ESRS Simplified: A New Era for Sustainability Reporting

2025 marked a turning point for sustainability reporting, defined by sweeping regulatory changes worldwide. From California’s Climate Accountability Package to the widespread adoption of the International Sustainability Standards Board (ISSB) IFRS S1 and S2 standards and Europe’s Omnibus I Simplification Package, companies faced an unprecedented wave of updates to regulatory requirements.

At the center of these regulatory shifts was Europe’s Corporate Sustainability Reporting Directive (CSRD). Widely regarded as one of the most ambitious sustainability reporting regimes globally, the CSRD’s first year of implementation exposed challenges around competitiveness, rising costs, and fears of overregulation and over-implementation. These concerns triggered calls for simplification, setting the stage for major reforms.

Responding to these pressures, the European Commission unveiled the Omnibus I Simplification Package in February 2025. Its goal: ease administrative burdens tied to sustainability reporting and due diligence directives across the EU. The package proposed major changes to the CSRD, the EU Taxonomy (EUT), and the Corporate Sustainability Due Diligence Directive (CSDDD) – including adjustments to timing, scope and content.

For the CSRD specifically, proposals aimed to:

1. Delay reporting requirements for Wave 2 companies by two years
2. Remove approximately 90% of companies from scope
3. Streamline reporting, assurance, XBRL tagging and value chain requirements  

Set against a turbulent geopolitical climate and mounting sustainability headwinds, these proposed reforms left companies in a prolonged state of uncertainty for much of the year.

From Complexity to Clarity: A New Chapter for the ESRS  

Fast forward to December 2025. On December 4, the European Financial Reporting Advisory Group (EFRAG) issued its final technical advice to the European Commission on the draft simplified European Sustainability Reporting Standards (ESRS). Our Sodali & Co team was in Brussels for the launch event, where EFRAG leaders emphasized their goal: deliver meaningful simplification without compromising substance.

To achieve this, the revised standards focus on six key levers:

1. Simplified Double Materiality Assessment (DMA)
2. Better readability and conciseness of the sustainability statements
3. Modification of the relationship between Minimum Disclosure Requirements (MDRs) and topical specifications
4. Improved understandability, clarity and accessibility of the simplified ESRS
5. Burden relief reductions
6. Enhanced interoperability

The outcome: a 70.2% reduction in mandatory data points, all voluntary data points removed, and a sharper emphasis on decision-useful information. There is also a renewed focus on materiality as the primary filter for reporting, supported by improved interoperability across frameworks.

Summary of changes to ESRS 

Beyond the cross-cutting standards, the revised ESRS introduce significant updates to the topical standards – particularly E1 (Climate Change), S1 (Own Workforce) and G1 (Business Conduct) – topics that are usually material for most companies. Notable updates include:

• E1: Scenario analysis and transition plans are no longer mandatory, even when climate change is material. However, companies are encouraged to disclose whether they expect to adopt a transition plan in the future.
• S1: Human rights disclosures are now limited to significant incidents. Data on non-employees must only be reported when material to the business model, reducing unnecessary detail and mitigating risks of self-incrimination.
• G1: Corruption and bribery disclosures have been streamlined. Mandatory reporting now focuses on final court decisions, sanctions or fines, rather than internal allegations or internal investigations, addressing concerns around sharing sensitive internal information.

EFRAG emphasized that these changes reflect months of extensive public feedback, intense negotiations and ultimately – compromise. Despite competing stakeholder interests, the goal for EFRAG remained clear: reduce complexity without losing sight of the CSRD’s original mission.   

By eliminating unnecessary granularity and restoring trust in market judgement, the revised ESRS signal a broader shift in sustainability reporting – from compliance to strategy. The hope is that companies can now focus on their priority sustainability topics and communicate more effectively how they manage sustainability programs – making disclosures not only less onerous, but also more decision useful for report readers.

Preparing for 2026 and Beyond  

With the revised ESRS now published, what comes next – and how can companies prepare for the next stage of their CSRD journey?

The simplified standards are currently with the European Commission for formal adoption, expected by mid-2026. In the meantime, companies should treat the draft ESRS as a reference point for updating their CSRD roadmap, as no major changes are anticipated. For those who have already completed their DMA but have not yet reported, the existing DMA remains valid and does not need to be redone.  

To stay ahead, companies may consider:

• Confirm that the material topics identified remain appropriate and determine whether any minor refinements to the DMA process would be useful in light of the simplified process.
• Review ESRS 2 disclosures to understand the streamlined General Disclosure Requirements (GDR) and update reporting accordingly, including removing any duplications that previously existed across standards.
• Identify where estimates, reliefs or phased-in requirements can be used appropriately to reduce reporting effort and improve efficiency.
• Adjust reporting templates and structure to take advantage of the increased flexibility offered by the revised standards.

Meanwhile, negotiations continue in Brussels on other elements of the Omnibus I proposal, including changes to the CSRD scoping thresholds.

At the time of writing, a provisional agreement on the CSRD has been reached, including:

• Reporting required for EU companies with over 1,000 employees and over €450 million in net annual turnover, reducing the number of in-scope companies by approximately 90%.
• Financial holding undertakings and listed small and medium-sized enterprises (SMEs) will be exempt.
• There will be a transition exemption for ‘Wave 1’ companies that were required to report from financial year 2024, with these companies out of scope for 2025 and 2026.
• Sector-specific reporting will be voluntary.
• There will be a review clause concerning a possible scope expansion of the CSRD in the future.

This agreement now awaits endorsement by the Council and European Parliament, with key dates ahead:

Legislative Timeline[3]

• December 10: Council vote
• December 11: Parliament Legal Affairs Committee vote
• December 16: Plenary vote in Parliament
• January 2026: Formal adoption of Omnibus changes 

From Uncertainty to Opportunity: Building Resilience for the Road Ahead

After a year defined by regulatory upheaval, staying prepared can feel daunting when the future remains unclear. In times like these, agility and resilience are key. Companies should focus on building sustainability programs that can adapt to shifting regulations and withstand future macro shocks.

Sodali & Co’s guidance for finding calm amidst the chaos:

• Compliance is not the only driver of sustainable value creation. Recognize and celebrate your sustainability program’s business achievements.
• Regulatory simplification is not a setback. Remember that change and transformation are not linear but happen in spurts. The direction of travel is still in favor of sustainability as a tool to unlock untapped business value.
• Be agile and build your resilience. Companies will need to manage multiple scenarios and pathways as potential changes are negotiated and take effect.
• Be proactive about assessing as new information comes out and over-communicating with your stakeholders. Misinformation and noise will be rife during periods of uncertainty.

At Sodali & Co, we’re here to help you navigate uncertainty and turn regulatory readiness into strategic advantage. Wherever you are on your CSRD journey, we can provide tailored guidance to keep you ahead of the curve. Reach out to us at info@sodali.com.