EFRAG Proposes Significant Amendments To European Sustainability Reporting

The revisions significantly reduce complexity by cutting approximately 68% of total data points and 57% of mandatory data points, while relocating non-mandatory content into a separate Non-Mandatory Illustrative Guidance (NMIG) document. The objective is to eliminate confusion without compromising decision-useful information.

The EDs are open forpublic consultation until 29 September 2025.

Framework Structure and Key Changes

The topics remain unchanged, and the ESRS continues to follow its existing structure:

• ESRS 1 and ESRS 2: General disclosures.
• Five environmental standards: Climate change, pollution, water, biodiversity and ecosystems, resource use and circular economy.
• Four social standards: Own workforce, value chain workers, affected communities, consumers and end users.
• One governance standard: Business conduct.

However, the structure has been revised. All non-mandatory content has been moved to the NMIG, ensuring that topical standards now include only mandatory disclosure requirements and their related application guidance. This separation addresses prior concerns about mixing mandatory and optional requirements within the same standard.

Reduction and Reclassification of Data Points

EFRAG has removed the least relevant mandatory data points, reducing them by 57%. Mandatory disclosures now apply only when material, and most deletions affect topical standards. While this reduces prescriptive detail, companies may still need to disclose certain information under ESRS 2 (General Disclosures) if material.

The following examples of deletions include those related to relevant inquiries we received from clients:

ESRS 1 (General Requirements):

• Requirement to provide detailed reasons when climate change is deemed immaterial (though companies must still disclose the basis for this conclusion under ESRS 2).
• Relief introduced for metrics with poor data quality. Companies can now disclose metrics with partial scope if reliable data is unavailable.
• Limited reporting requirements in the event of data gaps from mergers or acquisitions.
• Exemptions for commercially sensitive data.
• Allowances for estimation or reduced scope in value chain metrics.

ESRS E1 (Climate):

• Policies on managing climate-related impacts, risks, and opportunities (still required under ESRS 2 if material).
• Base year and baseline value for GHG targets (greater flexibility retained).
• Energy intensity for high-impact sectors.
• Total GHG emissions (Scopes 1–3 remain mandatory).
• Deletion of requirement to update climate targets every 5 years after 2030.

ESRS S1 (Own Workforce):

• Total employee departures during the reporting period.
• Removal of employee age distribution.
• Narrowing of human rights incident disclosures (the concept of "severe" human rights incidents was removed; now only substantiated incidents must be disclosed).
• Deletion of adjusted gender pay gap by employee category or country.

ESRS G1 (Business Conduct): Deletion of average time to pay an invoice

The full list of proposed amendments can be found through the following link for each of the ESRS.

Examples of data points converted to voluntary (moved to NMIG):

• Employee age distribution.
• Policies on eliminating discrimination and promoting DEI (still required under ESRS 2 if DEI is material, but with less prescriptive detail).

Reorganization and Terminology Updates

Many data points remain but have been reorganized to avoid duplication. Most Minimum Disclosure Requirements (MDR) in ESRS 2 are retained and renamed as General Disclosure Requirements (GDR). For instance, disclosures on material impacts, risks, opportunities, and their interaction with strategy and financial effects (previously SBM-3) were removed from topical standards but kept in ESRS 2.

Narrative Disclosures and Target Reporting

Narrative disclosures on policies, actions, and targets are slightly less detailed, but core requirements remain. For anytime-bound targets on material topics, companies must disclose:

1. Target value (or qualitative level)
2. Scope (own operations and/or value chain)
3. Geographical boundaries
4. Baseline value
5. Milestones or interim targets
6. Methodologies, assumptions, and whether targets are science-based

Importantly, policies, actions, and targets only need to be reported if they exist—there is no obligation to adopt them.

Materiality and Proportionality Principles

The double materiality principle (financial and impact) remains intact. Companies must assess both perspectives, considering the needs of financial and non-financial report users.

Key clarifications in ESRS 1:

• ESRS is now framed as a fair presentation framework based on relevance and faithful representation, avoiding a compliance-driven approach.
• The Double Materiality Assessment (DMA) should start with a top-down analysis of the business model to identify likely material topics.
• Evidence requirements must be reasonable and proportionate, reducing unnecessary documentation.
• New guidance explains materiality of information and practical considerations for identifying impacts, risks, and opportunities.

EFRAG is also consulting on whether to assess impacts on a gross or net basis. Current drafts suggest that severity should reflect mitigation measures in place before the impact occurred (net impact). If an impact is material, companies must disclose remediation actions and outcomes.

Other Key Updates

• A materiality filter now applies to all data points, including ESRS 2, eliminating irrelevant disclosures.
• Materiality is connected todecision usefulness, prioritizing stakeholder needs over exhaustive detail.
• ESRS now aligns with ISSB standards under a fair presentation regime.
• Proportionality relief: Materiality assessments and metric disclosures must rely on "reasonable and supportable information available without undue cost or effort," inspired by ISSB's IFRS S1 and S2.

Consultation on Financial Effects Disclosures

EFRAG is considering two options:

1. Allow only qualitative disclosures when estimation uncertainty is too high for quantitative data to be useful.
2. Require qualitative disclosures and make quantitative disclosure optional.

Outstanding Issues and Next Steps

The drafts do not yet address topics under negotiation in the CSRD Omnibus I package, such as:

• Relief for omitting confidential or sensitive information
• Phase-in provisions
• Obligations to adopt and implement 1.5°C- aligned transition plans

EFRAG must finalise and submit its technical advice on the ESRS simplification to the European Commission by 30 November 2025.

Upon receiving EFRAG's technical advice, the European Commission will review whether further amendments to the ESRS are needed in light of CSRD Omnibus negotiations. It will then adopt the revised ESRS through a delegated regulation, no later than six months after the updated CSRD enters into force. The goal is for companies to apply the revised ESRS for reporting on financial year 2027, with the option for early adoption in 2026.