EFRAG progress report: Simplification of the European Sustainability Reporting Standards

The Omnibus simplification proposals, announced by the European Commission in February 2025 proposed several changes to the application of the Corporate Sustainability Reporting Directive (CSRD). These included reviewing the number of companies in scope for CSRD, the timing of application of the CSRD, as well as the detail of the disclosures required under the European Sustainability Reporting Standards (ESRS).

While negotiations continue at a European level on the detailed proposals, EFRAG, the standard setting body who originally drafted the ESRS, have been tasked with simplifying them. In line with the guidance set out by the Commission they issued an update on their progress to date on 20th June. Here we outline the approach they have taken, and the potential implications for the ESRS.

Levers of simplification

Aligned to the guiding principles that formed part of the Commission’s original request to EFRAG to review the ESRS, the body has identified 6 levers of simplification, together with preliminary proposed amendments.

Simplification of the Double Materiality Assessment (DMA)

• The review includes considering feedback in relation to the level of effort and excessive focus on process, the absence of guidelines in relations to thresholds, aggregation and the scoring of individual impacts, risks and opportunities (IROs).
• Draft revisions proposed include the emphasis on a top-down, rather than a bottom-up approach to material topics, the application of an information materiality filter to datapoints and clarity in relation to effect of mitigating actions on materiality.

Improving clarity and integration of sustainability statements

• Concerns in relation to the length, structure, inclusion of Taxonomy templates, and the level of duplication across disclosure requirements have been flagged.
• To address this EFRAG is considering options in relation to an executive summary, the use of an appendix for detailed granular information including taxonomy templates, and a focus on streamlining of disclosures, avoiding repetition.

Streamlining MDRs and topical disclosure alignment

• Overlap between data points in ESRS2, and those required under MDRs in relation to policies, actions and targets (PATs) has been identified as a source of complexity in addition to other overlaps that occur in relation to governance and strategy disclosures.
• ‘Drastically’ reducing the number of mandatory PAT data points, and linking them to topics, rather than individual IROs is proposed alongside reinforcing the principle of cross referencing within statements to avoid duplication.

Improved understandability, clarity and accessibility of the standards

• Clearly distinguishing between mandatory and voluntary datapoints, reducing the number of voluntary datapoints where appropriate.

Introduction of other suggested burden-reduction reliefs

• Providing clarity and reliefs in relation to topics such as acquisitions and disposals, IFRS alignment, commercially sensitive information, EU regulation datapoints including those associated with SFDR, non-material activities, boundaries of reporting and financial institutions specific considerations.
• Provisional proposals under review are incorporating the concept of ‘undue cost and effort’ incorporated in IFRS S1 and S2 and will be refined in further iterations.

Enhanced interoperability

• Alignment of language and approach, especially in relation to emissions calculations, between the ESRS and ISSB standards is a key focus of the review.

Review of data points

The review has also included considering each of the current data points in order to identify the least relevant. Through this analysis, by either removing selected data points or reclassifying them as voluntary or non-binding, an estimated 50% reduction in data points is considered feasible. A focus on less granular narratives, which are seen to impede readability of statements is also underway.

Next steps

The key milestones in the process, according to EFRAG’s current workplan are outlined below. It should be noted that in response to concerns in relation to the level and timing of engagement, EFRAG have requested consideration be given to extending the current Commission deadline of 31 October 2025 to allow for more stakeholder feedback.

The outputs of this review should be considered in light of the other elements of the Omnibus proposals, as updated ESRS will ultimately only apply to those entities that remain in scope. For those companies that are considering which disclosure framework to align to, EFRAG’s voluntary standards for SMEs (VSMEs) may provide an interim solution. Alternatively, applying the principles of CSRD, including a double materiality assessment continues to provide valuable insights.

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