A sweeping proposal to simplify the European Sustainability Reporting Standards (ESRS) is underway, potentially cutting mandatory datapoints by over 50% and proposing other major simplifications.
Context
At its 19 June 2025 meeting, the European Financial Reporting Advisory Group (EFRAG) Sustainability Reporting Board (SRB) discussed key simplification proposals that aim to streamline ESRS implementation. The proposed changes come in response to the EU Commission's request to address challenges with early implementation, including excessive reporting burdens, fragmented disclosures, and inconsistent performance of the double materiality assessment (DMA).
Key takeaways
1. DMA overhaul: from checklist-heavy to strategy-driven
The DMA process is shifting from a complex, checklist-based approach to a business model-first framework. This means companies will focus on identifying what truly matters to their operations and stakeholders in terms of material topics, also reducing the level of related evidence to be provided. In addition, extending the materiality filter to all datapoints (including the ESRS 2 datapoints, which were previously excluded) has been proposed. The SRB reported on other work streams dedicated to the interaction between identifying IROs and material topics/sub-topics, assessing material topics and sub-topics, reporting granularity (with regard to topics or sub-topics) and other technical aspects of reporting where the DMA proved particularly difficult for early-stage reporters.
2. Mandatory datapoints halved: leaner reporting with less duplication
EFRAG aims to cut more than 50% of mandatory datapoints by removing low-value or duplicate requirements. This includes reducing prescriptive narrative elements and shifting many details into non-binding guidance. The goal is to eliminate boilerplate content and streamline reporting to include what matters most, thus helping companies focus on material issues without being overwhelmed by volume.
3. User-friendliness boosted: more intuitive structure and narrative clarity
The new proposals improve how sustainability information is structured and presented. Optional executive summaries, appendices for granular data, and clarified placement of taxonomy information allow companies to tell a clearer, more cohesive “sustainability story”. The intended result? Sustainability reports that are shorter, more coherent, and easier to navigate.
4. Interoperability enhanced: alignment with ISSB and IFRS S1/S2
EFRAG is actively trying to align the ESRS with global standards like the ISSB's IFRS S1 and S2, for example by including consistent definitions for GHG boundaries and reporting perimeters. This will mean less duplication of efforts for global companies and better harmonisation across regulatory frameworks, enabling smoother cross-border reporting and assurance.
5. Relief mechanisms introduced: more flexibility for complex realities
In recognition of the practical challenges, EFRAG is introducing several measures to reduce burdens, such as:
- relief for missing data due to M&A or value chain gaps
- optional qualitative disclosures when quantitative estimates are uncertain
- tailored approaches for financial institutions
- reconsideration of sensitive information and SFDR datapoints
SFDR alignment under review: relevance over volume
EFRAG is reassessing the 16% of mandatory ESRS datapoints linked to EU regulations – particularly optional SFDR principal adverse impact (PAI) indicators – many of which were included regardless of practical relevance. While investors emphasise the need for reliable ESG data from investees, evidence shows that several indicators have a number of disadvantages, such as:
- limited applicability across sectors;
- reliance on data that is difficult to obtain or verify and offers little added value in understanding a company's actual sustainability performance; and
- poor contribution to the ultimate investment decision.
EFRAG is now evaluating these datapoints from a general-purpose sustainability reporting perspective, aiming to eliminate or modify those that add to the reporting burden without delivering information that is useful for decision-making. This could lead to significant relief for companies reporting under both the CSRD and the SFDR.
What's next?
- A revised draft of the ESRS (V2) will be reviewed on 2 July 2025.
- The Exposure Draft is expected by mid-to-late July, followed by a public consultation period starting end of July.
- The deadline for the final version may be extended beyond 31 October 2025, pending a decision by the EU Commission.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
