Simplified ESRS: What is changing, and what does it mean for your reporting?
The European Commission has put forward a draft of revised ESRS standards that promises to significantly reduce companies' sustainability reporting burden. But what do the changes mean in practice, and how do they differ from the original ESRS requirements? In this article, we go through the clearest changes.
Timeline
ESRS, the European Sustainability Reporting Standards, are the technical standards that specify exactly what and how companies must report under the EU's CSRD, the Corporate Sustainability Reporting Directive, which sets requirements for large companies' sustainability reporting.
On 6 May 2026, the European Commission published its draft of the simplified ESRS standards. During a four-week period, running until 3 June, citizens and stakeholders had the opportunity to express their views on the draft. This allowed the public to contribute to the EU's decision-making process. On 3 July 2026, the European Commission adopted the standards considering the feedback received, with the aim of having them enter into force ahead of financial year 2027. A scrutiny period of 2–4 months is now expected, during which the European Parliament and the Council must approve the standards.
From EFRAG to the European Commission's draft
During 2025, EFRAG, the European Financial Reporting Advisory Group, developed a proposal for simplified standards at the Commission's request, and it is this proposal that formed the basis for the Commission's draft. One of the clearest differences between EFRAG's proposal and the Commission's draft is that, under the draft, undertakings shall not disclose non-material information in their ESRS disclosures, whereas EFRAG's wording on this point is more passive. However, an important exception exists in the Commission's draft under Chapter 8.2 – undertakings may include non-material information if it derives from other legislation, generally accepted frameworks such as GRI, or if it meets specific user needs, as long as it is clearly identified and does not obscure material information. Otherwise, the Commission's draft is largely based on EFRAG's wording, and it is primarily in comparison with the original ESRS standards that the changes become apparent. The Omnibus proposal — which you can read more about in our article (Omnibus and CSRD: Concepts, new standards and thresholds) — has also introduced new thresholds, meaning fewer undertakings will be within scope of the reporting requirement. The new thresholds apply regardless of whether the undertaking chooses to apply the old or the new standards.
The simplifications are welcomed by many in the business community who have long complained about the heavy reporting burden, with the original standards widely criticised for containing a large number of datapoints and lacking clarity. Critics, however, argue that the simplifications risk watering down a framework that was originally intended to drive sustainability progress forward.
How the new standards differ from the old ones
The differences between the revised and the original ESRS standards are numerous. The Commission states that the changes will reduce reporting costs by more than 30 per cent, reduce mandatory datapoints by 60 per cent, and reduce total datapoints by more than 70 per cent. It is worth noting that 10 percentage points of the total reduction is explained by the removal of the voluntary requirements, the so-called "may disclose" requirements — that is, requirements that most undertakings had already chosen not to report on. Below is a summary of some key changes worth noting:
1. The structure changes, with consolidated chapters
In the new draft of the simplified ESRS standards, many separate sections have been consolidated and restructured. For example, Application Requirements (ARs) have been moved from the end of each topic to immediately after each Disclosure Requirement (DR), making navigation easier since the reader no longer needs to jump between several different pages. Another example is that the number of appendices has been reduced from seven to two, which represents a notable simplification. Much of the information in the removed appendices has instead been integrated into the main body of the standard text. Six appendices have been removed: "Application Requirements", "List of phased-in Disclosure Requirements", "Structure of ESRS sustainability statement", "Flowchart for determining disclosures to be included", "Example of structure of ESRS sustainability statement", and "Example of incorporation by reference". As a result, only the appendix "Qualitative characteristics of information" remains. The appendix added in the new standards is "List of topics". This list was previously located within ESRS 1 but has now been moved out into an appendix.
2. The content and numbering of the Disclosure Requirements have changed
It is important to note that the numbering and content of the Disclosure Requirements are not directly comparable between the old and new standards. A Disclosure Requirement with the same label, for example E1-2, does not necessarily contain the same information in the revised standards as in the original ones. Furthermore, Disclosure Requirements have been given new labels, partly because some old Disclosure Requirements have been split into several new ones. For example, ESRS E1-11 in the new standards corresponds to ESRS E1-9 in the old ones, but they are not identical. It is therefore important not to assume that a Disclosure Requirement with the same name or number contains the same requirements as before.
3. Sector-specific standards disappear
The old standards divide ESRS into three categories: cross-cutting (ESRS 2 General Disclosures), topical (environmental, social and governance), and sector-specific. The sector-specific standards have been removed in the new draft, as a direct consequence of the Omnibus I Directive, which entered into force in March 2026 and withdrew the Commission's power to adopt such standards.
4. ESRS 2 is no longer mandatory
Under the old standard, all undertakings always had to provide ESRS 2 disclosures, including IRO-1 from every topical standard, regardless of the outcome of the materiality assessment. In the new draft, this mandatory wording has been removed, and the materiality principle applies consistently throughout the standard. The standard notes, however, that the Disclosure Requirements in ESRS 2 are of a fundamental nature and are therefore likely to result in material information for all undertakings regardless.
5. The climate change exemption is simplified
Under the old standard, an undertaking that assesses climate change as not material had to provide a detailed explanation of why this is the case, including a forward-looking analysis of circumstances that could make climate change a material sustainability matter in the future. In the new draft, this specific requirement has been simplified, and the undertaking now only needs to provide a description of the basis for its conclusion. Climate change is thus treated more like the other topics, but remains the only topic that requires any form of explanation in the event of non-materiality.
6. Fair presentation is a new, central concept
Fair presentation is something that is absent from the old standard and constitutes an important, principle-based addition in the new draft. The addition, which forms Chapter 2 of ESRS 1, links the materiality filter to the requirement for a fair presentation. Under the revised ESRS, fair presentation means that the sustainability statement shall provide a complete, neutral and accurate depiction of the undertaking's material impacts, risks and opportunities (IROs). The undertaking may, however, omit information that cannot be obtained without disproportionate cost or effort, provided that the fair presentation of the statement is not compromised.
