ESRS 2.0 launched - ”Everybody is unhappy, so the compromise is right”

ESRS 2.0 Simplified: What the New Draft Standards Mean for Companies

“Everybody is unhappy, so the compromise must be right” – this is how Chiara del Prete, Chair of EFRAG’s Sustainability Reporting Technical Expert Group, summed up the essence of the ESRS simplifications on Thursday, as EFRAG unveiled the significantly revised standards.

It’s a genuine watershed moment for sustainability reporting in Europe and beyond. The compromises won’t satisfy every stakeholder, but the update delivers a more streamlined, cost-effective and pragmatic path forward — one that reduces complexity while preserving the ambition and integrity of the EU’s sustainability agenda.

In this post, we have taken a closer look at what’s changing, explored what those changes really mean for how companies report on ESG, and outlined why it matters for organizations of all sizes preparing for future compliance.

The million dollar question: When does the simplified ESRS apply?

This was the most asked question at EFRAG’s launch event — so here’s the answer upfront. What EFRAG presented today is still a draft. For these revised standards to become the official European Sustainability Reporting Standards, the European Commission must adopt them as a delegated act. That process has mandatory legal steps, which means adoption is not expected before mid-2026.

The implications:

• Wave 1 companies preparing their 2025 reports must continue using Set 1 ESRS.
• If adoption slips and the Commission doesn’t allow early application, Wave 1 may even need to use Set 1 for their 2026 reports. ‍
• Voluntary reporters can start using Set 2 whenever they choose.
• For Wave 2 companies (reporting on 2027 data in 2028), ESRS 2.0 will most likely be in force.

‍

What’s Changing: Key Themes in the ESRS Update

Fewer datapoints: a leaner, sharper standard

The new simplified ESRS reduces mandatory datapoints (if material) by around 61%, and removes all voluntary (may-disclose) datapoints altogether. When voluntary disclosures are included, the total number of datapoints falls by roughly 68%. In terms of volume, the ESRS documentation itself is about 55% shorter than the original 2023 version.  

Beyond raw numbers, the architecture has been reworked. The overlap between the overarching ESRS 2 and the topical standards, which was the source of a lot of confusion and frustration has been minimized. For example,the relationship between “minimum disclosure requirements (MDR)” for policies, actions and targets (PATs) in ESRS 2 and additional datapoints for PAT disclosures in the topical standards  has been reconceived. MDRs are renamed as General Disclosure Requirements to signify that these apply across the topical standards, with only minimal additional information required under the topics. As before, policies, actions and targets only need to be disclosed once – but this insight is now clearer from the standards as well.

Application Requirements (ARs) — guidance explaining how to report — are restructured to appear immediately beneath disclosure requirements (DRs), improving readability and logical flow.Furthermore, terminology simplified: “matters” are replaced with a more streamlined definition of topic, reducing nested complexity.  

EFRAG also amped up the guidance game. They proposed a Non-mandatory illustrative guidance (‘NMIG’), which is a new document designed to provide non-binding illustrations of the requirements of Amended ESRS. The NMIG is comprised of content removed from ESRS 1.0 — including many disclosures which were voluntary and application requirements that were edited out — that EFRAG believes would still be useful to preparers. 

Even more importantly, they launched an online knowledge. This is a long awaited compilations of the dozens of pdf that were needed to prepare an ESRS report, on an easy to navigate, user-friendly database. Just imagine: you can now read the ESRS, and by clicking on words or phrases a trove of useful information appears: definitions, relevant paragraphs from the implementation guidances and even from external sources, such as the GUGH protocol. Well done, EFRAG!  

In short: the new draft ESRS is significantly more concise, easier to read and navigate — a major shift away from the heavy, compliance-checklist style that many early adopters criticized.

A more simple, pragmatic approach to DMA

The concept of double materiality (assessing both how a company’s activities impact the environment and society, and how ESG issues affect the company’s financial position) remains central under the revised ESRS. But the way companies are expected to perform this assessment is changing.

Under the original ESRS, the DMA approach was often viewed as overly burdensome, with detailed scoring, exhaustive sub-topic checklists, and heavy demands for extensive documentation. The revised ESRS instead emphasizes a more strategic, top-down approach: companies are encouraged to base their DMA on their business model and strategic context, using qualitative judgments supported by reasonable and proportionate evidence rather than exhaustive scoring.

What does this mean in practice? Take a beer producer. If you say water is material, no one expects a 40-page justification — beer is more than 90% water. You don’t need panels of experts, elaborate scoring models, or excessive documentation to “prove” the obvious.

