Important note
It is likely that the amended (simplified) ESRS will not come into effect for FY2025 disclosure cycle, see the timeline for the amendments to come into effect here (p.2). This means Wave 1 companies have to maintain / follow 2023 ESRS for this year’s reporting cycle.
In summary
- Simplification across 6 key ‘top-down’ levers
- DMA: focus on a simplified, pragmatic and meaningful approach
- Readability and conciseness of sustainability statement: organized around the management approach of sustainability topics
- Eliminate duplication, less relevant, more granular narrative datapoints: focus on relevant and decision-usefulness to the users
- Clarity, accessibility and understanding of ESRS: simplified concepts and shortened text
- Additional burden-reduction reliefs: more flexibility and possible exemptions
- Interoperability: further alignment with IFRS, in particular
- Critical “bottom-up review” of all datapoints to prioritise direct relevant and decision usefulness
- 57% reduction in ‘mandatory’ datapoints; all ‘voluntary’ datapoints eliminated, resulting in a total reduction of 68%.
- Length of ESRS standards reduced by 55%
- Content that was previously mandatory but seen as too detailed → moved to Non-Mandatory Illustrative Guidance or NMIG for short.
- General Disclosure Requirements (GDRs) were introduced as the new anchor for all Policies, Actions and Targets, replacing the old MDR structure. MDRs in topical standards reduced / eliminated
- Public consultation (link) open until Sep 29; EFRAG will deliver its technical advice to the EC by end of November.
Relevant articles
Double materiality made simple? – link
ESRS simplification enhancing interoperability – link
Workforce disclosures cut-down in ESRS revisions – link
Key changes across standards
General requirements (ESRS 1)
Overarching
- Additional emphasis on faithful representation
Double materiality
- “practical considerations” on DMA
- Clarified gross vs. net issue (for assessing impact materiality)
Reporting content
- Information materiality as an overarching filter for the inclusion of any information. Criteria for “significance” of information has been clarified
- Intended granularity of report (IROs vs. topics). Flexibility to follow a managerial approach
- Information disclosure restricted to sub-topic-related datapoints if material
General Disclosures (ESRS 2)
BP-1 (Basis for preparation):
- Simplified to a “comply or explain” format.
- Focuses only on stating compliance with ESRS 1 and noting exceptions (e.g. time horizons, acquisitions/disposals)
GDRs (General Disclosure Requirements):
- Consolidating most Policies, Actions and Targets (PAT) requirements under ESRS 2. Topical MDRs eliminated.
- Improved guidance on PAT by allowing companies to describe a policy once, even if it covers multiple topics
GOV Disclosures:
- GOV-1 and 2 consolidated, reducing granularity
- Many narrative datapoints on incentive schemes, risk management, and due diligence deleted
- Due diligence statement remains mandatory but simplified, aligned with the upcoming CSDDD.
Climate Change (E1)
- GHG emissions accounting aligned with GHG Protocol
- Simplified disclosures:
– Transition plan, scenario analysis, resilience.
– Policies, actions, and targets (PATs).
– CapEx/OpEx linkages, GHG emissions, carbon removals, carbon pricing.
– No longer required: baseline normalization (e.g., 3-year averages), subsidiary-level target reporting, or updates every 5 years after 2030 - Removed disclosures:
– Alignment with Paris-aligned benchmarks.
– GHG intensity on revenue.
– Concept of high climate impact sectors.
– Net-zero target disclosures.
– Acute and chronic physical risk exposures.
– Several financial effect datapoints
Pollution & Water (E2 / E3)
E2 Pollution:
1. Reliefs for site-level info. and centralization of anticipated financial effects in ESRS 2.
2. Deleted some detailed pollution transfer requirements (moved to NMIG)
3. Additional datapoint on secondary microplastics
E3 Water :
Deleted: water intensity per revenue.
New mandatory: total withdrawals and discharges (moved from voluntary to mandatory).
Biodiversity & Waste (E4 / E5)
E4 Biodiversity :
1. Deleted marine resources datapoint (policies on oceans instead covered via AR).
2. Narrowed definitions (e.g. biodiversity-sensitive areas, impact drivers).
3. Some disclosures moved to Application Requirements (not mandatory).
E5 Circular Economy:
1. Definitions included to clarify key terms
2. Removed explicit datapoint on non-recycled waste
3. Waste categories clarified; recycling metrics aligned with new glossary definitions.
4. Additional: % of total weight that are critical and strategic raw materials
5. % or total weight for which the final destination is unknown
Own Workforce (S1)
1. Revised wage benchmark hierarchy for non-EU countries.
2. More reliance on NMIG for definitions (employees, non-employees, value chain workers).
For the policies related to human rights and for the alignment with UNGP and OECD MNE Guidelines, eight datapoints from the four Social Standards have been merged into a “human rights policy” in ESRS 2 GDPR-P, for the four affected stakeholder groups
The indicator in relation to severe human rights cases have been merged into one and it is maintained across the four Social Standards
A small number of amendments on the scope has taken place for (i) SFDR PAI Indicator 3 of Table #3 in relation to days lost, as fatalities has been deleted from its scope (ESRS S1-13) and ; ii) the scope for the severe human rights cases has been revised in order to provide a clearer definition (ESRS S1-16, S2-3, S3-3, S4-3) .
Social Standards (S2, S3, S4)
Standards were significantly simplified, with many datapoints removed and the focus shifted to decision-useful information instead of detailed metrics.
Governance (G1)
No significant changes
Deep dive
ESRS 1
Faithful presentation. Information is material when
- omitting, misstating or obscuring information that could reasonably be expected to influence decisions of the primary users
- it is necessary for users to understand the IROs and how it is identified and managed
Assessing impact materiality
- Severity of impact shall be evaluated considering mitigation or prevention measures implemented before the impact occurred
- Remediation actions during the reporting period shall not be considered while assessing the impacts.
- Mitigation or preventions may be considered while assessing the materiality supported by effectiveness of the actions. But not if the actions have to be maintained
- Future remediation actions and policies arenot considered
- No netting of negative and positive impacts
- Positive impact when the business activities, products or services mitigate or remediate negative impacts of another party
Assessing financial materiality
- No major change
- Gross vs. net still a question
Material impacts and risks arising from actions
- Disclose negative impact / risks and associated action causing it.
Practical considerations
- Undertaking shall use reasonable and supportable information w/o undue cost or effort. Conducting due diligence and managing IROs are considered available.
- A limited further assessment on topics which may not be relevant to the company and its value chain.
- No need to analyse every time horizon
- For impacts, to analyse separately each characteristic of severity!
- Use of quantitative information or quantitative scoring is not required in all cases – a qualitative analysis may be sufficient. Consider “trend” compared to previous year in DMAs.
Information to be reported
- When a sub-topic is material, only report information relevant to the sub-topic.
Level of aggregation, disaggregation and group reporting Should reflect the level at which significant variations of material topics / IROs arise