7. The materiality assessment is more detailed and flexible
The new draft explicitly introduces a "top-down" approach and a "bottom-up" approach that undertakings can choose between or combine. In a top-down approach, the undertaking starts from its business model, strategy, sector, geography and value chain to identify the ESRS topics most likely to be material. The focus is on using existing knowledge of the business and its exposures, making a qualitative assessment of likely IRO’s and only carrying out more in-depth analysis where genuine uncertainty exists. The materiality assessment thereby becomes more proportionate, more strategically integrated and more judgement based. If the answer is not evident from that analysis, it is supplemented by a more detailed bottom-up approach, although undertakings may also choose to apply only this approach without first carrying out a top-down analysis. This means that individual potential IRO’s are identified and analysed more systematically before being linked to the relevant ESRS topics. This way of working is characterised by comprehensive identification of individual IRO’s, quantitative scoring matrices, aggregation to ESRS topics, and extensive stakeholder engagement. The new guidance thus marks a shift from a more exhaustive and resource-intensive approach towards a method that relies to a greater extent on professional judgement and a focus on the most relevant matters.
In addition, the new draft contains clearer rules on the periodicity of the assessment. The old standard required undertakings to report when the materiality assessment had last been revised and when the next revision was planned. The new draft goes further and requires undertakings, at each new reporting date, to actively consider whether changes have occurred that affect the materiality assessment. Such changes may relate to the undertaking's activities, structure, business relationships, understanding of IRO’s, assessment methodologies, or changes in the external environment.
8. More detailed rules on determining boundaries in the value chain
The new draft contains an entirely new section under ESRS 1 (5.3) on leased assets and long-term employee benefit plans (for example, pension plans). The Disclosure Requirements under Chapter 5.3 clarify the reporting boundaries for own operations and the value chain, and describe how the lessee and the lessor shall report on the leased asset. As for assets held under an undertaking's long-term employee benefit plans, these are connected to the undertaking through its business relationships in the value chain. The rules on reliefs for acquisitions and disposals (5.4) have also been clarified. If an undertaking acquires a subsidiary during the reporting period, it may defer including it in the materiality assessment until the following reporting period. The old standard addressed this in less detail.
9. The reliefs have been substantially expanded
The old standard had limited reliefs. The new draft contains three separate reliefs in Chapter 7.3. The first is the possibility to exclude activities from calculations if they are not a significant driver of the IRO’s that the metric is intended to represent, and if the exclusion is not expected to impair the relevance of the information. The second is that undertakings may report on a partial scope, or for part of the value chain, in relation to material IRO’s. This applies to IRO’s other than those within ESRS E1-8, Gross Scope 1, 2 and 3 GHG emissions. The third is that undertakings may exclude joint operations over which they do not have operational control from the calculation scope for the environmental metrics under E2 (Pollution), E3 (Water), E4 (Biodiversity and Ecosystems) and E5 (Resource Use and Circular Economy).
10. The transitional provisions have been changed and expanded
The old standard has a long list of phased-in requirements. The new draft has shorter, adjusted phase-in provisions, aligned with the Omnibus package and with new deadlines. What is new is that quantitative information on anticipated financial effects (under ESRS 2 and ESRS E1-11) may be omitted for financial years before 2030. Under the old standards, the corresponding relief only applied during the first three reporting years, which for wave-one undertakings meant the requirement would have applied from financial year 2028 onwards. In addition, for financial year 2026, wave-one undertakings that do not exceed the new thresholds (1,000 employees and EUR 450 million in net turnover) may omit all Disclosure Requirements in the topical standards from their sustainability statements.
11. Option to include an executive summary
The new draft introduces an option that was absent from the old standard. Undertakings may now include an executive summary in the sustainability statement containing the key messages about material environmental, social and governance impacts, risks and opportunities and how these are managed. The summary may be placed either directly in the sustainability statement or outside it, for example, in another section of the management report, provided that the conditions for incorporation by reference are met.
12. Clearer guidance on assessing the effect of actions ("gross vs net")
The new draft introduces clearer guidance on how already implemented actions shall be considered in the materiality assessment. For actual impacts that have already occurred, severity shall be assessed based on how it actually manifested during the reporting year, without regard to remediating activities carried out during the same period. For potential, future impacts, on the other hand, the undertaking may consider already implemented preventive and mitigating policies and actions, provided there is reasonable support that they effectively reduce the severity or likelihood. Actions or policies that have not yet been implemented may not be taken into account. The draft also clarifies that positive impacts shall be assessed separately and not netted against negative impacts. The old standard lacks equivalent, equally clear guidance on these points.
Summary
In summary, the new draft is a clearer and more flexible document, but it also means that several requirements that were mandatory for all undertakings now become materiality-dependent, which is perhaps the most significant substantive change.
The simplified ESRS standards apply from financial year 2027 onwards, with the possibility of early application already for financial year 2026. For undertakings that have already reported under the CSRD for 2025, the question remains: which will choose to remain with the original standards for 2026, and which will choose to apply the simplifications already for the next reporting year?
AVA Corporate Communications is a leading agency in financial communications, investor relations and sustainability reporting. We help listed companies navigate new and evolving regulatory requirements, including the revised ESRS standards, the CSRD, the CSDDD, the EU Taxonomy and the EUDR. Whether you are just starting your sustainability reporting, choosing to apply the new simplified standards already for financial year 2026, or waiting until 2027, we can support you through the entire process. Contact us to discuss how we can support you ahead of the coming reporting year.
