EU ESRS Reporting Simplified: Key Revisions Businesses Must Understand

The European Sustainability Reporting Standards (ESRS) are undergoing a crucial pragmatic adjustment. While designed as the core tool of the Corporate Sustainability Reporting Directive (CSRD) to enhance ESG information transparency and drive green transition, their initial implementation revealed a core contradiction: complexity and high compliance burden for businesses. To address this, the European Commission decisively launched the "Omnibus" package, initiating significant revisions to the ESRS. This not only signals more efficient and operable sustainability reporting but also directly impacts businesses operating in or with ties to the EU, reshaping their reporting strategies and resource allocation.

Six Key Simplifications to Boost Efficient Compliance

The draft ESRS revisions were released on July 31, 2025, opening a 60-day public consultation period set to close on September 29, 2025. The European Financial Reporting Advisory Group (EFRAG) anticipates these revised standards will lead to substantial quantitative burden reduction:

l  Mandatory Data Points: Reduced by approximately 57%, from over 500 to just over 200.

l  Total Disclosures (including voluntary items): Significantly cut by about 68%, from over 1000 to just over 300.

l  Overall Standard Length: Expected to be shortened by over 55%, making it more accessible and implementable.

These figures directly demonstrate the effectiveness of the "simplification" and "burden reduction" efforts, having a highly direct impact on business audiences focused on practical changes.

1. Simplified Double Materiality Assessment (DMA)

The Double Materiality Assessment (DMA) is central to ESRS, requiring companies to evaluate sustainability topics from both impact and financial materiality perspectives. Previously, the DMA process was criticized for its complexity and high burden. The revised approach emphasizes a "top-down" strategic method, identifying material topics based on the business model rather than exhaustive checklists, and requiring "reasonable and proportionate evidence". This shifts the focus from mechanical compliance to strategic thinking, demanding deeper understanding of business-sustainability links and concise reporting.

2. Enhanced Report Readability and Connectivity

Revisions aim to make sustainability reports easier to understand and use. New standards allow for a concise executive summary, with detailed data moved to appendices to avoid duplication and improve narrative flow. This enhances overall clarity, transforming reports into effective communication tools for company strategy and performance.

3. Optimized Relationship Between General Disclosure Requirements and Topical Standards

This revision redefines the relationship between General Disclosure Requirements (GDRs) and topical standards. Many mandatory data points in topical standards are removed, and most narrative disclosures on Policies, Actions, and Targets (PATs) are centralized in ESRS 2 (General Disclosures). This means companies disclose PATs under ESRS 2 if a topic is material, without repetition in topical standards.

4. Improved Understandability, Clarity, and Accessibility of Standards

Revisions aim to eliminate ambiguity, making standards easier to navigate. Most previously optional "may disclose" data points are removed. The standard structure is clearer, separating mandatory requirements from non-mandatory guidance. Application Requirements (ARs) are now placed directly under relevant disclosure requirements, significantly enhancing ESRS's "user-friendliness".

5. Introduction of Other Horizontal Burden-Reduction Reliefs

ESRS introduces reliefs for practical challenges, including exemptions for "undue cost or effort" and limited reporting for data gaps. A key change is the alignment of Greenhouse Gas (GHG) emission boundaries with financial reporting, allowing an operational control approach consistent with ISSB and GHG Protocol.

6. Enhanced Interoperability with ISSB Standards

These revisions significantly enhance ESRS compatibility with IFRS S1 and IFRS S2 from the International Sustainability Standards Board (ISSB). The new standards adopt consistent language and structure, clarify materiality assessment logic, and align GHG emission boundaries with ISSB and GHG Protocol. ESRS also integrates ISSB relief measures, like the "undue cost or effort" principle.

What Does This Mean for Businesses?

In addition to the ESRS simplifications, the EU's "Omnibus" proposal also adjusted the scope of CSRD, significantly reducing the number of affected companies:

l  Public Companies: The number of affected public companies will decrease by approximately 57%, from 14,000 to about 6,000.

l  Private Companies: The number of affected private companies will sharply decrease by about 73%, from 20,000 to about 5,500.

l  Total: The total number of companies affected by CSRD will fall from approximately 34,000 to about 11,500, an overall reduction of about 66%.

These changes have several practical implications for businesses:

l  Reporting burden significantly reduced, compliance more flexible and pragmatic. The substantial reduction in mandatory data points (57%) and optimized report structure (e.g., executive summaries, appendices, centralized PATs) will significantly lower data collection and preparation costs. Furthermore, reliefs like "undue cost or effort" and considerations for commercially sensitive information make the compliance process more flexible.

l  Shift in reporting focus to strategy and materiality. The move from a "checklist" approach to a "top-down, principle-based" DMA requires companies to think more deeply about the connection between their business and sustainability issues, focusing on truly material impacts, risks, and opportunities to provide more decision-useful information. The compliance challenge shifts from "quantity" to "quality" and "systemic understanding", demanding enhanced strategic thinking and narrative capabilities from companies.

l  Enhanced global comparability and interoperability. The deep alignment of ESRS with ISSB standards (including GHG boundaries, language structure, etc.) will greatly facilitate reporting for multinational companies across different jurisdictions, reducing redundant efforts. Existing CDP or GRI disclosures can serve as important stepping stones to meet ESRS requirements.

l  Digital reporting is an irreversible trend. CSRD mandates submitting reports in a standardized digital format (XBRL) to the European Single Access Point (ESAP). Companies must ensure their data systems are digitally capable, investing in specialized software for efficient data collection, integration, and XBRL tagging.

l  Compliance preparation is urgent. EFRAG released the draft revisions on July 31, 2025, and launched a public consultation, with final recommendations due to the European Commission by November 30, 2025. The European Commission is expected to adopt the revised ESRS by mid-2026, with companies applying the new standards for fiscal year 2027 (reporting in 2028). Companies should immediately review existing reporting processes, update materiality assessments, and train reporting teams. Even if not directly in CSRD scope, voluntary alignment with ESRS can enhance a company's credibility with investors.

The latest ESRS changes are making sustainability reporting in the EU smarter and more streamlined than ever. They're helping companies turn a legal requirement into a real business advantage by deeply embedding sustainability into their core operations. With simpler processes and a push for digital reporting, businesses can better manage their ESG performance and grab exciting new green opportunities.

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