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Key Changes Introduced in the Revised ESRS

A Significantly Narrower CSRD Scope
One of the most significant changes is the revised CSRD reporting threshold. Under the updated framework, mandatory reporting will primarily apply to companies with more than €450 million in revenue and over 1,000 employees, removing approximately 90% of previously in-scope companies from the reporting requirement. While this significantly reduces the compliance burden for businesses, it also reduces the availability of standardized ESG data, particularly from mid-sized and smaller companies. Companies outside the mandatory scope can still report voluntarily using the Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME). However, as adoption is optional, reporting is likely to become less consistent, making sustainability information less comparable across the market.
Significantly Fewer Mandatory Disclosures
For companies that remain within the CSRD scope, the reporting burden has been significantly reduced. Mandatory disclosure datapoints have been cut by 61%, and with the removal of voluntary disclosures, the overall reduction exceeds 70%. This allows businesses to focus on reporting the most material sustainability information rather than managing extensive disclosure requirements. However, it also means investors will have access to fewer ESG metrics, making deeper analysis and company engagement increasingly important.
Closer Alignment with Global Standards
The revised ESRS aligns more closely with the IFRS Sustainability Disclosure Standards, making it easier for multinational companies to prepare consistent sustainability disclosures across different jurisdictions. This improved interoperability reduces reporting duplication and supports a more streamlined reporting process, particularly for organizations already reporting under IFRS S1 and IFRS S2.
Greater Flexibility in Emissions Reporting
Companies can now define greenhouse gas (GHG) emissions boundaries using either the financial control or operational control approach, bringing the ESRS into closer alignment with IFRS S2. While this provides greater flexibility, organizations will need to clearly disclose the methodology they use to ensure emissions data remains transparent and comparable.
Changes to Asset Manager Disclosures
The revised ESRS also removes the requirement for asset managers to disclose sustainability information for assets managed on behalf of clients. This reduces reporting duplication and places disclosure responsibility more directly on asset owners. However, it may also reduce the availability of sustainability information across certain investment portfolios.
Continued Focus on Climate Transition
Despite the broader simplification efforts, organisations must continue to disclose whether their business strategy aligns with the 1.5°C climate pathway. Retaining this requirement reinforces the EU's commitment to climate transparency while ensuring investors continue to receive meaningful insight into companies' long-term climate transition plans.

What These Changes Mean for Businesses

The revised ESRS gives businesses an opportunity to move beyond compliance-driven reporting and adopt a more strategic approach to sustainability. With fewer mandatory disclosure requirements, organisations can focus on identifying material issues, strengthening governance, and improving the quality of their ESG data. The closer alignment with global reporting standards is particularly beneficial for multinational organisations, helping reduce duplication across jurisdictions. At the same time, companies will need to exercise greater judgement when determining material information and clearly explain the methodologies used in their disclosures, particularly for climate-related data.

What These Changes Mean for Investors

While the revised framework simplifies reporting for businesses, it also changes the way investors access and evaluate sustainability information. With fewer companies required to report and fewer mandatory disclosures available, investors will have access to a smaller pool of standardised ESG data. Greater flexibility in reporting methodologies may also make comparisons across companies more challenging. As a result, investors are likely to rely more on company engagement, sector expertise, and proprietary research to assess sustainability performance and long-term risks. In this evolving landscape, the quality, transparency, and credibility of sustainability disclosures will become even more important than the volume of information reported.

How Can Cognitud Help?

As sustainability reporting requirements continue to evolve, companies need more than regulatory compliance; they need a reporting strategy that supports informed decision-making, strengthens stakeholder confidence, and creates long-term business value. At Cognitud, we help organizations navigate this transition by conducting materiality assessments, developing sustainability strategies, strengthening ESG data management, and aligning disclosures with leading global frameworks, including ESRS, CSRD, IFRS S1/S2, GRI, and ISSB. Our practical, business-focused approach enables organizations to build credible, future-ready sustainability reporting that goes beyond compliance to support resilience and sustainable growth. Get in touch to explore how we can support your sustainability reporting journey.

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Frequently Asked Questions

The European Sustainability Reporting Standards (ESRS) provide a framework for organizations to report sustainability-related information under the Corporate Sustainability Reporting Directive (CSRD). Companies assess material environmental, social, and governance (ESG) impacts, risks, and opportunities, then disclose relevant information using standardized reporting requirements.

The ESRS include over 1,100 potential data points across environmental, social, and governance topics. However, organizations are only required to report the data points that are material to their business based on the double materiality assessment, except for certain mandatory disclosures.

The CSRD is the European Union regulation that requires eligible companies to disclose sustainability information, while the ESRS are the reporting standards used to meet those requirements. In simple terms, CSRD defines who must report, and ESRS explains what and how to report.

The ESRS are organized into four main reporting areas: General Requirements, Environmental, Social, and Governance. Together, these standards help organizations disclose sustainability-related impacts, risks, opportunities, and performance in a consistent and comparable manner.

The mandatory ESRS currently include ESRS 1 (General Requirements) and ESRS 2 (General Disclosures). Topic-specific standards covering environmental, social, and governance matters are reported based on the results of a company's double materiality assessment.