Executive Summary
December 2025 marks EFRAG’s finalised work on the simplification of the ESRS. As a part of the Omnibus proposals to reduce the reporting burden on European companies, the European Commission tasked EFRAG to provide a simplified version of the ESRS earlier this year. From June to November, EFRAG has carried out a series of consultations and feedback rounds with various stakeholders to simplify the reporting standards. The results of this process have been presented to the public and, more importantly, to the European Commission on December 4. Several key changes to the standard will have an impact both on the process of reporting and the content of ESRS reports. Before discussing the changes there are some important logistical issues to be aware of, especially as they relate to timing and implementation.
Firstly, although the simplified standards have been completed and presented, the approval and adoption by the EU political institutions is still outstanding. At the EFRAG conference on December 4, 2025, Commissioner Albuquerque stated that the approval process might take until June 2026. This means that we remain in a period of some uncertainty and we have, effectively, two versions of the standard now in circulation and being adopted in practice by various firms. It should also be noted that the July 2025 draft version has been substantially changed in form and in content to the current version of the ESRS; reliance on the July 2025 draft should be avoided.
Read in this blog post what, in Code Gaia’s view, are the most important changes in the new version.
Table of content
Some layout changes in the standards
| “I am mid-writing a report according to the old standards (Set 1) – do I have to start again?” No, you do not need to start over. Code Gaia has already provided a guideline regarding which version of the ESRS to use for companies who are in doubt. You can find that guidance here: https://codegaia.io/en/new-esrs-version-2-how-and-when-to-adapt/ Switching versions within the Code Gaia software will soon be possible once we have double-checked the new Standard content in detail and finished the old-to-new mapping |
Readability via re-organisation of ARs. The Application Requirements (ARs) within each standard have now been relocated immediately next to the Disclosure Requirements (DRs) to which they relate. This means that it is no longer necessary to skip backwards and forwards in the standard to read what must be reported. This is largely a quality-of-life issue for reading the standards.
More consistent referencing of the cross-cutting requirements. The newly named “General Disclosure Requirements” (GDRs) provide required topical information to be reported in a standardised way. These requirements have improved on the previous set of cross cutting requirements and are now much more clearly referenced in the topical standards, so it is easier to see exactly where they apply.
Rewording of Topical Standard ESRS E3. ESRS E3 has now been re-named from “water and marine resources” to simply “water”. This has been done to reduce duplications of content which overlapped with the biodiversity standard and the resource and circular economy standard. Standard E3 now makes it clear (ESRS E3, para 8) that some previously “water” information, more specifically marine/ocean information, is best reported under other standards such as E1, E2, E4, E5 and S3.
Changes to sustainability matters/ topics
EFRAG have rationalised the topics, sub-topics and sub-sub-topics (previously summarised as “sustainability matters”) down from a list of more than 100 to approximately half that number. This has partially been achieved by abolishing the level of sub-sub-topics. The term sustainability matters has been replaced by simply “topics”. In doing so, many of the overlaps between these topics have been recognised. In addition, the topic water no longer has an explicit marine resources component, and the marine related content is now more appropriately represented in the biodiversity or resources topics.
This is a welcome change that should not only reduce reporting duplication but also streamline the IRO identification process during the double materiality assessment.
Code Gaia has already mapped all of the old to the new topics to allow for materiality assessments conducted under the old list to be moved over to the new topics with relative ease. Existing and in-progress DMAs are therefore not negatively impacted by this. The main effect of the simplified list relates to the ordering of where information will be reported in the sustainability statement.
Changes to the DMA process
Several new clarifications of the DMA process have been explicitly drafted into ESRS 1 now. Some of these relate to content previously published as guidance, and some of them are new, clarifying issues in practice which have arisen over the past 18 months.
Reintroduction of a form of the original “top-down” approach to topical IRO assessment. ESRS 1 ARs 8 and 9 explicitly state that entire topics can now be assessed on the basis of combining IROs. This is being referred to as the “top-down” approach, which is similar to the description of “top-down” which was included in the first version of Implementation Guidance 1 (IG1). The new ARs are as follows: “Following a top-down approach, the materiality conclusion can be reached at topic level for combined impacts, risks and opportunities,” and “The undertaking may combine a ‘top-down approach’ for some topics with a ‘bottom-up’ analysis for others.”
