EU Sustainability Reporting Faces Major Simplification
- EFRAG proposes to cut ESRS data points by 57%, while the EU delays reporting for many firms until 2028 under the “Stop the Clock” directive.
Streamlining the ESRS Framework
The European Financial Reporting Advisory Group (EFRAG) has proposed significant changes to the European Sustainability Reporting Standards (ESRS), aiming to reduce complexity and improve usability. According to its June 2025 progress report, the number of mandatory data points could drop by 57%, with total disclosures reduced by up to 68%. These revisions respond to widespread concerns about information overload and redundancy in the first wave of sustainability reports filed under the Corporate Sustainability Reporting Directive (CSRD). EFRAG’s goal is to make sustainability reporting more focused, relevant, and manageable for companies.
The simplification effort includes clearer separation of mandatory and voluntary disclosures, improved structure and language, and the removal of overlapping requirements. Companies will be encouraged to report only on material topics, based on their business model and strategic priorities. This shift is expected to reduce the burden of collecting and presenting less relevant data. EFRAG’s revised exposure drafts are currently under public consultation until September 29, 2025.
Extended Timeline Under “Stop the Clock”
In parallel with EFRAG’s technical revisions, the European Commission adopted the “Stop the Clock” directive in April 2025, delaying CSRD reporting obligations for many companies. Firms entering the second and third waves of CSRD compliance will now begin reporting in 2028, covering the 2027 financial year. This extension gives businesses additional time to prepare for the new standards and adapt internal processes accordingly. The directive also postpones due diligence requirements under the Corporate Sustainability Due Diligence Directive (CSDDD) and modifies thresholds under the EU Taxonomy Regulation.
The delay applies to large undertakings not yet reporting, listed SMEs, and certain financial institutions. Companies already subject to CSRD—those with over 500 employees and listed on EU-regulated markets—remain on schedule. The Commission emphasized that the postponement is not a rollback of sustainability goals but a recalibration to ensure effective implementation. Member states must transpose the directive into national law by the end of 2025.
Focus on Materiality and Global Alignment
EFRAG’s revised ESRS introduces a simplified approach to the double materiality assessment (DMA), a core concept of the CSRD. Companies are now expected to identify the most relevant sustainability topics using a top-down method, starting from their business model. The level of evidence required to support materiality conclusions has been adjusted to be reasonable and proportionate. This change aims to reduce the effort spent on exhaustive topic screening and improve the clarity of sustainability statements.
In addition to simplification, EFRAG is enhancing interoperability with global frameworks such as the IFRS S1/S2 standards and the GRI Standards5. Joint guidance with the International Sustainability Standards Board (ISSB) outlines how companies can comply with both ESRS and IFRS requirements without duplicating efforts. A GRI-ESRS Interoperability Index has also been published, mapping disclosure overlaps and enabling streamlined reporting. These efforts support cross-border comparability and reduce the reporting burden for multinational firms.
Additional Insights: Relief Mechanisms and SME Support
Beyond structural changes, EFRAG has proposed new relief mechanisms for companies facing undue cost or effort in reporting. These include exemptions for missing input data, simplified treatment of mergers and acquisitions, and clearer boundaries for reporting scope. The ESRS also allows companies to present EU Taxonomy-related information in separate appendices, improving readability and integration with financial reporting.
For smaller entities, the Commission has adopted a Voluntary Sustainability Reporting Standard tailored to non-listed SMEs. This framework offers a proportionate approach to ESG disclosures, helping SMEs respond to stakeholder demands and improve access to finance. While voluntary, it signals the direction of future expectations for smaller firms operating within the EU.
