The CSRD directive, which aims to harmonize sustainability reporting for regulated companies by proposing sustainability standards known as ESRS standards, is now being called into question. The European Omnibus project, presented at the beginning of the year, aims in particular to simplify the ESRS sustainability standards. At the end of July 2025, EFRAG (an advisory body to the European Commission) published a list of recommendations for changes to these standards. These changes were open for consultation until September 29, 2025.
What are the CSRD Directive and ESRS standards?
The CSRD (Corporate Sustainability Reporting Directive) aims to harmonize the publication of sustainability information. For large companies that meet several specific operational and financial criteria*, it imposes common standards on their environmental, social, and governance (ESG) impacts, risks, and opportunities. The goal is to improve corporate transparency on ESG policies and actions.
The ESRS standards, European standards derived from the CSRD, are the standards that companies must follow to communicate transparently on their ESG issues. They specify the information required from companies regarding the impacts, risks, and opportunities (IRO) of their activities in terms of sustainability. At the request of the European Union, the ESRS were designed by EFRAG (European Financial Reporting Advisory Group). They are divided into two categories: cross-cutting, to define “general requirements and information to be disclosed,” and thematic (environmental, social, and governance).
Omnibus: simplification of ESRS underway
Although these standards were applied for the first reporting period in 2025, their use is currently on hold following the Omnibus legislative project, adopted on February 26, 2025. This set of new proposals aims to revise several texts, including the CSRD. The goal is to simplify requirements to preserve European competitiveness and reduce complexity and administrative burdens for affected companies.
As a key part of this drive for simplification, ESRSs are set to undergo numerous changes, including schedule modifications, substantial amendments to the texts, a narrowing of the scope of companies affected, and reductions in their obligations. A first step in this simplification process was the adoption of two delegated acts, “Quick Fix” and “Stop the Clock,” in July 2025. Wave 1 companies, already required to comply with the CSRD, saw their sustainability reporting obligations reduced for the 2025 and 2026 financial years thanks to the Quick Fix Amendments. This extension of the “phasing-in” period (non-mandatory publication of certain data in the early years) would allow for a gradual increase in expertise on complex ESG issues, as well as a reduction in the workload associated with reporting. The “Stop the Clock” directive allows companies that have not yet published their CSRD reports (waves 2 and 3) to do so only from 2027 or 2028.
ESRS revised and simplified by EFRAG
On July 31, 2025, EFRAG proposed simplified ESRS. In this version, mandatory data has been reduced by 57% and the total number of indicators to be published by 68%. European experts have identified several strategic areas for action.
The first of these is the simplification of double materiality analysis. As a reminder, this concept combines financial materiality (the risks and opportunities for the company related to environmental changes) and impact materiality (the environmental and social impacts that the company’s activities have on the environment). EFRAG has therefore proposed making double materiality more targeted: if the ESRS is not entirely material but only one or more of its sub-issues are, reporting will only be required on those sub-issues.
Clarification has also been provided on how to link the identification of impacts, risks, and opportunities with materiality analysis, as well as the level of granularity expected in sustainability reporting, particularly in ESRS 2. Voluntary disclosure requirements have also been removed. In addition, methodological guidance on how to correctly apply the disclosure requirements (the Application Requirements) must be published before the latter. Non-mandatory illustrative guidance, or NMIG, will also be provided to help companies understand and implement the ESRS. BP-1, which refers to the first level of reporting, remains aligned with ESRS 1 and must be carried out according to the “comply or explain” principle, i.e., the company either applies ESRS 1 or explains why it does not. To improve readability and limit repetition of information, EFRAG also suggested simplifying the structure of sustainability reports: the first part will be a summary, and the second part will contain the appendices with detailed data. With the same aim of efficiency and conciseness in mind, EFRAG also recommended drastically reducing the specifications for mandatory policies, actions, and targets (PATs) in thematic standards.
PATs, or concrete measures implemented to manage a sustainability issue, should only be reported once if they are already implemented within the company on a material issue and described only once in the entire report, even if they cover different material issues. Finally, the Minimum Disclosure Requirements (MDR), replaced by the name General Disclosure Requirements (GDR), have clarified reporting on PATs (policies, actions, and targets) and reduced related reporting requirements.
In addition to these two major areas, EFRAG wants to simplify the collection of difficult data. Companies are required to comply with the principle of “undue cost or effort,” meaning that any collection effort that is disproportionate to the usefulness of the information must be avoided. For acquisitions or disposals of businesses, there will also be a reduction in the amount of information required. The number of mandatory data points must be reduced. If quantitative data on the global value chain is too difficult for certain companies to access, they will have the option of publishing partial data.
Furthermore, the sectoral standards project has been abandoned since the adoption of the Omnibus Act on February 26, 2025. As specified by EFRAG, sectoral requirements are now limited to references for ESRS 2, without any specific development.
The final point on which the expert group recommends action is greater compatibility with global standards. Terminology and definitions will be harmonized with IFRS/ISSB standards—IFRS S1 and S1 or GRI—to facilitate multi-jurisdictional reporting and avoid duplication of effort.
Essential elements preserved
As proof of a strong ongoing commitment to sustainability, certain essential points will remain unchanged. The double materiality analysis will be simplified but not eliminated: it remains mandatory. Scope 3 carbon footprint (indirect emissions across the entire value chain) must still be reported unless the data is inaccessible. As it is still difficult for companies to act on other sustainability criteria, maintaining a thorough and rigorous assessment of carbon impact is crucial. In addition, simplified ESRS will continue to be aligned with the SFDR Regulation and the European Taxonomy.
While criticism from Wave 1 companies is behind this simplification project, some companies that had prepared ambitious ESG strategies for the coming years regret this step backwards. However, many commentators argue that this simplification of ESRS will not undermine the substantive sustainability requirements previously set at the European level.
Next steps in the consultation process
Following the comments received during this consultation period, EFRAG will prepare its official draft revision of the ESRS. This will be submitted to the European Commission on October 31, which is free to make changes, and will then formally adopt the revised ESRS standards. The co-legislators, the European Parliament and the Council of the EU, will then have two months to object to the text proposed by the Commission. These new standards are expected in early 2026.
*Since February 26, 2025, the adoption of the Omnibus laws has led to changes in the scope of companies affected and a postponement of deadlines. To date, companies subject to the CSRD will have to follow the following schedule:
– Wave 1: for fiscal years beginning on or after January 1, 2024, all large public-interest companies with more than 500 employees that meet one of two criteria: total assets of €25 million and net sales of €50 million.
– Wave 2: for financial years beginning on or after January 1, 2027, all large companies that meet two of the following three criteria: total assets of €25 million, net sales of €50 million, average number of employees during the financial year of 250.
– Wave 3: for financial years beginning on or after January 1, 2028, SMEs listed on a regulated European market that meets two of the following three criteria: a balance sheet total of between €0.45 million and €25 million, turnover of between €0.9 million and €50 million, and an average number of employees of between 10 and 250 during the financial year
– For financial years beginning on or after January 1, 2028: non-European companies with net European revenue exceeding €150 million at the end of the last two consecutive financial years and with a branch in France with net revenue exceeding €40 million.
