EFRAG delivers simplified ESRS to EU Commission

Context

The simplified ESRS represent a key milestone in the EU Commission’s 2025 Omnibus initiative to reduce the regulatory burden on companies while maintaining sustainability transparency. Building on lessons learned from Wave 1 reporters and extensive stakeholder input from over 700 public consultation respondents, EFRAG has delivered a set of draft simplified standards that reshape the reporting landscape.

The draft standards come at a time of significant regulatory developments. The Legal Affairs Committee (JURI) of the EU Parliament reached an agreement on 13 November on the compromise text of the Omnibus I directive, with a potential vote anticipated as early as 16 December 2025 (still to be confirmed). In the meantime, the delayed implementation of CSRD into Luxembourg national law further postpones the mandatory reporting obligations.

Key changes to the ESRS

1. Reduction in datapoints and structural simplifications

The simplified ESRS reduces datapoints by around 70%, dropping from 1,073 to 320 datapoints that are required if material. All voluntary disclosures have been deleted, and language has been simplified throughout. The ESRS are now shorter, clearer, and easier to understand and implement.

Companies are further granted flexible granularity of reporting: by topic or by specific impacts, risks, or opportunities as managed internally. A more open disclosure approach has been added, with options to use internal references, add non-material information, and present appendices and executive summaries to increase readability whilst avoiding duplication and boilerplate reporting.

2. Focus on useful information and fair presentation

The simplified ESRS emphasise usefulness of information as a general filter and fair presentation for more relevant and less compliance-oriented reporting. The standards prioritise decision-useful disclosures, helping companies report what truly matters to stakeholders rather than following overly prescriptive checklists. There is now an explicit stress on ‘fair presentation’, with strong alignment to IFRS S1. No datapoints are required to be disclosed outside the scope of materiality.

3. Simplified materiality assessment

The double materiality assessment (DMA) has been simplified through clearer guidance, reduced documentation requirements, and better alignment with audit needs. The DMA has been made lighter and more intuitive, reducing complexity while still covering both impact and financial materiality. The dedicated ESRS Chapter (Chapter 3, ESRS 1) has been restructured for better readability and understandability of the process.

The standards now include principles-based guidance on how to consider prevention, mitigation and remediation actions when assessing the materiality of an impact, introducing the concept of ‘inherent impact’. Clarification has been provided on the level at which the DMA is completed for both environmental and social topics, with additional guidance on material geographies to support the determination of the level of aggregation and disaggregation adopted for reporting purposes.

4. Enhanced flexibility through reliefs and exceptions

Substantial reliefs, proportionality mechanisms and ad hoc phasing-in for challenging disclosures have been introduced. The systematic preference for direct data in value chain metrics has been removed, reducing pressure for data collection from upstream and downstream partners. Having acknowledged the practical challenges, the draft eases requirements related to value-chain information, allowing reasonable estimates and phased-in expectations.

Broad use of the undue cost or effort principle has been introduced, including beyond the IFRS scope of application. Reliefs without time limits but with transparency mechanisms and expectations to see coverage improved over time have been introduced for metrics, acquisitions, joint operations without operational control, and for non-material activities.

Furthermore, it is further expected that Level 1 will incorporate a relief for commercially sensitive information.

5. More principles-based narrative reporting

The standards move towards narrative explanations rather than exhaustive quantitative disclosures, enabling companies to present context in a clear and tailored way. This shift should reduce the compliance-oriented nature of reporting whilst maintaining transparency and allowing companies to communicate their sustainability performance in a manner that reflects their specific circumstances.

6. Enhanced interoperability with international standards

Common disclosures preserved where possible, enhancement through fair presentation, revised GHG boundary and provisions for anticipated financial effects were introduced with the aim of enhanced interoperability with the ISSB standards. This improved alignment with ISSB standards should strengthen global comparability and supports companies engaged with international sustainability frameworks.

However, as some reliefs in ESRS go beyond those in the ISSB standards, companies should pay attention when using them if they wish to comply with ISSB’s standards.

Next steps in the legislative and standard-setting process

EU Commission process:

• The EU Commission will now prepare the Delegated Act revising the first set of ESRS based on EFRAG’s technical advice
• A new public consultation launched by the EU Commission is expected in early 2026
• The whole process is expected to take six to nine months, after which the standards will be adopted through a Delegated Act
• The objective is for the revised standards to apply from FY2027, with a possibility for earlier application for FY2026 (still to be confirmed)

EFRAG support:

• EFRAG stands ready to support implementation of ESRS through revamped guidance, explanations resulting from Q&A and educational materials
• The ESRS Knowledge Hub, launched on 4 December 2025, is a key interactive tool to navigate the ESRS ecosystem

Omnibus I and national implementation:

• A potential vote on Omnibus I is anticipated as early as 16 December 2025, though this remains to be confirmed
• The implementation of CSRD into national law across Member States, including Luxembourg, is being closely monitored

CSRD application timeline for Luxembourg companies

Luxembourg implementation status:

• Luxembourg has confirmed that CSRD reporting will not be mandatory for financial years 2024 and 2025
• Bill of law 8370 was not approved and published by 30 November 2025
• Under Article 166 of the Bill, the law takes effect on the first day of the month following its publication
• The earliest possible CSRD obligations would therefore apply to FY2026
• The Bill specifies that undertakings whose financial year ended before the date of entry into force will not be required to prepare and publish sustainability information for that financial year, though they may choose to do so on a voluntary basis

Wave 1 companies:

• FY2024 and FY2025: either voluntary reporting under CSRD, or continuing to report under NFRD provisions (as also explicitly suggested by the CSSF), including compliance with the EU Taxonomy Regulation
• FY2026 (once CSRD is implemented): compliance with the first set of ESRS and “quick fix” amendments, provided they remain in scope following Omnibus
• FY2027: reporting required under the new ESRS, provided they remain in scope following Omnibus

Wave 2 companies:

• Scope to be confirmed based on Omnibus
• First reporting expected in FY2027 under the new ESRS

Non-EU companies:

• First reporting remains scheduled for FY2028
• Scope to be confirmed as part of the next legislative negotiations
• For those remaining in scope, reporting should be conducted using the revised ESRS, as non-EU standards do not feature among the EU Commission’s priorities according to the recently released “kill list”.

Author : Rocco Mezzatesta