For the past several years, the Corporate Sustainability Reporting Directive (CSRD) has been the centerpiece of Europe’s ambition to lead the world in corporate sustainability transparency. But as companies began preparing to implement the European Sustainability Reporting Standards (ESRS), a clear message emerged: the cost, complexity, and breadth of the requirements were overwhelming even for highly sophisticated organizations.

This week, the European Financial Reporting Advisory Group (EFRAG) responded with its boldest move yet—a sweeping revision of the ESRS that dramatically cuts reporting obligations and fundamentally reshapes how companies will approach sustainability disclosures in the EU.

A Course Correction Years in the Making

EFRAG was originally mandated back in 2020 to develop the EU’s sustainability reporting standards, which were formally adopted in 2023. But as the CSRD rollout began, pressure mounted from industry groups, member states, and even sustainability practitioners who argued that the standards—while ambitious—were too heavy to implement in practice.

Enter Omnibus I, the European Commission’s initiative aimed at rationalizing sustainability and regulatory requirements across several major laws, including the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM). The Commission asked EFRAG to rethink the ESRS through a new lens: keep the spirit of the EU Green Deal intact, but strip away anything that creates unnecessary burden without improving decision-useful information. The result is a revised ESRS that amounts to the most extensive simplification since the CSRD was conceived.

A Reporting Universe That Suddenly Shrinks

Perhaps the most consequential shift has nothing to do with datapoints at all, but with who must report. EU lawmakers are poised to raise the CSRD applicability threshold to companies with at least:

• 1,750 employees, and

• €450 million in annual revenue

That move alone would exclude roughly 90% of the companies originally expected to comply. The CSRD, once envisioned as a broad corporate transparency regime, appears to be evolving into something much more targeted.

For companies breathing a sigh of relief, this does not mean sustainability reporting is going away—but rather that it is being recalibrated to be more realistic and, frankly, more implementable.

A 70% Reduction That Redefines the ESRS

At the heart of EFRAG’s proposal is a dramatic culling of disclosure requirements: mandatory datapoints reduced by 61%, voluntary datapoints eliminated entirely, and a total reduction exceeding 70%.

This is not window dressing. For many companies, the original ESRS felt like a multi-year data-collection project more suited for regulators than for corporate management. The revised standard represents a philosophical shift—one that prioritizes relevance over exhaustiveness. EFRAG’s message is clear: sustainability reporting should be meaningful, not mechanical.

Reimagining Double Materiality for the Real World

No part of the ESRS generated more confusion—and more consulting budgets—than the double materiality assessment (DMA). EFRAG now admits this was “the most challenging area” of implementation. The revised DMA aims to simplify rather than dilute:

• Companies can choose a top-down approach that starts with strategy rather than a long list of predefined topics.

• Definitions for impacts, risks, and opportunities are clarified to reduce interpretive differences.

• Several formerly mandatory topics are now optional unless material.

• Companies may report only on material sub-topics, a significant shift away from all-or-nothing disclosures.

• Annual re-assessment is no longer required unless the business undergoes meaningful change.

The goal is to focus reporting energy on what actually matters to the company and its stakeholders—not on proving why dozens of other topics do not matter.

Letting Go of the Value Chain Burden

Another major obstacle in the original ESRS was the expectation that companies collect direct data from suppliers—something even the Commission acknowledged was often impractical.

The revised standard does something that would have been unthinkable two years ago: it explicitly removes the preference for direct supplier data. Companies may now rely on estimates and “reasonable, supportable information available without undue cost or effort.”

In short, EFRAG has accepted what companies have been saying all along: global supply chains cannot be audited into perfect transparency overnight.

Building a Bridge to the ISSB

One of the strategic undertones of the revision is greater alignment with the International Sustainability Standards Board (ISSB). This matters because many global companies have been preparing to reconcile European requirements with the IFRS sustainability standards used elsewhere.

EFRAG’s updated text borrows heavily from ISSB concepts—including the treatment of anticipated financial effects, the use of estimates, and the structure of entity-specific information. The message is subtle but important: the EU is not walking away from leadership, but it is inching toward interoperability.

A More Practical Standard, Not a Retreat From Sustainability

Some may interpret the revisions as a softening of the EU’s sustainability agenda. But EFRAG’s language suggests the opposite: that simplification is necessary to preserve credibility and ensure companies can actually deliver high-quality information.

The recalibrated ESRS still requires rigor. But it acknowledges that high-quality sustainability reporting cannot be built on unrealistic data expectations or administrative strain. The revised framework shifts the conversation from compliance to usability, and from quantity to clarity.

What Comes Next

With EFRAG’s technical proposal in hand, the European Commission must now draft and adopt a Delegated Act revising the ESRS. That process will determine when the new requirements formally take effect—and which companies must prepare for a very different reporting landscape than the one they anticipated.

One thing is certain: Europe’s sustainability reporting regime is entering a new chapter. And for many companies, this revision may be the first moment the CSRD feels not just ambitious, but achievable.