Simplified ESRS: Eurosif warns against further cuts

Yesterday, EFRAG published its final technical advice to the European Commission for simplified European Sustainability Reporting Standards (ESRS).

Eurosif appreciates the streamlined structure of the revised ESRS and the preservation of the standards’ core elements. However, the substantial reduction (by 61%) in the number of data points, despite preserving critical information such as climate and biodiversity transition plans, removes some essential disclosures including climate scenario analysis and detailed exposures to physical and transition climate risks. We caution against any further reduction: EFRAG's simplified standard is already the absolute minimum to meet investors’ needs.

We welcome improvements such as clarifying the double materiality principle and eliminating the duplications between cross-cutting and topical disclosures, which facilitate the use of the ESRS. Concerns mount, however, over extensive reliefs granted to preparers. Cross-cutting reliefs, especially those based on “undue cost or effort”, lack requirements for companies to establish timelines for full compliance. This risks turning these reliefs into common practice rather than exceptional measures and undermines the credibility and comparability of reports for investors.

We call for maintaining mandatory quantitative and qualitative disclosures on anticipated financial effects, as these are vital for investors’ risk management and capital allocation decisions. However, additional reliefs for companies lacking “skills, capabilities or resources” to publish this information could, without clear safeguards, further limit transparency.

Finally, interoperability between the ESRS and international standards such as the ISSB and TNFD must be ensured. We support EFRAG’s efforts to bridge international gaps by introducing globally recognised concepts such as “fair presentation” in the ESRS. However, the deletion of some data points, and introduction of reliefs going beyond international standards, hinder global interoperability to the detriment of companies and investors alike.

“EFRAG had to find a difficult balance between maintaining core information for investors and simplifying reporting for companies” Nathalie Dogniez, Chair of Eurosif, said. “The end result can still deliver the essential disclosures for investors and other financial institutions, provided the European Commission refrains from making further cuts and includes safeguards to protect investors.”

 “The strength of European sustainable finance relies on robust, decision-useful disclosures,” said Aleksandra Palinska, Executive Director. “While we recognise the effort to simplify the ESRS, cutting too deeply risks weakening Europe’s leadership on transparent and reliable sustainability reporting. Ensuring that companies provide complete and comparable data is essential for investors to channel capital where it is most needed for the transition.”

Eurosif urges the European Commission to swiftly adopt the revised Delegated Acts without further weakening EFRAG’s proposals, while adding necessary time limits to companies’ reliefs. Any further cut in data points, or new exemptions, would undermine the relevance of the ESRS and their usability for investors.

 

Contact: Anne Risse, Policy and Communication Officer – anne.risse@eurosif.org

Please find the full press release in PDF form here.