Navigating the latest ESRS updates: key insights for your organisation

The simplification of the DMA under the amended ESRS aims to reduce complexity and shift focus from procedural compliance to meaningful, decision-useful sustainability reporting. For example, a new section in ESRS 1 introduces “practical considerations” for conducting the DMA. This emphasizes a top-down approach starting from the business model to identify obvious material topics. For these obviously material topics, organisations can collect less evidence to support conclusions compared to the 2023 ESRS requirements (eliminating unnecessary scoring). Another example is clarification on how to consider remediation, mitigation and prevention policies and actions in assessing the materiality of impacts (in practice known as the “gross versus net” issue). 

To improve readability and integration of sustainability statements within corporate reporting, certain reporting flexibilities are now clarified. An example is allowing an organisation to disclose information just once, in aggregate, for information related to policies, actions, and targets if organisations apply these to more than one material topic. This aims to improve readability, reduce the reporting burden, and help organisations better tell their sustainability story.

In the 2023 ESRS, the Minimum Disclosure Requirements (MDRs) on policies, actions, and targets within ESRS 2 are duplicated in topical standards, while the topical standards included additional, non-essential disclosure requirements. Within the amended standards, the MDRs are renamed to General Disclosure Requirements (GDR), where the datapoints to be reported are reduced to essential disclosures only. For example, describing the scope of the policy is seen as essential and is therefore still required in the amended draft ESRS. Disclosing the most senior level individual in the undertaking’s organisation that is accountable for the implementation of the policy is considered a non-essential disclosure and is therefore removed. This creates a shift towards a less prescriptive and more principles-based disclosure model.

The structure of the standards has changed, separating clearly mandatory and non-mandatory disclosure requirements. The mandatory guidance (application requirements) is now included immediately after the related disclosure requirements. Additionally, the majority of the “may disclose” datapoints are removed to avoid misinterpretation and to clarify what is truly required versus optional. The non-mandatory guidance has been moved to separate “Non-Mandatory Illustrative Guidance” documents.

EFRAG introduces a range of burden-reduction reliefs to simplify reporting, including broader use of IFRS-aligned provisions such as “undue cost and effort” when reporting metrics and the disclosure of ranges for quantitative anticipated effects. Another important change is a new relief when organisations encounter data quality issues for own operations and value chain metrics, where a partial metric scope is allowed when accompanied by the required disclosures and data availability improvement plan.

EFRAG has drafted the amended ESRS so that they align more closely with IFRS S1 and S2 by updating terminology and harmonizing disclosure requirements to enhance interoperability. Examples are the clarification of fair presentation in line with IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and alignment with the GHG protocol by applying the financial control approach for emission reporting.  

(For wave 2 companies - future reporters with a CSRD obligation for fiscal years beginning on or after 1 January 2027): 
The information materiality assessment determines what organisations need to disclose about their material sustainability topics. A reassessment of information materiality enables organisations to direct reporting efforts to the remaining disclosure requirements in the amended ESRS, saving time and effort by no longer focusing on requirements from the 2023 ESRS that have been removed. For example, organisations can focus their efforts on improving the data quality of a strategic metric instead of drafting detailed narrative disclosures that are no longer mandatory. This assessment is foundational for wave 2 companies to plan and budget their CSRD readiness activities for 2026 and 2027. This will apply to wave 1 organisations (current CSRD reporters) in future years when the amended ESRS apply.

(For wave 1 and wave 2 organisations) 
The CSRD goes beyond reporting. This was always the case, but the revised ESRS and the reduction in datapoints provide an opportunity for organisations to put renewed efforts into defining their policies, setting targets and implementing action plans to make progress on their material impacts, risks, and opportunities. Dedicated attention can be given to essential activities, as required under other regulations, like developing a climate transition plan and supply chain due diligence to focus on operational improvements and reduce risks.  

(For wave 2 companies) 
The DMA is the cornerstone of the CSRD. When refreshing the DMA, organisations should take note of the additional guidance once the amended ESRS are finalized to focus on genuinely relevant sustainability matters. EFRAG provides new practical guidance as well as clarifications of certain elements that were unclear in the past. This will apply to wave 1 organisations in future years when the amended ESRS apply.