On 3 December 2025, EFRAG submitted its technical advice to the European Commission on the simplified European Sustainability Reporting Standards (draft ESRS). This advice is part of the EU’s broader initiative to streamline sustainability reporting under the CSRD, aimed at reducing complexity while maintaining decision-useful information for stakeholders.
Key changes in the draft ESRS
EFRAG’s proposals introduce significant updates. Below, each key change is explained with practical implications for preparers:
- Fair presentation framework
- 61% reduction in mandatory datapoints
- Materiality-driven reporting
- Simplified Double Materiality Assessment (DMA)
- New reporting reliefs
- Anticipated financial effects
- Expanded phase-in provisions
Fair presentation framework
The draft ESRS emphasises fair presentation of sustainability-related impacts, risks, and opportunities (IROs). This approach aligns with IFRS principles and requires companies to provide a balanced view of material information, not just compliance with disclosure checklists.
Practical implication: Preparers must ensure narrative and quantitative disclosures collectively present a true and fair picture of sustainability performance.
61% reduction in mandatory datapoints
The draft ESRS reduces mandatory datapoints by 61% compared to the first iteration. While this simplifies compliance, actual report length will depend on material topics for the entity since the reduction in datapoints various across topics. However, fewer datapoints may lead to more entity-specific disclosures.
Practical implication: Companies should review which topics remain material and prepare tailored disclosures that meet fair presentation requirements.
Materiality-driven reporting
All disclosures are now subject to materiality assessment, replacing previous prescriptive requirements. This change gives preparers flexibility but demands robust materiality processes.
Practical implication: Strengthen governance around materiality assessments and document decision-making to support audit and assurance.
Simplified Double Materiality Assessment (DMA)
Entities can perform the DMA using either a top-down approach (starting at topic level) or bottom-up (starting at individual IROs). Additional guidance clarifies how to consider mitigation actions and decision-useful information.
Practical implication: Choose the DMA approach that best fits your business model and ensure consistency across reporting cycles.
New reporting reliefs
Draft ESRS 1 introduces a number of new permanent reporting reliefs intended to reduce the overall reporting burden without compromising transparency, including:
- Deferral of the inclusions of a newly acquired subsidiary to the following reporting period, and the exclusion of disposed subsidiary from the beginning of the period in which it is disposed;
- Undue cost and effort provisions, introducing the concept of using “all reasonable and supportable information that is available to the undertaking at the reporting date without undue cost or effort”; and
- Flexibility in metric calculations in which entities may (i) omit information of activities if it is not a significant driver of the IRO related to that metric, and (ii) report only on a clarified scope of the reporting boundary of the metric if there is lack of reliable or obtainable data without undue cost and effort.
Practical implication: Map out which reliefs apply to your entity and disclose when they are used to maintain credibility.
Anticipated financial effects
Draft ESRS 2 requires both quantitative and qualitative disclosures on anticipated financial effects of material sustainability-related risks and opportunities. This aligns with IFRS S1, improving interoperability.
Practical implication: Prepare systems to capture financial impact data and integrate sustainability with financial planning.
Expanded phase-in provisions
‘Wave one’ entities may defer certain disclosures until 2030, including quantitative data on anticipated financial effects and substances of concern.
Practical implication: Use phase-in relief strategically to prioritise readiness for high-impact disclosures.
Next steps
The European Commission will review EFRAG’s advice and adopt a delegated act by mid-2026. New standards are expected to apply from financial year 2027, with early adoption for 2026 still under discussion.
Preparers should begin aligning processes now, focusing on materiality, data governance, and interoperability with IFRS standards.
Contact us