Simplification of impact severity assessment. The new standard clarifies in ESRS 1 AR14. that “the undertaking need not analyse separately each characteristic of severity (see Chapter 3.2.1), unless further assessment is necessary, such as when the conclusion of the analysis of severity on that basis is unclear”. In practice, this means that it is at least permissible to short-cut the detailed assessment of an impact’s severity once the severity outcome is a certainty.
Clarifications to the use of time horizons. The new standard also clarifies in ESRS 1 AR 15. that it is not necessary to assess every time horizon for every IRO. Code Gaia already recognised that the time horizons (which effectively act as scenarios) were descriptive and not criteria for determining materiality. The simplified standard has made this recognition explicit.
Clarification of the role of mitigation within the assessment of an impact. Code Gaia has expressed a number of times that the suggested approach from previous EFRAG communications to excluding implemented mitigation within the assessment of severity was a mistake. The new standard now explicitly clarifies (ESRS 1, para 44(a)) that impact “severity is assessed based on the current reporting period, i.e. taking into account how they were mitigated in the previous periods.”
| “Is my existing / old DMA redundant now? Must I do it again?” No, existing and ongoing DMAs are not invalidated by the simplification. There are some logistical changes to the sorting/ ordering of IROs and there is now freedom to be less explicit with the assessment of the sub-criteria of severity for impacts. The “old” DMA method is more detailed than the new version requires, so the new requirements are satisfied by the old. Neither of these changes invalidates any IRO which has already been assessed. Changes to the topics can be integrated simply by mapping of the existing IROs over to the new set of topics. IROs can also be aggregated up to the new topics using the same mapping. A new DMA is not required. |
Reporting of information in the sustainability statement
Requirement for “Fair Presentation” in addition to the existing “faithful representation” principle. ESRS 1 Section 2, is a new provision which requires reporting companies to “provide information that is comparable, verifiable and understandable”. Furthermore companies must also provide “entity-specific information” when applying ESRS is not sufficient to enable users to understand the undertaking’s material impacts, risks and opportunities and how the undertaking manages them”. These requirements are further clarified in the attendant ARs which suggest that slavishly following an ESRS-only scope and excluding other non-ESRS information (especially that which a stakeholder would expect to be material) does not constitute “fair presentation” of the company’s specific circumstances.
Expansion of the undue cost or effort provision. The new Standards expands the application of the concept of Undue cost or Effort, which allows (ESRS 1 Section 7.4) that reporting companies “use all reasonable and supportable information that is available to the undertaking at the reporting date without undue cost or effort”. In the previous version of the standard, this provision was previously only used for the reporting of financial effects in some of the “E” standards and for value chain related information. Section 7.4 now expands this explicitly to the materiality process, the scope of the value chain and to metrics reporting across all standards.
Significant collapse of content within topical standards. The Topical Standards, especially those that relate to the value chain, have been significantly reduced in terms of requirements and general content. While the number of disclosure requirements has only slightly decreased, the level of detail required within each disclosure requirement has decreased substantially. For example, the topical standard S2 “Workers in the value Chain” has dropped from around 7500 words to 2600 words. 48 ARs in the previous version of this topical standard have been reduced to 10. This streamlining also, potentially, removes a disincentive to under-report these topics, or to construct materiality assessments which favour their exclusion. Stakeholders might have more reason to expect the inclusion of these topics given that the burden of reporting them (alongside the provision for scoping the value chain based on no undue cost or effort) is so reduced.
Outlook and further resources on the key changes
EFRAG has stated that further guidance on the Standard (such as a rework of IG1) is expected to be forthcoming. For now, the substantive changes to the Version 2 standard represent a significant departure from some previous guidance aspects, whilst others have been now drafted into the Standard itself. Code Gaia will continue to closely monitor the CSRD and ESRS landscape and to provide best practice approaches for sustainability management and reporting.
Some resources for further reading on the main changes:
EFRAG release of new standard:
https://www.efrag.org/en/news-and-calendar/news/efrag-provides-its-technical-advice-on-draft-simplified-esrs-to-the-european-commission
EFRAG’s short guide to the Simplified Standards:
https://www.efrag.org/sites/default/files/media/document/2025-12/Simplified%20ESRS%20Factsheets%20%284%29.pdf
EFRAG new interactive ESRS knowledge hub (currently only including information on ESRS Set 1):
https://www.efrag.org/en/news-and-calendar/news/efrag-launches-the-esrs-knowledge-hub-a-new-digital-gateway-to-sustainability-reporting