Auditors will instead spend their energy on the non-obvious: why certain industry-relevant topics are not considered material. If an oil extraction company claims that health and safety isn’t material because “we have strong mitigation measures,” that’s exactly the kind of reasoning that will raise eyebrows.The simplified ESRS brings clearer guidance here: how to evaluate negative impacts that are already being mitigated, and how much that mitigation should influence the materiality judgement.The result: more flexibility, less administrative burden and potentially a more meaningful focus on what really matters, rather than ticking boxes and getting lost in sub-sub topics (which, by the way, were removed from AR16).

Principles-based narrative disclosures that are flexible

Another core change is how narrative information (policies, actions, targets, or PATs) is dealt with. The revised standards take a more principles-driven approach: instead of detailed prescriptions for mandatory metrics and sub-sub-topic disclosures, companies can describe their ESG strategies and management approach, their targets and progress in a way that reflects their own realities and structure. This change reflects feedback from preparers who signalled to EFRAG that in their current form, ESRS-based sustainability statement are so long and detailed they don’t work as a communication tool. “This was very worrysome”, commented del Prete on this finding. “A sustainability report is still a story that companies tell about themselves, and we need to provide flexibility for this”, added Gemma Sanchez, head of the social standards technical group.

The revised standards enableorganizations to shape their sustainability reporting as strategic communication: aligned with company values and business strategy rather than a rigid compliance exercise. By allowing for executive summaries and moving data-heavy tables to appendices, it will also open up space for integrating ESG information in broader corporate reporting,potentially bridging the gap between financial and non-financial reporting.  

Reliefs, proportionality, and phased implementation where appropriate

Recognizing that one size does not fit all, the revised ESRS introduces a range of reliefs and proportionality mechanisms. For example, where data collection would result in “undue cost or effort,” companies may apply more flexible reporting, mitigating the burden of compliance. A notable example of this is the anticipated financial effects of sustainability topics. Companies can now phase-in this reporting as late as 2030. “Use these relieves wisely”, noted Simon Braaksma, member of EFRAG’s sustainability reporting board. “If you want your company to be resilient, don’t sit back and have a cup of tea, but start talking to finance colleagues and check the reports of those, who have been calculating these financial effects for years now”.

In addition, many of the challenging disclosures - especially those requiring granular data or considerable outreach across a company’s value chain - come with phasing-in options. The preference for directly collected value chain data has also been eradicated, in ESRS 2.0 estimates are just as good for reporting (given that the company is transparent about the nature and origin of these estimates).

‍

What Do These Changes Mean for Sustainability Reporting Practices?

Reporting gets more strategic and less burdensome, moving from compliance to value

The overall effect of simplification is to make the reporting of sustainability more manageable and, perhaps more important, more meaningful. By reducing the number of datapointseliminating overlaps and repetitionsand enabling principles-based narrative disclosures, companies can now express their own voice in telling their sustainability story, aligned with strategy, business model, and stakeholder priorities. Reporting on how IROs are managed by the company becomes less rigid and prescriptive: companies won’t need to tell the story by impact, risk or opportunity, they can now opt for telling the story on the topic level.

This shift helps ESG reporting move further away from a mere box-ticking exercise and more toward strategic value creation. Companies can concentrate on material issues, smoothly integrate ESG into management reporting, and simply do a better job of communicating with their important stakeholders (investors, employees, customers, regulators) about how sustainability is managed in practice, not just in metrics.

This shift understandably triggers some alarm bells for anyone who remembers the “old days” of sustainability reporting, when companies could tell almost any feel-good story about their CSR initiatives. Those narratives rarely reflected real impacts on people or the environment, nor did they reveal the risks the business actually faced. EFRAG is clear on this point: more flexibility in narrative reporting does not mean a return to cheerful greenwashing. The intent is not to let companies spin a nicer story — it’s to allow them to explain their impacts in a way that is coherent and decision-useful. Reporting will remain evidence-based and comprehensive. And yes, that means the bad news still has to be disclosed.Yet risks remain: comparability, transparency, and possible “lowest common denominator” reporting

With flexibility comes risk. A number of commentators have noted that reducing granularity could weaken consistency and comparability between companies. Where companies adopt more narrative, qualitative disclosures, or use reliefs to avoid commitments, for example, the consequence could be a patchwork of reports which will make comparisons of performance or progress more difficult for investors, regulators, and civil society.

In particular, relaxing value-chain data requirements may result in more estimates and approximations, which could make the resulting data less robust or reliable.

Finally, if reporting becomes too "light" there is a risk that the ESRS – indeed, originally meant to be a solid foundation for EU sustainability ambition – will  drift towards a mere lowest-common-denominator approach in which compliance is easy but accountability suffers.

What it means for large corporations versus mid-size companies

The updated ESRS is arguably a game changer, especially for companies that have so far hesitated to embrace CSRD compliance, including mid-sized enterprises who fell out of CSRD’s scope, due to resource constraints or perceived complexity. How companies should respond depends on whether they are reporting voluntarily or are in scope of the CSRD/ESRS requirements.

