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2025 was another challenging and demanding year for the sustainability reporting pillar at EFRAG, with a focus on both the ESRS simplification and the establishment of the VSME ecosystem.

However, both are essential to promote high-quality sustainability-related information as an indispensable and integral element of sound economic and business decision-making. In a context marked by accelerating technological change, geopolitical tensions and long-term transition risks, historical financial data alone no longer provide a sufficient basis for judgement and decision-making. Robust sustainability information is necessary to distinguish informed analysis from speculation, and to preserve trust, market stability, financial resilience and ultimately long-term growth.

Experience shows that such information can only achieve these objectives if it is properly standardised. Financial reporting reached its current level of usefulness through a demanding but structured process – clear legal frameworks, high-quality standards, proper management processes, effective governance, external assurance and market supervision and enforcement. There is no doubt that sustainability reporting must follow the same path. The CSRD and ESRS address the inefficiencies, costs and inconsistencies generated by fragmented, uncoordinated data requirements.

At the same time, ambition must be accompanied by realism. Early ESRS choices were largely inspired by best practices and therefore implicitly targeted the most advanced and largest undertakings. This has created genuine implementation challenges, particularly for the smaller companies in the initial scope of the CSRD. From that perspective, the de-scoping proposed under the Omnibus package represents a necessary recalibration. However, I strongly believe that companies that are no longer within the mandatory scope must not be excluded from the sustainability journey.

A proportionate, well-designed voluntary reporting framework for these companies remains essential if we want sustainability to become a shared driver of long-term value creation for the companies themselves and across the European economy. Here, the work done to establish and enhance the ecosystem for voluntary reporting, with adequate resources and tools, was also indispensable to the broader sustainability reporting in the European Union.

I also believe it was necessary to revisit the overall standard-setting approach. Although ESRS were conceived as principles-based, the first set leaned too far towards prescriptive and granular requirements, reinforcing a compliance-driven perception of sustainability reporting. Amended ESRS deliberately restore the focus on substance over form as well as on what genuinely matters – the material impacts, risks and opportunities of companies – without unnecessary details that could undermine clarity and faithful representation.

Amended ESRS now strike a more balanced compromise between simplification and informational integrity. Targeted reliefs and phased implementation provide much-needed flexibility and breathing space, acknowledging that the transition was progressing too quickly. Sustainability is, by nature, a long-term endeavour. Yet while its benefits lie in the future, action – and transparent reporting – must begin now if Europe is to remain competitive and resilient.

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With its VSME Forum and Ecosystem, EFRAG is successfully supporting capacity building for SMEs on sustainability reporting. Information needs of lenders and business counterparts are at the heart of what we do: listening to SMEs and their counterparts, understanding their needs, involving local players, mapping existing tools and platforms, and educating and developing proportionate material in different languages. We reduce entry barriers for the adoption of the Voluntary Standard for non-listed Small- and Medium-sized Undertakings (VSME), with the ultimate goal of facilitating SMEs’ access to finance and business opportunities.

We executed a complete rewrite of ESRS in less than nine months, which seemed almost impossible, but we succeeded thanks to the commitment of our staff, the SRB and SR TEG. With simplified ESRS, reporting is going to be less costly and more understandable, more focused and relevant, helping companies to move from compliance back to business and transition. EFRAG’s simplification activity was fully based on preparer experience and challenges during the 2024 reporting season.

EFRAG had to balance high expectations for simplification with the multi-stakeholder transparency ambitions of the CSRD, which remained unchanged after the Omnibus. We reached a compromise, with many points heavily debated, and diverging views on whether the result actually meets the simplification ambition or has excessively weakened the standards. This is the nature of multi-stakeholder standard setting: mutual cooperation yields a better public good profile within the limits set by the Level 1 regulation.

Our commitment to digitalisation and accessibility of EFRAG material is evidenced by the VSME Digital Template (with hundreds of downloads per week), the VSME XBRL Converter, and the launch of the EFRAG Knowledge Hub.

With the enactment of simplified ESRS and the Voluntary Standard expected in June 2026, we will continue to support SMEs and will enhance the role and content of the Knowledge Hub. We will continue our work on Non-European ESRS and contribute to international developments with a focus on interoperability. We will also consult stakeholders on the process and content of future guidance and other material to serve their needs.

