ESRS 1: Reduced Reporting Burden and Increased Flexibility
Welcome to the second part of our series on navigating the new landscape of sustainability reporting. We are now diving deeper into the heart of the framework, looking at ESRS 1 - General Requirements. This standard lays the foundation for all sustainability reporting under the European standards and has undergone important revisions to become more principle-based and clear.
A Shift Towards "Fair Presentation" and a Principle-Based Approach
One of the most significant changes in the [Draft] Amended ESRS 1 Exposure Draft July 2025 is the reinforced focus on "fair presentation" as an overarching principle. EFRAG has introduced this concept to reduce the risk of reporting becoming an excessive "compliance exercise" and to promote more focused and decision-useful reports. This move is also intended to increase interoperability with global reporting standards like IFRS S1, which also emphasizes fair presentation.
To achieve a fair presentation, companies are required to report relevant information that provides a reliable representation. This means the information must be complete, neutral, and accurate. The standard also emphasizes that reports should only include material information, be concise, and avoid generic "boilerplate" text. Another important point is that ESRS explicitly does not impose specific actions or behaviors, but rather sets requirements for what should be reported about material impacts, risks, and opportunities.
Clarified Materiality Assessment (DMA) for More Practical Reporting
The Double Materiality Assessment (DMA) is the core of sustainability reporting, and ESRS 1 has received clearer instructions to ensure that businesses only report information that is material. The new revision has introduced a new section with "practical considerations" for carrying out the DMA. This includes a recommendation to start with a "top-down" approach, where the business model is analyzed to identify the most obvious material topics first. The evidence requirement should be reasonable and proportional, especially when a topic is obviously material for the sector or business model.
These changes represent a significant improvement that addresses previous challenges in sustainability reporting. Before the reform, there was an excessive focus on process rather than results or the company's strategic context. The previous AR 16 (which listed sustainability topics) was often misunderstood and used as a checklist to document non-materiality for each element, instead of as a guide to identify material topics. There was also a lack of clear sector guidance, which created uncertainty for reporting companies.
It is now clarified that when only a sub-topic is material, the reporting should be limited to this specific sub-topic without triggering reporting of all data points in the relevant thematic standard. This is a measure to avoid unnecessary detail and promote more focused reporting. Furthermore, a relief related to "undue cost and effort" in the DMA has been introduced, which is in line with IFRS S1. This means that companies should not be forced to report irrelevant information when reliable data is not available without undue cost or effort.
The terminology has also been streamlined; the term "sustainability matters" has been replaced with "sustainability topics" or "sub-topics" to simplify and harmonize the language in the standards. The previous AR 16, which was a list of sustainability topics, has now been converted to a non-mandatory appendix (Appendix A) in the [Draft] Amended ESRS 1. This appendix serves as a non-binding guide and is streamlined by removing "sub-sub-topics".
Simplified Structure and Guidance
The structure of the standards has been revised and streamlined to improve readability. All mandatory requirements ("shall disclose/include/report/describe/explain") are now presented in the main text of the standard and are counted as separate data points. The mandatory methodological guidance (Application Requirements - ARs) is now placed in separate boxes under the respective Disclosure Requirements (DRs), and includes "shall consider" for methods and "may (present)" for presentation choices.
A significant change is that all "may disclose" (voluntary disclosures) have been removed or rephrased as application requirements to reduce complexity. This means there is no longer a separate category for voluntary disclosures in the main text, but that useful guidance is now available in a separate document: Non-Mandatory Illustrative Guidance (NMIG). The NMIG document is non-binding and collects illustrations and guidance that were previously part of the mandatory standards but are now intended to be useful, but not imposed. EFRAG recommends that the NMIG should not be part of the delegated regulation.
Overall, the revisions have led to a significant reduction in the number of mandatory data points (57% in total, 68% including previous "may disclose" data points). Reporting on Policies, Actions, Targets, and Metrics (PATM) can now be presented at different levels of aggregation, and descriptions of material IROs can be presented along with the PATM information to avoid duplication.
Overall, the revisions have led to a significant reduction in the number of mandatory data points (57% in total, 68% including previous "may disclose" data points)
What Does This Mean for Your Reporting?
These changes in ESRS 1 represent an important step towards more effective, flexible, and user-friendly sustainability reporting. By focusing on "fair presentation" and a clearly defined materiality assessment, companies get a better opportunity to tell their unique sustainability story without too much focus on process. The reduced amount of mandatory information, combined with clear guidance in the NMIG, allows for a focus on what is truly material for the company and its stakeholders.
Follow along in the series to dive into the specific changes in the thematic standards!
Here you can find EFRAG's proposed changes and the logs of the changes from the original regulation:
https://www.efrag.org/en/amended-esrs-0
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This article was prepared with the help of a large language model (AI tool), Notebook LM. The information is based on the drafts from EFRAG (European Financial Reporting Advisory Group), including their [Draft] Amended ESRS Exposure Drafts, Basis for Conclusions, and Log of Amendments, dated July 2025.
EFRAG's materials, such as these drafts, are published for comments and are intended as technical advice to the European Commission. EFRAG itself emphasizes that the information in their drafts does not constitute advice and should not replace the services of a qualified professional.
We encourage you to report any errors or inaccuracies you may discover in this article so that we can correct them. Please note that the AI tool does not guarantee the accuracy or completeness of the information and recommends independent verification
