With its draft revised European Sustainability Reporting Standards (ESRS), the European Financial Reporting Advisory Group (EFRAG) strikes a good balance between reducing the number of datapoints and preserving key information that is necessary for sustainability reporting users. However, new provisions on reporting reliefs could affect the quality of sustainability reports.
EFRAG has published its draft revised ESRS on 31 July 2025, with the objective to make sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD) more manageable while preserving its relevance and alignment with the European Green Deal. As reported by EFRAG, mandatory datapoints have been cut by 57%, and the full set of disclosures reduced by 68%. The overall length of the standards has been shortened by over 55%, making ESRS more accessible and implementable.
Finance Watch welcomes the preservation of a large part of quantitative datapoints and the reduction of qualitative datapoints which, in some cases, tend to unnecessarily increase the length of certain sustainability reports without providing an informational value added.
However, Finance Watch expresses concerns over targeted reliefs that could impact the quality of sustainability reports, in particular regarding the “Undue cost or effort” relief. Finance Watch warns that the Impacts, Risks and Opportunities (IROs) identification could become an exercise where companies rely on standardised IROs for a specific sector without adequately tailoring the assessment to their own activities. This risks creating legislative loopholes for large companies not to report important (material) information. Finance Watch agrees with the European Central Bank’s position stating that reliefs for lack of sufficient data quality should be limited in time, and more generally reliefs should be exceptional.
Finance Watch also encourages EFRAG to solve targeted weaknesses observed from the first sustainability reports. Finance Watch noted that, in a CSRD report benchmark on 64 banks (representing 75% of the total assets), only 59% of the reporting companies reported their transition plan while 84% disclosed GHG emission reduction targets. Finance Watch shares concerns over the credibility of the emission reduction targets for companies stating that they did not adopt a CSRD transition plan. To prevent greenwashing, Finance Watch recommends that the ESRS require the publication of the transition plan disclosures as soon as the company discloses GHG emission reduction targets. Finance Watch also recommends EFRAG to require reporting subsidiaries of non-EU groups disclosing a transition plan to set and disclose GHG emission reduction targets at local level. A mere statement that targets are set at group level should not be allowed.
Finally, Finance Watch welcomes interoperability efforts between the ESRS and the ISSB Standards, but highlights the importance to defend the principle of double materiality and the reporting approach adopted under CSRD. Finance Watch has continuously warned against the limits of the ISSB (International Sustainability Standards Board) approach to address the overlap between the notion of impact materiality and financial materiality.
EFRAG consultation on revised ESRS exposure drafts
