A majority of investors and financial institutions believe that the European Union’s proposed simplified ESRS could undermine the quality of sustainability information they receive from companies, according to a new study published by the EFRAG.
According to ESG Today, the findings highlight growing concerns that recent efforts to streamline sustainability reporting may come at the expense of data comparability and the availability of critical climate and environmental metrics.
The study, Cost-Benefit Analysis on the Draft Amended European Sustainability Reporting Standards, was released following EFRAG’s publication of its proposed revisions to the ESRS in early December.
The changes are intended to significantly reduce the reporting burden on companies subject to the EU’s Corporate Sustainability Reporting Directive (CSRD) and form a central part of the European Commission’s Omnibus I initiative aimed at regulatory simplification.
EFRAG was originally mandated by the European Commission in 2020 to develop the ESRS, which were formally adopted in 2023. Following the launch of the Omnibus package, EFRAG was asked to provide technical advice on how the standards could be simplified in line with the Commission’s objectives.
One of the most substantial changes proposed under the amended ESRS is a sharp reduction in disclosure requirements. Mandatory datapoints have been cut by 61%, while all voluntary disclosures have been removed, resulting in an overall reduction of more than 70% in datapoints. Additional revisions include changes to the double materiality assessment, reduced emphasis on direct value chain data, and increased flexibility for companies to use estimates rather than collecting primary data from suppliers.
To assess the impact of these changes, EFRAG commissioned Prometeia and Syntesia to evaluate the costs and benefits of the revised standards. The analysis draws on survey responses and interviews with CSRD Wave 1 and Wave 2 reporters, voluntary reporters, and a wide range of ESG data users, including financial institutions, NGOs, consultancies, data providers, and civil society organisations.
From a preparer perspective, the revised ESRS are expected to deliver substantial cost savings. EFRAG estimates total savings of €3.7bn between 2027 and 2031, representing a 34% reduction in reporting costs. When supply chain impacts are included, total savings are estimated to reach €4.7bn, or a 44% reduction. Among Wave 1 reporters, 90% expect lower recurring internal costs, while nearly 75% anticipate reduced external costs, with a median expected reduction of 20%.
Preparers also reported that the streamlined standards offer greater clarity and usability, and most do not expect any negative impact on access to green finance or the cost of capital. Many companies further indicated that they do not believe the revised standards will reduce the overall quality of sustainability data.
In contrast, ESG data users were notably more cautious. The study found that 55% of users expect the amended ESRS to negatively affect information quality, rising to 67% among investors and financial institutions. Key concerns include reduced comparability, cited by 52% of respondents, as well as the loss of critical climate data (45%) and other environmental information (43%). Despite 68% of users acknowledging that streamlining may improve usability to some extent, none of the investors or financial institutions surveyed said they were certain these benefits would materialise.
EFRAG summarised the divide in stakeholder views, stating:
“Overall, the stakeholder consultation highlights a positive reception among preparers, who appreciate the simplification and proportionality introduced, and a more cautious stance among users, who emphasize the need to preserve analytical robustness and completeness in sustainability reporting.”
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