EU Postpones Enhanced Sustainability Reporting Obligations for Significant Corporations by Two Years
The European Commission has announced a series of amendments to the European Sustainability Reporting Standards (ESRS), aiming to reduce the reporting burden and increase certainty for companies that began sustainability reporting for the financial year 2024, known as "wave one" companies.
These amendments, adopted on July 11, 2025, are part of the ongoing revamp of the ESRS in relation to the Corporate Sustainability Reporting Directive (CSRD). They are designed to address the specific needs of early adopters and larger companies currently reporting under the CSRD.
Key points of the amendments include:
- Wave one companies are now allowed to omit information on the anticipated financial effects of certain sustainability-related risks for the 2024 financial year, as well as for 2025 and 2026. This means no additional information beyond what was required for 2024 must be reported for these years. - Wave one companies with more than 750 employees will benefit from phase-in provisions similar to those that currently apply to companies with up to 750 employees for financial years 2025 and 2026, easing their reporting obligations. - These amendments address the fact that wave one companies were not included in the earlier "stop-the-clock" Directive that delayed sustainability reporting requirements for "wave two" and "wave three" companies (those starting in 2025 and 2026).
Regarding the scope and thresholds of CSRD applicability, the Commission is undertaking a broader revision of the ESRS with the goal of substantially reducing the number of data requirements, clarifying ambiguous provisions, and improving alignment with other legislation. This review is expected to be completed by financial year 2027.
Importantly, the Commission’s Omnibus I package proposes raising the threshold for CSRD applicability, potentially limiting the scope to companies with more than 1,000 employees instead of the current large undertakings including those with more than 250 or 500 employees. Some lawmakers are considering an even higher threshold, which would further reduce the number of companies subject to CSRD reporting.
The same package is expected to substantially reduce the amount of information required under the CSRS. The European Financial Reporting Advisory Group (EFRAG), responsible for revising the ESRS, is targeting a reduction by approximately two-thirds of data points that companies must report.
In summary, these developments reflect the EU’s effort to ease the compliance burden on companies currently within the scope of CSRD, especially early adopters or larger companies currently reporting, while also tightening and refining the regulatory framework to focus on the most significant sustainability disclosures going forward. The threshold increase and major cutbacks in reporting requirements are intended to streamline the directive’s impact and improve its practical implementation.
- The amendments in the European Sustainability Reporting Standards (ESRS) have not only reduced the reporting burden for 'wave one' companies but also provide phase-in provisions for larger 'wave one' companies with more than 750 employees, promoting ease in their reporting obligations.
- In an effort to improve the practical implementation of the Corporate Sustainability Reporting Directive (CSRD), the European Financial Reporting Advisory Group (EFRAG) aims to significantly decrease the amount of information required under the CSRS, potentially reducing up to two-thirds of the data points that companies must report, signifying a move towards focusing on the most significant sustainability disclosures.