With most European companies reporting voluntarily, we face the collective challenge of promoting the availability of high-quality data to interested stakeholders under a voluntary system, not only for SMEs but also for larger companies.

My thanks to the SRB and SR TEG for their dedication during another challenging year, and heartfelt thanks to our staff for their efforts, resilience and commitment that led to our success.

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In the first quarter of 2026, we focused on developing the Sustainability Reporting Board’s 2026 work programme. This involved identifying and prioritising the key standard‑setting and implementation projects. The objective was to design a focused yet flexible programme that responds to the expectations of EU institutions and incorporates early lessons from the first wave of ESRS implementation.
In parallel, EFRAG prepared comment letters on consultations launched by the Greenhouse Gas Protocol (GHGP) and the Global Reporting Initiative (GRI). Our aim was to bring a strong European perspective into these global frameworks and to promote a high degree of alignment between ESRS, GHGP and GRI.

Looking ahead, our strategic focus for 2026 is to support implementation while advancing key priorities from the Sustainability Reporting Board’s workplan.

This includes the development of N-ESRS, aimed at ensuring proportionality and broad accessibility. We are also progressing work on anticipated financial effects to strengthen the link between sustainability matters and financial performance. In parallel, our agenda consultation will help shape future standard-setting priorities by reflecting stakeholder needs and emerging policy developments.

Together, these efforts underline EFRAG’s contribution to a transparent, efficient, and globally relevant corporate reporting framework, supporting both market confidence and the EU’s sustainability ambitions.

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CHALLENGE ADDRESSED

In March 2025, in the context of the Omnibus initiative, the European Commission formally requested EFRAG to develop a simpler draft version of ESRS adopted in 2023. The goal was to reduce any unnecessary administrative burden for companies that report under the CSRD, while preserving the policy objectives of the Green Deal.

In particular, EFRAG’s instructions were as follows:

• substantially reduce the number of mandatory datapoints;
• clarify provisions that are unclear;
• improve consistency with other EU laws;
• give clearer instructions for applying the materiality principle;
• simplify the structure and the interaction between different sections of the standards; and
• improve interoperability with global sustainability reporting standards.

2025 FOCUS

Building on the lessons learned in 2024 by the first wave of ESRS reporters and extensive multistakeholder evidence from a public consultation, EFRAG delivered draft simplified ESRS to the European Commission in December 2025. That draft introduces more flexibility, reliefs and phasing-in. It also cuts mandatory datapoints by 61% and removes all voluntary datapoints (resulting in a total datapoint reduction of 71%).

Building on the lessons learned in 2024 by the first wave of ESRS reporters and extensive multistakeholder evidence from a public consultation, EFRAG delivered draft simplified ESRS to the European Commission in December 2025. That draft introduces more flexibility, reliefs and phasing-in. It also cuts mandatory datapoints by 61% and removes all voluntary datapoints (resulting in a total datapoint reduction of 71%).

EFRAG published a call for input in April 2025, and more than 800 stakeholders – preparers, users, civil society, auditors, etc. – responded. The EFRAG Secretariat analysed these responses with support from experts recruited for the Pilot Project ‘Embarking companies and stakeholders into the European sustainability reporting journey’.

EFRAG also held 41 interviews with preparers of different sizes, sectors and Member States and benchmarked about 650 ESRS statements for 2024 (see the EFRAG State of Play platform and report). Furthermore, the EFRAG Secretariat analysed the 887 questions received through the ESRS Q&A Platform to identify disclosures most in need of simplification or clarification.

Based on this feedback, interviews and analyses, the EFRAG SRB provided the strategic direction for simplification. Following this direction, with technical input from EFRAG SR TEG and the support of a small group of SRB and SR TEG members, the EFRAG Secretariat developed the exposure drafts (EDs), which were published in July 2025 for a 60-day public consultation.

More than 700 responses were received in the second consultation, and the EFRAG Secretariat and pilot experts again analysed the feedback received. There were also 21 outreach events in September and two field tests with more than 40 preparers. These outreach activities involved a wide array of stakeholder groups, such as preparers (including business associations), academia, users, auditors, trade unions and civil society.

From mid-October until approval in December, the exposed standards were reviewed by the EFRAG SRB, while EFRAG SR TEG reviewed the exposure drafts and improved them in accordance with the simplification mandate and the feedback received. The final draft was delivered to the European Commission on 3 December 2025.

