The EU’s journey toward stronger sustainability reporting has been unfolding for years, and each step helped shape the simplified ESRS we see today:
The Non-Financial Reporting Directive (NFRD) marked the EU’s first formal step toward requiring companies to disclose sustainability information. While it improved transparency, the framework was widely considered too limited and lacking in detailed guidance.
Recognising the need for more comprehensive and consistent reporting, the EU proposed the Corporate Sustainability Reporting Directive (CSRD). This new directive significantly expanded the scope of reporting and tasked EFRAG with developing a more robust and structured set of sustainability standards, the ESRS.
EFRAG released the initial ESRS framework, providing detailed requirements across environmental, social, and governance topics. However, many companies raised concerns that the standards were overly complex, resource-intensive, and challenging to implement in practice.
In response to these concerns, the European Commission began reviewing key sustainability regulations through the Omnibus I initiative. Reducing administrative burden became a central priority, leading to a targeted effort to simplify the ESRS while preserving the core intent of the CSRD.
The newly released ESRS is the direct result of this effort, a more streamlined, practical version designed to keep the EU’s sustainability goals intact while making reporting far easier for businesses.
With the updated standards, the EU is essentially saying, “Let’s keep sustainability reporting meaningful, but make it realistic for companies to handle.” Here are the most significant changes shaping this simplified framework:
A key discussion alongside the simplified ESRS has centered on which companies should fall within the scope of the CSRD, especially given the ongoing political pressure to reduce the administrative burden for smaller. This pressure has been particularly visible in cases involving mid-sized EU companies—some employing around 1,750 people and generating approximately €450 million in annual revenue—that have argued the reporting requirements may be disproportionately heavy for their scale. Policymakers have explored the idea of raising the reporting thresholds so that only the largest enterprises would be required to report. However, it is important to clarify that these proposed threshold changes are still under consideration and have not been legally adopted. However, some sustainability advocates have expressed concern that narrowing the scope may limit visibility into the environmental and social impacts of a broader set of EU companies. From a regulatory standpoint, the change reflects a deliberate move toward reducing unnecessary administrative pressure while concentrating reporting efforts on companies with the most material impacts.
The Simplified ESRS is not yet fully official, at least not legally. EFRAG has completed and published the simplified standards, but they aren’t in force yet. To become legally binding, the European Commission must adopt them through a Delegated Act. Until that happens, the 2023 ESRS remain the mandatory standards.Once the Delegated Act is approved and cleared by the European Parliament and Council, the simplified standards will formally replace the 2023 ESRS and become the new reporting framework for companies.
As the EU shifts toward a smarter, more focused sustainability reporting framework, companies will need clarity, structure, and the right expertise to navigate this transition effectively. Even with simplified standards, organizations must still interpret the updated requirements, reassess materiality topics, and align internal systems to ensure they are ready once the rules become legally binding. This is where Cognitud steps in. Cognitud helps organizations translate the simplified ESRS into practical action, offering end-to-end support that delivers both compliance and strategic value. Our team guides companies through updated materiality assessments, streamlined data-collection processes, and value-chain mapping aligned with the new “reasonable effort” provisions. We also help build scalable reporting frameworks, integrate global standards such as ISSB, and craft long-term sustainability strategies that enhance resilience and business performance. As the new ESRS moves closer to formal adoption, Cognitud provides the clarity, tools, and expertise companies need to stay ahead, not just to meet expectations, but to turn regulatory change into an opportunity for smarter, more efficient, and more impactful sustainability practices. Cognitud stands ready to support businesses at every step of this new reporting landscape.
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Abhigyan Gupta
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The simplified ESRS is a streamlined version of the European Sustainability Reporting Standards created for non-listed SMEs and smaller companies. It reduces complexity and focuses only on essential ESG disclosures, making sustainability reporting more accessible and proportionate.
In 2025, ESRS shifts toward a more practical, SME-friendly approach. The standards now include simplified disclosure requirements, improved alignment with global frameworks like the ISSB, and clearer guidance for materiality assessments. The aim is to reduce burden while improving relevance and comparability.
The simplified ESRS is not mandatory. It is voluntary for SMEs that are not under the CSRD. However, companies already falling under the CSRD must continue using the full ESRS, starting from 2025–2026 depending on their size and listing status.
Double materiality means companies must assess sustainability topics from two perspectives: • Impact materiality: how the company affects people and the planet; • Financial materiality: how sustainability issues affect the company’s financial performance. If a topic is material from either angle, it must be disclosed.
Materiality must follow a structured assessment based on relevance, significance, and risk. Companies must document how they evaluated environmental, social, and governance impacts and identify which topics justify reporting. Non-material topics can be excluded but must be explained briefly.
