Five things the Commission needs to fix in the ESRS

The European Commission is revising the ESRS — and we've had our say.

The European Sustainability Reporting Standards (ESRS) set out what companies must disclose on sustainability under the EU's Corporate Sustainability Reporting Directive (CSRD). Earlier this year, as part of its Omnibus package, the Commission proposed a series of amendments — changes that could significantly affect what companies report and how. We submitted our response to the public consultation. Here's what we think.

Where we agree 

Much of what the Commission proposes is sensible, and we support the direction of travel. The proposed changes reflect lessons learned from early implementation and address genuine gaps in the original standards.

Where we have concerns

While the intent behind the revisions is good, several proposals require sharper thinking to prevent loopholes and protect the integrity of the data. We see five critical areas that need fixing:

1. Aggregation and disaggregation: the revised text states that the level of detail used in a materiality assessment does not require the same level of detail in the final report. We think this is a mistake. If a topic is material for a specific country or business unit, it should be reported as such — not absorbed into a broader figure that obscures the underlying issue. The current proposal risks allowing companies to under-report material information without technically breaking the rules.

2. Climate transition plans: the Commission proposes that companies with climate transition plans not aligned with the 1.5 °C target must say so explicitly – a step in the right direction. But we would go further: the term "climate transition plan" should be reserved for plans that are fully aligned with the Paris Climate Agreement. Plans that fall short should be described differently. Without that distinction, the label risks becoming meaningless.

3. Microplastics: secondary microplastics — those that break down from larger plastic items — account for an estimated 69% to 81% of microplastics in the world's oceans. Excluding them from reporting scope risks two things: companies under-reporting their environmental footprint, and responsibility shifting to other companies higher up the value chain.

4. Pollutant emissions: the Commission proposes that companies may rely on a managerial assessment to determine whether their emissions of pollutants are significant enough to warrant disclosure. We do not think this is sufficient. Any such assessment should be supported by third-party verification — either by an external auditor or by reference to recognised industry or regulatory benchmarks. Self-assessment without external checks is a weak foundation for a reporting standard.

5. Asset management activities: the proposed revision would exempt assets held on behalf of clients from managers' materiality assessments. We disagree. Asset managers earn fees on these assets — it is, after all, their core business model. The impacts, risks and opportunities associated with those assets should therefore be included in scope. Exempting them creates a direct inconsistency with the ESRS requirement to consider impacts, risks and opportunities across the value chain.

What's next?

We welcome the Commission's work on these revisions. But several proposals need closer scrutiny before they are finalised. The Commission has an opportunity to set a standard that genuinely drives transparency — and that requires closing the gaps, not leaving them open for interpretation.