In addition to the above-mentioned general simplifications, the topical standards were amended as follows:

Environmental Reporting Standards (ESRS E1–E5)

ESRS E1 Climate change

• Streamlined disclosures on climate risk identification and resilience
• Stronger alignment and consistency with ISSB on key disclosures
• More flexibility on targets (net-zero targets, exemptions for financial institutions on absolute Scope 3 targets)
• Simplified financial disclosures (e.g. financial resources linked to transition plan (E1-1, E1-7))

Other than climate change (ESRS E2 to E5)

• Clearer scope and guidance across standards (e.g. boundaries, definitions and methodologies with updated glossary support)
• Simplified and more consistent metrics with clearer breakdowns where needed; deletion of less decision-useful metrics
• Greater flexibility when methodologies are not mature: qualitative or phased-in disclosures allowed (e.g. secondary microplastics or substances of concern (toxic substances)) and some flexibility in choice of metrics
• More focused mandatory disclosures: core metrics strengthened (e.g. water withdrawals and discharges, key material inflows, waste), while duplicative datapoints were removed
• Improved alignment and coherence within ESRS and with relevant EU laws (e.g. Waste Framework Directive)
• Consolidation of overlapping requirements (biodiversity location-specific disclosures)

Social Reporting Standards (ESRS S1–S4)

• Simpler structure and more than 60% narrative datapoints cut for policies, actions and targets
• Disclosure requirements related to engagement, channels and remedies simplified and merged
• ESRS S1 Own workforce:
  • Deletion of several datapoints related to actions and targets
  • Metrics:
    • clarification of key concepts and definitions such as adequate wage, work accidents and human rights incidents
    • use of materiality as a filter clarified (particularly for non-employees’ reporting)
    • tables now optional
    • deletion of breakdowns in a number of datapoints (e.g. gender in training)
• Scope of ‘human rights incidents’ in ESRS S2–S4 clarified

Governance Reporting Standard (ESRS G1)

• Restructured to enhance alignment with the PAT approach: policies (G1-1), actions (G1-2), and targets (G1-3)
• Reduction in granular datapoints, focusing on SFDR datapoints and key information on supplier relationships, corruption and bribery
• More guidance on definitions and scope of reporting
• Fewer metrics (e.g. incidents of corruption and bribery, average time to pay an invoice, etc.)

The simplified ESRS are expected to come into force in the EU in the second half of 2026.

OUTCOMES

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2025 FOCUS

The Knowledge Hub provides a digital, interactive platform with ESRS materials and other relevant sources in one place, enabling intuitive navigation and seamless access to all relevant information at the level of individual disclosure requirements and paragraphs. Per the Omnibus I Directive, the European Commission will establish a digital portal for companies with free access to templates, guidelines and information on all EU reporting requirements. The Knowledge Hub plays a crucial role in this respect.

Key features of the custom-tailored Knowledge Hub include:

• ESRS standards in multiple versions, with navigation functionality;
• ESRS Implementation Guidance, including datapoint lists linked at paragraph level;
• ESRS Q&A explanations;
• XBRL taxonomy elements;
• paragraph-level links to interoperable frameworks such as GRI, TCFD, and ISSB S1 and S2;
• VSME Standard, implementation guidance, and supporting tools; and
• ESRS State of Play portal, including a repository of 2024 ESRS reports and related statistics.

The Knowledge Hub has been highly successful since its launch, growing from more than 6,000 registered users between 4-31 December 2025 to more than 16,000 users by mid-May 2026. Further enhancements, including additional interactive content and features, are planned for 2026.

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CHALLENGE ADDRESSED

In the context of the European Commission’s strategy to support SMEs (entities with fewer than 250 employees), EFRAG issued in December 2024 the Voluntary Sustainability Standard for SMEs (VSME). The Standard was designed to reduce the effort of dealing with uncoordinated data requests and provide better access to business and funding opportunities. The VSME was formally recommended by the European Commission in July 2025.

During the public consultation in 2024, SMEs called for:

• a standardised reporting template to enter their data;
• a list of GHG calculators to help the calculation of greenhouse gas emissions; and
• additional guidance for certain difficult disclosures.

