Unpacking EU’s drive for simpler sustainability rules

The European Union's sustainability reporting landscape is a dynamic tapestry, constantly evolving to balance ambitious ESG goals with the practicalities of corporate implementation. 

In this article, we unpack the latest developments from the EU, focusing on EFRAG's initial findings on CSRD reporting, the upcoming amendments to streamline standards and the anticipated new "Omnibus" package specifically designed to simplify environmental regulations.

ESRS amendments on the horizon

In a significant move to streamline the Corporate Sustainability Reporting Directive (CSRD), EFRAG has released working drafts of proposed amendments to the European Sustainability Reporting Standards (ESRS). 

While these drafts are currently unapproved and subject to change, they signal a clear intention to reduce the reporting burden, with EFRAG planning to cut the overall number of ESRS data points by two-thirds. This includes a reduction of over half the mandatory data points and the complete removal of all voluntary data points. 

The amendments aim to introduce more flexibility in determining material topics, allowing companies to predetermine obvious issues based on market and business model analysis, to reduce complexity in scoring individual impacts, risks and opportunities (IROs). New guidance is provided on how to consider implemented remediation, mitigation and prevention policies when assessing impact materiality. Sub-sub-topics have also been removed for a more streamlined list of sustainability matters.

Furthermore, changes to Disclosure Requirements (DRs) within topical standards are proposed, clarifying that policies, actions and targets only need to be reported "if you have them." The "undue cost and effort" relief is extended to all metrics, including those within a company's own operations. This means companies are not required to provide information if it cannot be obtained with reasonable effort and expense, which in turn allows for greater reliance on estimates from secondary data, when primary data collection from the value chain is challenging. 

EFRAG sheds light on early CSRD implementation

EFRAG has released a comprehensive report offering valuable insights drawn from sustainability statements published by Wave 1 companies. Based on an analysis of more than 650 statements, the report highlights the current state of play, revealing where companies are hitting the mark with the new requirements and where inconsistencies still need to be addressed.

While report lengths vary significantly, with Southern EU companies generally producing longer reports than their Northern counterparts, the overarching structure largely adheres to ESRS guidelines, facilitating broad comparability. 

The report indicates a strong consensus on the materiality of certain topics, with ESRS E1 (Climate change), S1 (Own workforce) and G1 (Business conduct) being consistently reported as material by over 90% of companies. It is noted that only 10% of companies considered all ten ESRS topical standards material, and sub-topics like "Biodiversity animal welfare" or "Microplastics" were rarely deemed material.

The report also sheds light on stakeholder engagement. 97% of companies engaged internal stakeholders, primarily employees. Yet, engagement with broader societal groups such as NGOs, communities and trade unions was significantly less frequent. 

Within specific sustainability topics, E1 stood out, with most companies setting 1.5°C targets for Scope 1 and 2 emissions. The details of climate transition plans, present in 55% of reports, varied considerably, hindering comparability. Environmental standards like E2 (Pollution) and E3 (Water and marine resources) were among the least reported. 

On the social front, S1 was nearly universally reported as material, covering aspects like adequate wages and discrimination, while S2 (Workers in the value chain) and S3 (Affected communities) saw less frequent disclosure. Governance (G1) was also widely addressed, with disclosures focusing on ethics, anti-corruption and corporate culture.

New “Omnibus" package targeting environmental regulations 

The European Commission is reportedly preparing another "omnibus package" for this autumn, specifically aimed at simplifying several key environmental regulations. This initiative reflects a broader effort to reduce administrative burdens and enhance competitiveness within the EU.

The package is expected to cover a range of significant environmental legislation, including the EU Deforestation Regulation (EUDR), the Green Claims Directive, the Industrial Emissions Directive and potentially the EU's forced labour rules. A formal "call for evidence" to gather stakeholder and public input on these planned policy changes will be published shortly.

The inclusion of the EUDR is unsurprising, given the significant opposition it has faced from member states and the European People's Party (EPP), who have advocated for delays and further simplification of its rules. The EPP recently voted against the Commission's deforestation risk country list and has actively pushed for these changes.

The inclusion of the Green Claims Directive in this simplification effort is particularly noteworthy, as trilogue negotiations are still ongoing. However, it aligns with the Commission's indication that it views the directive as not fully aligned with its simplification agenda. The Commission had even announced an intention to withdraw the Directive proposal in June 2025, though its final status remains somewhat unclear. 

There is expressed disappointment among stakeholders that regulations and directives not yet fully implemented are already becoming targets for further simplification efforts, raising questions about the stability and long-term trajectory of these environmental policies.

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