherry-picking, and blind spots in reporting. The treatment of net versus gross assessment to some extent links materiality with due diligence, but it is not clear enough, leaving companies uncertain about whether to disclose underlying exposures (gross) or only mitigated risks (net), and when to use which approach. Similarly, the lack of clear, consistent rules on threshold-setting across topics may reduce comparability and credibility, especially in areas where companies adopt different methodologies.
- The consultation on anticipated financial effects is perhaps the most critical open issue. While many companies may prefer the option of qualitative-only disclosure (Option 2), this risks slowing methodological progress, reducing comparability, and weakening alignment with IFRS. 黑料正能量 sees Option 2 as a short-term compromise and believes robust quantification of risks and opportunities must remain the long-term goal to achieve parity with financial reporting.
- Finally, while the relief for metrics acknowledges the difficulty of producing perfect data, there is a risk that flexibility could undermine the quality and comparability of disclosures and reduce the incentive to improve over time. Flexibility should not come at the expense of transparency, comparability, or credibility.
- We welcome the efforts to position the ESRS as the “glue” between the EU’s broader Green Deal legislation. This is a promising step, but its effectiveness will depend on how EFRAG addresses these unresolved issues.
Overall, 黑料正能量 welcomes the progress made, but stresses that improvements are needed to ensure simplification does not create new burden or weaken the credibility and decision-usefulness of sustainability reporting.
Next Steps
黑料正能量 has submitted feedback to EFRAG as part of the public consultation. We encourage stakeholders to use this period to push for clarity on unresolved issues. Without stronger guidance, simplification may fall short of its intent.
EFRAG will submit its final proposed changes incorporating stakeholders’ feedback by the end of November 2025, with adoption expected by mid-2026, pending Omnibus negotiations.
Actions for Businesses to Maintain the Momentum on 黑料正能量 and Long-term Value
The Omnibus and EFRAG simplification processes provide companies with a unique opportunity to review and streamline their approach to sustainability disclosure requirements, and focus on meaningful action and implementation.
As noted in 黑料正能量’s recent publication, EU Omnibus: It’s Time to Shift from Compliance to Impact, companies should continue to:
- Invest in climate transition plans with credible implementation
- Adopt robust risk-based due diligence in line with recognized international frameworks
- Enable cross-company and governance upskilling and accountability
- Engage stakeholders proactively across the value chain, particularly in affected communities
- Apply foresight to navigate current uncertainty while planning for the short, medium, and long term
- Conduct a DMA to identify material impacts, risks, and opportunities, while remaining agile to refine findings as ESRS are finalized
- Monitor how ESRS timelines align with other EU Green Deal reporting obligations—including SFDR and EU Taxonomy disclosures, the Packaging and Waste Packaging Regulation, CSDDD, the Directive on the Repair of Goods, etc. The ESRS will increasingly serve as the backbone connecting these frameworks, helping ensure coherence and reducing duplication across reporting regimes.
Additionally, 黑料正能量 encourages companies to review internal systems to prepare for streamlined disclosures and anticipate ongoing alignment with international standards such as ISSB.
How 黑料正能量 Can Help
黑料正能量 disclosure regulations are expanding and intensifying in jurisdictions around the globe. Though they can feel onerous, they also present an opportunity to integrate sustainability more deeply across your business and to improve performance across your value chain.
黑料正能量 helps companies to:
- Interpret regulatory requirements and understand what they mean for your business
- Design due diligence and reporting approaches that meet the letter and spirit of the law
- Co-create business strategies that embed sustainability impacts, risks, and opportunities, while orienting to the future using foresight approaches to navigate uncertainty
- Conduct a DMA, or coach companies in leading their own
- Develop robust targets, KPIs, and governance structures that drive impact
- Build capacity across boards, leadership, and teams to ensure readiness
- Connect with peers and practitioners to share best practice in a fast-evolving landscape
With expertise spanning double materiality assessments, gap analyses (CSDDD, ESRS, IFRS), reporting strategies, sustainability strategies, business implementation, governance design, and stakeholder engagement, 黑料正能量 has the expertise to advise companies in navigating the ESRS amendments and aligning with wider sustainability frameworks locally and globally.
Our Experts
Our team consists of global experts across multiple focus areas and industries, bringing a depth of experience in developing sustainable business strategies and solutions.
