For business leaders, the European Sustainability Reporting Standards (ESRS) have become synonymous with complexity. The initial rollout of the Corporate Sustainability Reporting Directive (CSRD) established a perception of a vast, burdensome framework requiring exhaustive data collection across every facet of an organization and its value chain. The prospect has been, to put it mildly, daunting.
However, in a surprising and welcome turn, recent developments signal a significant shift in philosophy. In July 2025, a pivotal set of proposed revisions to the ESRS signaled a clear pivot towards pragmatism. The European Commission and its technical advisor, EFRAG, are actively working to simplify requirements, substantially reduce mandatory data points, and transform ESRS from a perceived compliance checklist into a more strategic and manageable framework.
This post cuts through the noise to highlight the five most impactful and counter-intuitive changes from the latest proposals. Understanding these shifts is crucial for any business leader looking to navigate the future of ESG reporting not just as a regulatory hurdle, but as a strategic opportunity.
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1. Materiality is Now Your Filter, Not Your Burden
The revised standards place a much stronger emphasis on using materiality as an “overall filter of information.” This is more than a semantic change; it fundamentally alters the approach to reporting. The goal is no longer to boil the ocean but to strategically identify what truly matters.
New practical guidance encourages companies to perform a “top-down” materiality assessment (ESRS 1, AR 17). This means you can start with a high-level, qualitative analysis based on your unique business model, value chain, and strategy to determine which topics are likely to present material impacts, risks, or opportunities. This replaces the dreaded “bottom-up” approach that implied a need to assess every possible impact across all operations. This shift empowers leadership to integrate sustainability into core business strategy from the outset, rather than treating it as a granular, bottom-up compliance exercise.
Further underscoring this focus on pragmatism is the introduction of the “undue cost or effort” relief for materiality assessments (ESRS 1, paragraph 47). This provision acknowledges that identifying material issues should be based on reasonable and supportable information that is available without excessive burden.
The new directive is clear: companies are not expected to assess every conceivable issue. Instead, the focus is on using reasonable and supportable evidence to concentrate on areas where material impacts, risks, and opportunities are genuinely likely to arise.
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2. You Can Report What You Don’t Do (Without Justifying It)
One of the most surprising changes clarifies a core principle of the ESRS. If your company performs its materiality assessment and determines a topic is material, but you have not yet adopted related policies, actions, or targets (PATs), the requirement is simple: you must disclose this fact.
Crucially, the revised ESRS 2 (paragraph 30) only requires the company to disclose this fact, with no corresponding requirement to provide a reason or justification for the absence of these PATs. You only need to state that they are not in place.
This is significant because it reinforces that ESRS is a disclosure framework, not a behavioral mandate. The standards are designed to elicit transparency about a company’s current state, not to force the creation of policies purely for reporting purposes. This shift allows for a more honest and incremental approach to sustainability management, where disclosure reflects reality rather than aspiration.
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3. The Value Chain Just Got a Reality Check
Reporting on the full upstream and downstream value chain has been a primary source of anxiety for companies, particularly concerning data availability from smaller partners. The new proposals introduce critical reliefs that acknowledge these real-world challenges.
A key transitional provision in ESRS 1 (paragraph 122) states that for the first three years of reporting, companies can limit their value chain disclosures. If not all necessary information is available, you may use information that is available in-house or publicly accessible, provided you explain the efforts made to obtain the data, the reasons why not all of the necessary information could be obtained, and your plans to obtain the necessary information in the future.
Furthermore, the revised standards no longer specify a preference for direct data from value chain partners. Instead, ESRS 1 (paragraph 62) explicitly allows companies to use estimates, sector-average data, or other proxies based on what is practicable and reliable. These reliefs provide a much-needed reality check, recognizing the immense difficulty of gathering comprehensive data, especially from SMEs within the value chain.
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4. Telling a Coherent Story Is the New Goal
The revised standards explicitly include the principle of “fair presentation” (ESRS 1, Chapter 2), moving sustainability reporting closer to the established philosophy of financial reporting. This requires a company to provide a “complete, neutral, and accurate depiction” of its material impacts, risks, and opportunities.
This principle encourages companies to move beyond a disconnected list of data points and instead present a cohesive narrative. This is a direct invitation to move beyond compliance-driven data dumps and toward building a compelling, authentic sustainability narrative that can strengthen brand trust and stakeholder relations.
Supporting this goal is new flexibility in the report’s structure. Companies now have the option to include an executive summary and can group information based on how they actually manage issues, rather than being forced to follow the standard’s layout rigidly (ESRS 1, paragraphs 109 and 112). This flexibility empowers companies to structure their report in a way that is most intuitive and useful for stakeholders, reinforcing the shift from pure data provision to strategic communication.
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5. The Clock Has Stopped (For Many)
In a move that provides crucial breathing room for thousands of companies, the EU has formally adopted the “Stop-the-Clock” directive. This directive officially postpones the ESRS reporting requirements by two years for many businesses.
The effective dates have been changed as follows:
• Wave 2 entities (other large companies not in the first wave) will now begin reporting for the 2027 financial year, pushed back from 2025.
• Wave 3 entities (listed SMEs, small and non-complex credit institutions, etc.) will now begin reporting for the 2028 financial year, moved from 2026.
It is important to note that the 2024 reporting deadline for the first wave of large, listed companies was not changed by this specific directive. However, separate “quick fix” amendments extend some transitional reliefs for this group by (1) extending certain transitional provisions applicable to the first and second year of reporting and (2) in certain cases, providing additional reporting relief. This delay provides a critical window for a vast number of organizations to build the systems, processes, and expertise needed to comply effectively.
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Conclusion: From Compliance Exercise to Strategic Tool
The overarching trend of these revisions is unmistakable: ESRS is evolving into a more flexible, strategic, and pragmatic framework. The intense focus on exhaustive data collection is giving way to a more refined emphasis on a clear, honest, and material-driven narrative.
The renewed emphasis on materiality (1) provides the strategic filter, the relief on PAT disclosures (2) encourages honesty over performance, the pragmatism in value chain reporting (3) acknowledges real-world limitations, and the principle of “fair presentation” (4) provides the narrative framework. Together, with the extended timeline (5), these changes signal a clear mandate: focus less on boiling the ocean and more on telling a clear, strategic, and honest story about what truly matters.
With these new reliefs and a focus on “fair presentation,” how will your organization use this opportunity to tell a more authentic and strategic sustainability story?