August 11, 2025
The European Financial Reporting Advisory Group (EFRAG) has released proposed revisions to the European Sustainability Reporting Standards (ESRS), the framework underpinning the Corporate Sustainability Reporting Directive (CSRD). These changes aim to make sustainability reporting more practical, reduce administrative burdens, and keep companies focused on the disclosures that matter most—while preserving the EU’s core policy goals on transparency, climate action, and sustainable finance.
Why the ESRS Are Changing
Since their debut, the ESRS have been central to the EU’s push for consistent sustainability reporting across member states. While comprehensive, the original framework often proved complex and resource-intensive. Many companies struggled to integrate ESRS requirements into existing systems without incurring high costs. In response, the European Commission tasked EFRAG with making the standards more usable while maintaining alignment with global frameworks like the IFRS Sustainability Disclosure Standards.
The ESRS remain structured into:
Cross-Cutting Standards – Applicable to all in-scope companies, covering principles (ESRS 1) and general disclosures (ESRS 2).
Topical Standards – Covering environmental, social, and governance themes, reported on if material.
Sector-Specific Standards – Still in development, tailored to industry-specific impacts and risks.
Key Updates in the 2025 Draft
1. A More Targeted Materiality Assessment
Double materiality—covering both financial and impact perspectives—remains core, but the process is more flexible. Companies can start from their business model to identify likely material topics, report at a sub-topic level where relevant, and avoid exhaustive reviews of immaterial standards.
2. Simplified Report Structure
Reports can now open with a concise executive summary, supported by detailed appendices. This structure improves readability for stakeholders and reduces duplication.
3. Clearer Separation of Requirements and Guidance
Mandatory requirements are now distinct from “good practice” examples, which are moved into separate guidance. Application guidance sits directly under each disclosure requirement for clarity.
4. Reliefs for Complex Data Collection
Where data gathering—especially across global value chains—would create undue cost or effort, companies can disclose partial metrics or provide qualitative statements in place of precise figures.
5. Stronger Alignment with Global Standards
Definitions and terminology are closer to IFRS standards, enabling multinational companies to align EU and non-EU reporting obligations and minimise duplication.
What Hasn’t Changed
Double materiality remains non-negotiable.
Scope 3 GHG emissions must still be disclosed, with some reliefs for incomplete data.
Integration with EU policy tools such as the SFDR and EU Taxonomy is preserved.
Core topical standards on climate, resources, and circularity still apply where material.
Implications for Reporting Strategy
For most companies, the revisions present opportunities to:
Reassess materiality using a business-model-first approach.
Structure reports for narrative clarity and stakeholder usability.
Leverage data reliefs to ease burdens without sacrificing compliance.
Align ESRS with other reporting obligations to reduce duplication.
These changes will also affect non-EU companies with operations or value chain links in the EU.
Timeline and Next Steps
Consultation Period: Open until 29 September 2025.
Final Technical Advice: To European Commission by 30 November 2025.
Adoption: Expected early 2026.
First Application: For reporting periods starting the following year, with transitional relief for certain entities.
Action Plan for ESG Leaders
Gap Analysis: Compare current reporting against revised ESRS general and topical standards.
Materiality Refresh: Refocus on high-impact and high-risk areas.
Team Training: Ensure preparers understand the new structure and relief mechanisms.
Technology Integration: Explore systems to manage sustainability data alongside financial data for more efficient compliance.
Bottom line: These updates signal that the EU is willing to listen to business feedback. The 2025 ESRS revisions aim to balance ambition with practicality—keeping reporting rigorous, globally aligned, and implementable at scale.
