The European Commission has presented a draft for the revision of the European Sustainability Reporting Standards (ESRS) – and in several points, it deviates from the original recommendations of the advisory body EFRAG. By reducing mandatory data points by over 60%, the EU is responding to massive criticism regarding the administrative burden of CSRD implementation. For sustainability and compliance managers, the central question now arises: What does the reform specifically mean for ESG strategy and reporting processes from 2027 onwards?
What remains, what changes
The principle of double materiality remains untouched. Companies will continue to report on both the impact of their business activities on the environment and society, as well as the financial risks posed by sustainability issues. At the same time, reporting requirements are being significantly streamlined: fewer mandatory data points, more room for company-specific priorities, and targeted relief for medium-sized enterprises. The Commission is taking a more pragmatic approach than EFRAG originally proposed – which may reduce implementation costs but requires a careful review of preparations already underway.
Why fewer mandates do not mean lower standards
The financial sector views the reform critically. Günther Thallinger, a member of the Board of Management at Allianz, argues that too many companies are being exempted from comprehensive reporting requirements. This assessment carries weight: investors, rating agencies, and insurers require detailed ESG data for risk assessments and investment decisions – regardless of the legal minimum requirements. This creates a strategic challenge for companies: those who only meet the regulatory minimum risk failing to meet capital market expectations. The reform could thus lead to a two-tier reporting practice – regulatory minimum reporting and expanded, market-driven disclosure.
Concrete impact on ongoing projects and supply chains
Companies that have already invested resources in CSRD preparation should examine three areas. First: If ESG software solutions have already been configured based on the original ESRS version, adjustments to data fields may be necessary. Second: Materiality analyses already conducted should be refined based on the modified requirements – particularly for topics that were narrowly classified as material or non-material. Third: The reduced requirements for supply chain information primarily relieve medium-sized suppliers but require adapted communication with business partners regarding changed data requirements.
What sustainability managers should do now
The ESRS reform offers a breathing space but should not be misunderstood as an opportunity to scale back sustainability strategy. Sustainability and compliance managers should now consider the following steps:
- Update materiality analysis: Use the time until 2027 to refine your double materiality analysis and focus on the sustainability topics that are truly relevant.
- Align stakeholder expectations: Check what information investors, customers, and business partners expect beyond the minimum requirements.
- Strategically align data infrastructure: Invest in ESG data management systems that efficiently support both mandatory reports and expanded disclosures.
- Adapt supply chain communication: Inform your suppliers about reduced data requirements, but keep critical sustainability risks in view.
The ESRS reform is not a reason to relax, but rather an opportunity for professionalization. Companies that now strategically focus their sustainability reporting on the truly material topics while keeping an eye on stakeholder expectations will be better positioned in the long term in the competition for sustainable capital and business relationships.
You can find out more about sustainability reporting here.