For voluntary reporters, the simplified ESRS offer an immediate opportunity. These organizations can already begin using the new, streamlined standards to shape their sustainability disclosures. With significantly reduced data requirements, clearer structure and more flexible narrative elements, the simplified ESRS provide a more accessible and cost-effective framework. For many mid-sized enterprises that previously stepped back from ESG reporting due to limited resources or perceived complexity, the simplified standards create a realistic entry point.  

For companies formally in scope of CSRD, however, caution is essential. Until the simplified ESRS are officially adopted by the European Commission, these organizations must continue reporting in line with the currently applicable ESRS Set 1 and any interim relief. Early switching is not recommended as it may lead to compliance gaps or unmet legal requirements.  

Large multinationals stand to benefit once the simplified standards are formally introduced. That said, reporters with complex value chains should approach the transition thoughtfully. The simplifications, while helpful, may reduce granularity in certain areas. Companies with higher ESG exposure may need to go beyond the minimum and maintain more detailed disclosures voluntarily. to ensure context, comparability and stakeholder confidence.

‍

Challenges & Opportunities: What Companies Should Watch

Challenge: Transition period and uncertainty — what applies when?

It’s important to note that the simplified ESRS are still draft guidelines. The next step is for the European Commission to adopt them via a Delegated Act, which is expected within six months. Once adopted, these new standards will presumably apply for the financial years 2026 or 2027 (respectively reporting in 2027 or 2028) — although early voluntary application could be possible.

Meanwhile, the original ESRS (Set 1) adopted in 2023 remain applicable for companies, even though some reliefs from interim "quick-fix" regulations may apply already. This transition creates a window of uncertainty: organizations must stay informed, monitor developments, and prepare to adjust their reporting.

Opportunity: A realistic path going forward for late adopters and volunteer reporters

With the revised ESRS, companies that so far have delayed or avoided CSRD/ESRS reporting (due to limited ESG-reporting capacity)-find an easier point of entry. This is true because the lower data burden, together with flexibility in presentation, makes the framework much less daunting.

This may trigger wider adoption, improved internal ESG governance, and fuller ESG disclosures across Europe, not only from the largest firms but increasingly from mid-sized ones too.

Challenge: Overuse of reliefs may diminish the quality of ESG oversight

Nevertheless, such simplification comes along with several trade-offs. One such over-reliance is on reliefs, narrative, or qualitative reporting and approximations, which may be harmful to the much-needed transparency, comparability, and robustness of ESG reporting. This would weaken the ability of external stakeholders to assess ESG performance and ultimately harm broader sustainability goals, including measuring progress toward climate, biodiversity, and social targets.

Investors, regulators, and civil society might need to urge companies not only to adhere to the letter of the ESRS but also to the spirit: providing meaningful disclosures, not just minimal ones.

Opportunity: Better integration of ESG and financial reporting

The updated ESRS facilitate a more integrated reporting model. This allows flexibility in the structure, such as making executive summaries or appendices, or even management-report style disclosures, which would help companies embed ESG disclosures in their traditional corporate reporting.

This integration supports strategic thinking: ESG becomes part of the business planning, governance, and financial reporting, not a standalone compliance add-on. For companies seeking to embed sustainability deeply into their business model, this is a major advantage.

Conclusion

The new ESRS mark a turning point for the EU in their journey to standardized, meaningful and practicable sustainability reporting. Fewer datapoints, removing voluntary disclosures, simplifying materiality assessments, and making narrative disclosures principles-based, the new standards allow for a leaner, more accessible basis upon which companies can report ESG.

But simplicity should not be at the expense of substance. The real value of ESRS will only emerge if companies take this opportunity to embed sustainability into their core business strategies, use reporting as a tool for transparency and accountability, and resist the temptation to treat ESG reporting as a mere compliance exercise.

What you can do today:

1. If your company is under the obligation or will be under the CSRD/ESRS reporting obligation, check now the simplified ESRS draft — including factsheets and logs of amendments — to understand what might change for your next sustainability statement.

2. Begin rethinking your data-collection and ESG governance processes with a view on integrating ESG reporting into the current management reporting systems.

3. Determine if your organization will voluntarily adopt the new ESRS early.

4. Engage stakeholders-investors, employees, suppliers, and communities early in the process. Use the simplified structure as an opportunity to create a meaningful dialogue on what sustainability means for your business.

With the simplified ESRS, the EU is not lowering the bar for sustainability – it’s raising the bar for practical, meaningful sustainability reporting. This, for companies, policymakers, investors, and civil society alike, is a call to move from compliance toward commitment.