On December 3rd 2025, the European Financial Reporting Advisory Group (EFRAG) submitted its technical advice to the European Commission on the draft simplified European Sustainability Reporting Standards (ESRS). This marks a major step in reducing the reporting burden for companies under the 2025 Omnibus initiative.
But here’s the bigger picture: while lawmakers debate thresholds and exemptions, stakeholders, not politicians, will ultimately determine how the market deals with sustainability. Consumers, investors, and business partners increasingly expect transparency and ethical practices. Companies that ignore these expectations risk losing trust and competitiveness, regardless of regulatory rollbacks.
Key changes in the simplified ESRS
The EFRAG advice aims to reduce the regulatory burden for companies in the context of the European Commission’s 2025 Omnibus initiative, of which early drafts were released in February this year. The EFRAG draft simplified ESRS focuses on making sustainability reporting clearer, more practical, and less compliance-driven.
It is important to note that this advice strictly concerns the content of the ESRS standards and does not address the recent CSRD discussions in the European Parliament, including the Omnibus vote on November 13, which drastically reduces the scope of mandatory sustainability reporting in Europe.
Here are the most important changes in EFRAG’s simplified ESRS:
- Relevance over compliance: Usefulness of information as a general filter and emphasis on fair presentation for more relevant and less compliance-oriented reporting.
- Simplified materiality assessment: Clearer guidance, less documentation, and better alignment with audit requirements.
- Elimination of the preference for direct data in the value chain, reducing the pressure for data collection.
- Proportionality and phasing-in: Relief mechanisms for challenging disclosures.
- Principles-based standards for narrative disclosures, particularly for policies, actions and targets, with flexibility on how to present the information.
- Shorter, easier standards: ESRS are easier to understand and to implement.
- 61% reduction of datapoints: all voluntary disclosure are deleted.
- Better interoperability with the ISSB Standard: Companies should note that some ESRS reliefs go beyond ISSB requirements.
The European Commission will now prepare the Delegated Act based on this advice.
ESRS Knowledge Hub
EFRAG also launched an ESRS Knowledge Hub, an interactive online platform designed to support companies, practitioners and all sustainability reporting stakeholders in navigating the ESRS and broader sustainability reporting materials developed by EFRAG.
A positive evolution
We welcome the refining of the ESRS’s from the original framework. Some initial requirements were too detailed and difficult to achieve, and we see indications that some of these concerns have been addressed adequately.
Meanwhile: CSRD scope shrinks. Why does this matter?
In parallel, trilogue discussions on the Corporate Sustainability Reporting Directive (CSRD) have started following the European Parliament’s vote on November 13. The proposed changes drastically reduce the scope of mandatory sustainability reporting. Here we are less optimistic.
An overview of the proposed changes to the CSRD (Corporate Sustainability Reporting Directive):
- Higher thresholds for reporting: Only companies with at least 1,750 employees and €450 million revenue will remain subject to CSRD requirements. This means 92% of companies originally covered by CSRD would now be exempt.
- Taxonomy reporting also is limited: Only businesses within this reduced scope will need to provide sustainability disclosures under EU taxonomy rules.
- Reduced standards: Reporting standards are further simplified and reduced, requiring fewer qualitative details and sector-specific reporting becoming voluntary. The main points of these new ESRS proposals from EFRAG are explained above.
- SME protection: Smaller companies will be shielded from excessive data requests by larger partners. Large firms cannot demand more than what is outlined in the Voluntary SME Standard (VSME).
- Narrowed due diligence requirements (CSDDD): Corporate due diligence duty only applies to very large corporations i.e. over 5,000 employees and €1.5 billion in annual turnover. However, even these very large companies will no longer need to prepare transition plans aligned with the Paris Agreement.
- Liability at national level: Non-compliance will result in fines and liability at the national level, not EU-wide, and companies must fully compensate victims for damages.
Once agreed, changes to both the CSRD and CSDDD will be published in the Official Journal of the EU. Member states then have 12 months to transpose them into national laws.
For a deeper dive into these developments, read our related article: The Omnibus vote: Europe votes to weaken sustainability reporting rules.
Our perspective: Stakeholders will drive sustainability
While EFRAG’s ESRS simplification is a pragmatic step forward, the Omnibus vote risks diluting the EU’s sustainability ambitions by drastically reducing the number of companies subject to mandatory reporting.
But here’s the reality: stakeholders, not shareholders nor lawmakers, will hold companies accountable. These stakeholders expect companies, their suppliers, clients and investors to show ethical and sustainable behaviour.
The familiar notion of shareholder value should not differ fundamentally from stakeholder value, certainly not stand in opposition to it.
We remain confident that common sense will prevail, and that genuine leadership and ownership will outpace political pushbacks in Europe.
We’ll continue to monitor these developments and share our insights with you.
