EFRAG’s interim assessment of the revision of the ESRS

The European Commission (EC) tasked EFRAG with revising the ESRS in order to reduce the reporting burden while maintaining the core objectives of the Corporate Sustainability Reporting Directive (CSRD).

EFRAG must submit a technical opinion by October 31, 2025. The report published on June 19, 2025, which we summarize here, contains an interim assessment.

At the end, we provide you with an assessment of the status of the ESRS from our personal perspective.

I. Areas of the ESRS identified by EFRAG that require simplification

1. Simplification of the double materiality assessment (DMA)
   • Transition to a strategy-driven top-down approach
   • Clarification of concepts (e.g. gross vs. net impact, role of subtopics)
   • Introduction of a filter for the materiality of information for all data points, including ESRS 2
   • Greater emphasis on a fair presentation (analogous to ISSB/IFRS S1), less “checklist behavior”
2. Improving readability and integration
   • Enabling companies to preface the ESRS report with a detailed summary (“Executive Summary”)
   • Enabling attachments for metrics, information from the EU taxonomy and explanation of non-material topics
3. Revision of the regulations for policies, measures and targets (“PATs, policies, actions and targets”)
   • Reduction of overlaps between ESRS 2 and other standards
   • Limitation of mandatory PAT information
   • Emphasizing aggregation and flexibility in reporting
4. Clarification of mandatory vs. voluntary content
   • Reduction of voluntary content
   • Restructuring of standards to separate mandatory requirements and guidelines
5. Further simplifications and adjustments
   • Addition of pragmatic simplifications for transitional periods (e.g. for takeovers, restructurings, M&A etc.)
   • EU Regulation data points: reassessment of the relevance of 16% of data points linked to the SFDR and other regulations
   • Metric simplifications: Extensive scope for exclusions or estimates if data is not available or insignificant
   • Sector-specific issues: inclusion of guidelines for financial institutions
   • Forward-looking information: Alignment with IFRS relief for cases with a high degree of uncertainty

II. Improving global interoperability

• in particular adjustment to IFRS S1/S2 and the GHG protocol
• Recalibration of the GHG emission limit for adjustment to the consolidated financial statements

III. Data point reduction

• Target: Reduce the number of mandatory data points by 50%
• Approach:
  • Elimination of data points of low relevance
  • Posting extremely granular data points to the appendix of the report
  • Transition to principle-based narrative requirements

IV. Next steps

• Version 2 (V2) of the draft amendments: by July 2, 2025
• Adoption of the exposure draft: mid to end of July
• Public consultation: end of July to beginning of September
• Cost-benefit analysis: interim report in October, final report in December

Our conclusion

EFRAG conducted a comprehensive information gathering exercise to drive the simplification of the ESRS. The process was characterized by a strong data base and participation. Over 820 stakeholder groups participated in the comment period (from April 8 to May 7) and submitted around 16,000 comments. In addition, numerous individual discussions were held with companies from various sectors, of different sizes and from different countries. In addition, the first wave of ESRS reports was examined and analyzed for potential improvements.

The interim financial statements provide a solid basis for assessing the scope of the expected changes to the ESRS (“ESRS Set 2”). However, a detailed presentation and specification of the results is not evident in the interim statement. In simple terms: EFRAG reports on what is being discussed in the working groups, but not on the results or the course set. This was probably to be expected, given how controversial the debates on the omnibus are currently being conducted by EU parliamentarians, NGOs and companies.

In the current interim report, EFRAG points out that the usual due diligence in accounting could not be completely fulfilled due to the time pressure. In accounting, it is customary to publish a discussion paper first. In this paper, initial ideas and concepts are made available to stakeholders for discussion. An exposure draft is then published. This “near-final standard” is a preliminary version of the final standard. Finally, the final standard is published. If EFRAG publishes an exposure draft in mid to late July 2025 as announced, there will be little scope to make corrections to the standards. It is crucial to be aware of the extent to which ERFRAG’s deliberations have already taken concrete shape.

Below you will find a few points that particularly catch our eye:

• In the discussions about Omnibus and the simplifications necessary to reduce administrative burdens, the DMA was, to our knowledge, hardly ever discussed. It seems that it was not the focus of the simplification measures. According to the interim report, the situation seems to have changed.
• In the revision, EFRAG has come closer to the ISSB standards, i.e. IFRS S1 and S2, in many respects. This can be seen in many places, particularly in one crucial area: The IFRS Sustainability Disclosure Standards contain explicit relief (“reliefs”) for companies if obtaining certain information would involve unreasonable effort or disproportionate costs (“undue cost or effort”). This applies in particular to data on the value chain, forward-looking information or sensitive business information. According to the information available, EFRAG has included these simplifications in its planning and has thus granted companies a degree of freedom in sustainability reporting that users of conventional International Financial Reporting Standards (IFRS) have known and practiced for years. This should help the application of ESRS to gain greater acceptance.
• There is no reference to the thresholds for the ESRS application obligation. This is also formally understandable, as EFRAG has no mandate to set the thresholds, in particular the threshold for the number of employees. Nevertheless, it is obvious that EFRAG has inevitably considered the size dimensions of companies when estimating, for example, the reasonable number of data points or when discussing the requirement for a compliant DMA. The fact that there is no reference to the extremely important threshold value of the number of employees is unfortunate, as the impact of the ESRS stands and falls with the number of companies affected.

Our recommendation

While the details are still being sorted out by the political stakeholders, our recommendation to companies is to prepare for the lowest common denominator of the ESRS (E1 Climate, S1 Employees, G1 Governance) and to establish data processes in these three fields that are as solid as possible and lead to reliable data. In the supply chain regimes of large corporations and the public sector, there is an increasing focus on dealing with climate change and CO2 emissions in particular. Companies should use this time to get to grips with carbon reporting. Let’s talk!

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