A Turning Point for European Sustainability Reporting

The first sustainability reports prepared in accordance with the European Sustainability Reporting Standards (ESRS) were characterized above all by one thing: poor readability. With an average length of 127 pages, they generated less transparency than overload. In response, the European Parliament adopted a provisional agreement in December 2025 – the Simplified ESRS. Fewer data points, clearer structures, and a stronger focus on materiality are intended to make reporting more practicable. However, the most significant changes lie in the conceptual details.

Why the ESRS Were Simplified

When the first ESRS reports were published in early 2025, a purely compliance-driven mindset prevailed. Companies sought to fulfill all requirements as comprehensively as possible, regardless of whether the information was truly relevant for readers. The result was lengthy, highly technical reports in which key messages were lost.

The European Financial Reporting Advisory Group (EFRAG) responded with the Simplified ESRS. The scope of the standards was significantly reduced, and the number of required data points was cut by around 60 percent. The aim is to rebalance the fundamental tension between stakeholders’ demand for information and companies’ ability to implement the requirements.

Fair Presentation Moves to the Center

At the heart of the new standards is the principle of fair presentation, a concept already familiar from financial reporting. Sustainability reports are expected to present a true and fair, decision-useful view of a company’s situation. The decisive factor is no longer maximum completeness, but which information actually influences the decisions of investors and other stakeholders.

Closely linked to this is the materiality filter. Companies may omit disclosures if they are not material to decision-making – even if they are generally required by the standard. At the same time, if the standard disclosures are insufficient to convey a realistic picture, additional company-specific information must be provided. While “entity-specific considerations” were already possible before, they are now an integral part of the fair presentation concept.

More Structure, Less Information Overload

The Simplified ESRS also allow greater flexibility in the structure of reports. Companies may now include an executive summary highlighting the key points, while methodological explanations can be moved to the annex. This is intended to make the core messages stand out more clearly and improve readability.

Clearer Boundaries Within the Double Materiality Assessment

Key aspects of the double materiality assessment are also clarified by the Simplified ESRS. Positive impacts are now only considered as such if they go beyond merely eliminating a company’s own negative impacts. In addition, particularly for potential negative impacts, mitigation measures already implemented may be taken into account in the materiality assessment.

Importantly, however, even effectively mitigated impacts must still be reported if they remain relevant for the decision-making of report users.

Opportunities and Risks of the Simplified ESRS

For companies, the new standards offer an opportunity to once again use sustainability reports as a communication tool and move away from a purely compliance-driven approach.

At the same time, simplification also entails risks. Fewer data points mean less granularity, and the expanded scope for judgment may impair comparability between reports and lead to the expectations of highly specialized readers (e.g. investors, auditors, etc.) being met only to a limited extent.

Conclusion

The Simplified ESRS mark a turning point in European sustainability reporting, although they still need to be adopted by the European Council. They respond to genuine overload and create greater focus and flexibility. Whether they will lead to more transparency or merely to shorter, more convenient reports remains to be seen.

What is clear is that sustainability reporting requires strategic positioning and methodological clarity. Silvester Group supports companies in consistently applying materiality, implementing fair presentation in a meaningful way, and communicating sustainability not only in compliance with regulations, but in a decision-relevant manner. This creates opportunities for credible and integrated ESG reporting.