Revised ESRS: what the European Commission’s final draft actually changes

Fair presentation instead of a checklist

The most fundamental change concerns the very logic of the report. The overarching principle becomes fair presentation of the statement, rather than the mechanical ticking-off of individual disclosures. The materiality of information now acts as a general filter that also applies to ESRS 2.

In practice this means two things at once. On one hand – fewer mandatory datapoints and greater freedom in shaping the content. On the other – greater responsibility for judgement: it is the company that decides what is material and sufficient to enable an understanding of its impacts, risks and opportunities (IROs). Where the ESRS structure alone is not enough, entity-specific disclosures become necessary. The report stops being a form and becomes a coherent narrative, backed by the quality of the underlying process.

Double materiality stays, but the process is lighter

The double materiality concept remains a pillar of ESRS. What changes is how the assessment (DMA) is carried out. A top-down approach is now available: a company starts from a long list of topics, understands its business model and value chain, filters out topics that are not relevant, and only then – for the remaining ones – identifies the specific IROs and information to be reported.

A meaningful relief: an annual update of the DMA process is no longer required, unless warranted by changed circumstances or management judgement. The role of mitigation and remediation measures in the materiality assessment has also been clarified – giving companies a clearer basis for identifying material negative impacts.

ESRS 2 remains the foundation, MDRs become GDRs

ESRS 2 remains the core of the report. Many general disclosures, until now scattered across topic-specific standards, are consolidated within it to reduce repetition and ensure consistency. The former minimum disclosure requirements (MDRs) are recast as general disclosure requirements (GDRs) – making it explicit that they are subject to the materiality filter.

A few granular narrative requirements have also been removed, and application requirements have been streamlined and placed directly under the related disclosures. The result: less duplication, but a greater need for judgement when explaining context.

Reporting boundaries closer to the financial statements

The revised standards clarify that the reporting boundary generally follows the (consolidated) financial statements. Several practical points, however, are worth noting:

• Leased assets – GHG emissions from using a leased asset are attributed to the lessee (in its own operations), while the lessor considers them as part of its downstream value chain.
• Pension schemes – an analogous rule applies to IROs arising from assets held as part of an employee pension scheme.
• Assets managed on behalf of clients (e.g. in asset management) – are not reported as the company’s own impacts.

These clarifications help companies more accurately attribute IROs to their own operations or to the value chain – with a direct bearing on the scope of data to be collected.

Climate: more flexibility, fewer mandatory elements

In the area of climate, the financial perimeter is retained, but for GHG emissions the equity shares and operational control approaches are also permitted, in line with the GHG Protocol. Some companies may therefore need to revisit how they set their organisational boundaries.

The changes also affect the transition plan. Where a plan exists, its key features are disclosed, but the company need not make available all the information used to manage it, and scenario analysis is not mandatory. Companies still state whether their emissions reduction targets are compatible with limiting global warming to 1.5°C – but they are no longer required to update those targets every five years after 2030.

Standards E2–E5 and S1, G1: a sharper focus

The environmental standards have been simplified, concentrating them on decision-useful information. Among other things: E3 is narrowed to water resources (with disclosure of withdrawals and discharges), E5 focuses on key materials and separate reporting of packaging, and new definitions are introduced for the durability and reparability of products. In E2, the scope of substances is aligned more closely with the REACH regulation.

On the social and governance side, requirements are clarified in S1 (including revised disclosure thresholds and a new obligation to disclose the benchmark used for adequate wages; human rights incident disclosures are limited to substantiated instances) and in G1 (distinguishing political influence from lobbying and requiring disclosure of confirmed incidents of corruption or bribery). At the same time, several datapoints have been deleted – including employee age distribution, family-related leave, and the average time to pay invoices.

More freedom in structure, and a broad package of reliefs

Companies gain greater flexibility in structuring the statement. An executive summary becomes optional, and EU Taxonomy disclosures, detailed calculations and non-material matters can be moved to dedicated sections or appendices. Policies, actions, targets and metrics (PATMs) may be presented in aggregate, at the level at which they are actually managed.

The relief mechanisms have also been expanded. Phase-in periods have been extended – including for E4 and S2–S4 – the principle of reporting based on reasonable and supportable information available without undue cost or effort has been retained, and in limited circumstances companies may omit commercially sensitive or legally protected information. Interoperability with the IFRS Sustainability Disclosure Standards has improved – although key differences remain, such as the retention of double materiality and value chain reporting.

What this means for your company

• First-wave (Wave 1) entities should consider early adoption of the revised standards from financial year 2026 and build a coherent, credible reporting narrative – including through an executive summary that helps users navigate the document.
• Other companies would do well to begin a gap assessment now for their 2027 report, develop their DMA approach by benchmarking against published Wave 1 reports in their sector or business model, and assess which transition reliefs and exemptions could reduce the initial reporting scope while the necessary processes are being built.
• Companies below the threshold should consider voluntary reporting (VS/VSME) as part of their strategy – proactive disclosure can differentiate an organisation in the eyes of clients, banks and investors, particularly given value-chain pressure.