Revised European Sustainability Reporting Standards may see a significant reduction in data points by up to 66% as per EFRAG's consideration.
The European Financial Reporting Advisory Group (EFRAG) has unveiled an Amended ESRS Exposure Draft, outlining potential changes to the European Sustainability Reporting Standards (ESRS) aimed at simplifying and streamlining the reporting requirements under the Corporate Sustainability Reporting Directive (CSRD).
Key proposed changes include:
1. **Substantial reduction in mandatory disclosure data points:** EFRAG aims to reduce mandatory "shall" datapoints by over 50%, and in total reduce ESRS datapoints by approximately 66% by eliminating less relevant disclosures and adopting a more principle-based approach. This means a focus on core, decision-useful information development by companies rather than exhaustive data reporting.
2. **Simplification of the Double Materiality Assessment (DMA):** EFRAG plans to clarify and streamline the DMA process to reduce complexity. They emphasize a ‘top-down’ approach where the level of evidence needed is reasonable and proportionate. Information materiality criteria will be strengthened with a decision-usefulness focus. The draft also clarifies how mitigation/remediation actions and positive impacts are considered for materiality.
3. **Streamlining ESRS 2 (General Disclosures):** The general sustainability standard applicable across all sustainability issues (covering governance, strategy, policies, actions, and targets) is being simplified to avoid duplication and excessive detail, with many data points either deleted or made voluntary guidance rather than mandatory.
4. **Clearer distinction between mandatory and voluntary content:** The draft clarifies which disclosures are mandatory and which are non-mandatory guidance, making the standards easier to apply for reporting entities.
5. **Multiple levers for simplification:** EFRAG is activating six main levers to simplify obligations, including modifying Minimum Disclosure Requirements and improving interoperability with IFRS Sustainability Disclosure Standards (IFRS S1 and S2).
The public consultation and exposure draft timeline for the amended ESRS Exposure Draft is planned for mid-July 2025, with formal consultation to follow, allowing stakeholders to provide feedback before finalization.
These changes reflect EFRAG's responsiveness to stakeholder feedback regarding the disproportionate effort and complexity involved in earlier drafts, aiming to make compliance more feasible and sustainability reporting more meaningful for companies and users alike.
The revised ESRS comes after the release of the European Commission's Omnibus I package in late February, which aims to reduce the sustainability reporting and regulatory burden on companies. The draft also includes a new section of "practical considerations," including clarifying the expected level of evidence to support conclusions.
The changes proposed by EFRAG could reduce the number of datapoints reported by companies by approximately two-thirds, making the reporting process more manageable and user-friendly. The draft report can be accessed here.
- The European Financial Reporting Advisory Group (EFRAG) has initiated a substantial reduction in mandatory disclosure data points under the Corporate Sustainability Reporting Directive (CSRD), aiming to simplify and streamline corporate sustainability reporting by eliminating less relevant disclosures and adopting a more principle-based approach.
- In the realm of business and policy-and-legislation, EFRAG seeks to simplify the Double Materiality Assessment (DMA) process by clarifying and streamlining the criteria used to determine the materiality of sustainability-related information, emphasizing a ‘top-down’ approach that focuses on core, decision-useful information.
- As part of the European Commission's Omnibus I package, the general sustainability standard under the CSRD (ESRS 2) is being simplified by EFRAG, with many data points either deleted or made voluntary guidance rather than mandatory, reducing complexity and avoiding duplication across all sustainability issues.
