With its technical advice on the draft simplified European Sustainability Reporting Standards (ESRS) of 28 November 2025, the European Financial Reporting Advisory Group (EFRAG) intended to reach a delicate and necessary equilibrium: a framework that is leaner, more implementable, and still capable of carrying economic meaning. From the perspective of European capital markets, this balance should be tested and protected, not further compressed. Implementation is the key to success.
A necessary simplification — not a retreat
The political mandate behind the Omnibus process was clear: reduce unnecessary burden, especially for companies facing disproportionate reporting costs, while preserving the decision-usefulness of sustainability information.
The draft simplified ESRS reduce mandatory data points, shorten and clarify standards, and simplify the materiality assessment process. Streamlining is not deregulation, but a recognition that quantity does not equal quality, and that comparability, clarity and usability matter more than extensive disclosure.
At a moment when sustainability is under political pressure, stability and predictability are strategic assets
Investors, analysts and issuers have long called for clearer and more consistent indicators rather than narrative obligations that are difficult to audit, digitise or compare. Alignment with investor reporting requirements in the Sustainable Finance Disclosure Regulation (SFDR) is a “guiding principle” for the European Parliament. Decision-usefulness is core.
Lean does not mean empty
There is a threshold beyond which simplification becomes erosion. Sustainability reporting must remain fit for purpose: enabling capital allocation, risk assessment and transition financing.
The new ESRS respects this boundary and preserves the informational backbone required by capital markets, including data that underpin sustainable finance regulation and investor disclosures.
It reinforce that sustainability data should not become second-class information, detached from financial reporting standards in terms of framework, digital usability and reliability. The coming years in a more competitive environment will show how these disclosure requirements support transition and correct capital allocation. The simplified ESRS represents a minimal but sufficient expression of sustainability reporting.
Europe’s responsibility in a global context
Europe does not operate in isolation. Global investors increasingly assess companies across jurisdictions, standards and asset classes. EFRAG’s effort to strengthen consistency with international sustainability frameworks is politically essential.
Sustainability reporting enables markets to understand transition pathways, risks and opportunities
A European framework that is lean, coherent and internationally connectable strengthens Europe’s position rather than weakening it and enables European companies to remain competitive, while ensuring that sustainability information remains globally intelligible and locally enforceable.
At a moment when sustainability is under political pressure, stability and predictability are strategic assets.
Implementation before further revision
From a governance perspective, the priority should be implementation, not further reduction. Regulatory systems mature through application and calibrated adjustment — not through continuous compression before first use.
EFRAG’s technical advice reflects effort and consultation. Further shortening will fragment coherence, reopen data gaps, and undermine the Green Deal objectives reaffirmed in the Omnibus Directive.
The prudent path is clear: implement the simplified ESRS through a Delegated Act, support and observe their application, and fine-tune only where evidence demonstrates necessity. Robust frameworks evolve through balanced adjustment, not constant redesign!
The political signal Europe can send
By adopting EFRAG’s technical advice, European institutions signal regulatory overreach and simplification with substance and not through subtraction.
Sustainability reporting enables markets to understand transition pathways, risks and opportunities.
The simplified ESRS should be allowed to work now.
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