EU Commission Asks EFRAG To Simplify CSRD Standards

The European Commission has requested the European Financial Reporting Advisory Group (EFRAG) to accelerate the process of preparing less complex sustainability reporting norms under the Corporate Sustainability Reporting Directive (CSRD). With a hard deadline of merely seven months, EFRAG has to issue technical guidance regarding changes to the European Sustainability Reporting Standards (ESRS) as of October 31, 2025. This action reflects the Commission's wider effort to cut back on regulatory costs while preserving the European Green Deal's essential goals.

The move comes after the release of the Commission's Omnibus I package in February, which made major changes to several regulatory proposals, such as the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD), the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM). The Omnibus package seeks to simplify sustainability reporting requirements and make it more efficient without undermining the effectiveness of EU environmental policy.

EFRAG was originally tasked in June 2020 by the European Commission to develop the ESRS, which were endorsed in 2023. Enterprises and stakeholders have subsequently complained about the standards' complexity and their large data demands, which has prompted action from the Commission. The future changes are intended to dramatically cut the number of datapoints required for sustainability reports while enhancing transparency and harmonisation with international reporting standards.

In a letter to EFRAG, European Commissioner for Financial Services and the Savings and Investment Union Maria Luis Albuquerque underscored the Commission's dedication to reducing unjustified administrative burdens while continuing to meet the sustainability objectives of the European Green Deal. She noted that simplification and burden reduction would be central to the Commission's mandate at present.

The letter sets out certain requirements for the revision of the ESRS, with an emphasis on streamlining the number of required datapoints by eliminating those considered least critical to general-purpose sustainability reporting. The revised standards are also anticipated to emphasize quantitative over qualitative data, keeping narrative disclosures to a minimum while maintaining compatibility with international reporting frameworks. Notably, these changes should not compromise the principle of materiality, which establishes the relevance of reported information based on its importance to stakeholders and the company itself.

In addition to alleviating the reporting burden, the updated ESRS also needs to resolve inconsistencies with other EU legislation, eliminate unclear provisions, and make more specific guidelines on the application of the materiality principle. These changes will be made to help ensure that companies report only material information and that assurance service providers can properly test compliance. The structural and presentation features of the standards will also be simplified to make them easier to use.

The Commission has also underscored the necessity of enhanced convergence between the ESRS and international sustainability reporting standards. Greater interoperability is one of the objectives, enabling firms with operations in several jurisdictions to coordinate their reporting and minimize repetitive disclosures. The new ESRS should enable easier integration with schemes like the International Sustainability Standards Board (ISSB) standards and the Global Reporting Initiative (GRI) framework so that firms can effectively fulfill several reporting requirements.

Realizing the urgency with which the initiative needs to be undertaken, the Commission has laid out an aggressive timeline to effect the changes. The updated law is to be effective in time for entities to begin applying the new standards for sustainability reporting for the financial year 2027. Businesses would also have the choice of taking on the standards a year earlier, for the financial year 2026, if they so desire.

To ensure these timelines are met, the Commission has invited EFRAG to implement new methods and establish a comprehensive work plan that will deliver high-quality, evidence-based recommendations within the specified timeline. The letter asks EFRAG to provide the Commission with its internal timeline and development plan by April 15, 2025.

In reply to the Commission's call, Patrick de Cambourg, EFRAG Sustainability Reporting Board (SRB) Chair, reiterated EFRAG's pledge to streamlining and improving the ESRS. He recognized the value of learning from the initial wave of companies that applied the initial ESRS, so that the updated standards are pragmatic, effective, and proportionate. By narrowing down the standards, EFRAG is to assist businesses in delivering meaningful and decision-useful sustainability information without compromising on the ambition of the CSRD.

This new development is a major turning point in the EU's sustainability reporting environment. Although the initial ESRS were intended to ensure transparency and accountability, the onerous reporting requirements were problematic for most companies, especially small and medium-sized enterprises (SMEs). The Commission's action to streamline the standards is part of a larger initiative to reconcile regulatory requirements with the operational needs of businesses so that sustainability reporting is both possible and effective.

As the role of sustainability reporting becomes more vital to corporate governance and investment choice, revisions to the ESRS soon to come will be carefully observed by companies, investors, and regulators as much. The initiative will be successful if EFRAG can reduce the reporting needs while not diluting the integrity and relevance of the sustainability disclosures. If implemented well, the new ESRS could provide a global standard for effective and efficient sustainability reporting, reaffirming the EU's leadership in corporate transparency and best business practice.