The European Parliament allocated specific funding to EFRAG via a dedicated pilot grant, which allowed EFRAG to launch in 2025 a comprehensive VSME ecosystem, aimed at answering these needs and supporting more broadly the market acceptance of the VSME.

Under the Omnibus I Directive, the European Commission is expected to issue a voluntary standard as a delegated act in 2026. This standard will be based on EFRAG’s VSME Standard and will be available for use by all companies outside the scope of the CSRD, irrespective of their size. With the issuance of this delegated act, the VSME will be replaced by the Voluntary Standard.

2025 FOCUS

EFRAG successfully launched the SME Forum as an active platform for feedback and collaboration between SMEs and their business counterparts (including financial institutions and those responsible for the value chain of larger entities). EFRAG held six general plenaries with the SME Forum to discuss the support guides and the other deliverables of the ecosystem, such as mappings of digital tools and initiatives, surveys on market acceptance, and exchange of good practices. In addition to the Forum, EFRAG also has an active SME community, where individual professionals with an interest in SME reporting can contribute to EFRAG technical debates.

EFRAG arranged multiple outreach events, including joint events with the OECD, and participated in the European SME Assembly. EFRAG also undertook multilingual educational activities, such as its ESG-themed videos and training sessions.

In May 2025 EFRAG strengthened its support for SMEs through the publication of a free, open‑source Digital Template, the accompanying XBRL Taxonomy and XBRL Converter. The Digital Template enables SMEs and software vendors to produce both human‑ and machine‑readable VSME reports in XBRL format, lowering entry barriers and supporting the broader adoption of structured sustainability reporting. By allowing preparers to complete an Excel‑based template and convert it into XBRL with a single click, the solution provides a simple yet robust entry point into digital VSME reporting. Digital reports generated through this solution allow stakeholders, including banks and other financial institutions, to efficiently access, process and store structured sustainability data for analytical and decision‑making purposes.

Responding to market demand, EFRAG also enabled a translation feature in the VSME Digital Template in October 2025. This was a joint project with National Standard Setters in the EU, which ensured the availability of the Digital Template in 11 EU languages. The VSME Digital Template and XBRL Converter are extensively used by SMEs, with approximately 1,000 template downloads and 250 XBRL conversions per week.

EFRAG gratefully acknowledges the following national standard setters for their support in the joint VSME Digital Template translation project:

• AFRAC and DRSC (Austria and Germany)
• ANC (France)
• CNC (Portugal)
• DBA (Denmark)
• ICAC (Spain)
• Ministry of Finance Poland (Poland)
• NSAI (Ireland)
• OIC (Italy)
• ZFI (Lithuania)

Other key achievements include the publication of two reports – one mapping available digital platforms and initiatives for SME sustainability reporting and the second mapping available digital tools (i.e. GHG calculators, geolocation tools, etc.). These reports offer valuable insights into the European digital reporting landscape. Market players also appreciate the list of free national GHG calculators published on EFRAG’s website.

Moreover, in December 2025, EFRAG published three support guides on Comprehensive Disclosure Modules C2, C3 and C7 (Practices, policies and future initiatives; GHG reduction targets and climate transition; and Severe negative human rights incidents, respectively). These three VSME support guides provide practical, ready-to-use support with clear examples and actionable case studies, all specifically designed for use by SMEs.

Furthermore, the VSME market acceptance survey progress report, published in December 2025, reflects growing awareness of the VSME Standard and the generally positive market acceptance, as reflected in the widespread use of the Standard by users. The report provides a snapshot of current acceptance and awareness, as well as the challenges and support required after the European Commission recommended the use of the VSME in July 2025.

Lastly, EFRAG was honoured in Geneva at the ISAR Honours 2025 – International Category for its pioneering work on the VSME, particularly the development of the VSME Digital Template and XBRL Converter. This international recognition highlights the VSME’s growing importance as a practical, scalable solution that enables SMEs to participate meaningfully in the sustainability reporting landscape.

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EFRAG Conference, 4 December: Draft Simplified ESRS

2025 FOCUS

EFRAG unveiled its draft simplified ESRS at its annual conference after delivery to the European Commission. More than 3,000 people registered for this hybrid event, with 300 people attending it in Brussels. Participants included preparers, supervisors, auditors, academics and members of the civil society.

The changes to the foundation standards, ESRS 1 and 2 (also called ‘cross-cutting standards’), as well as those made to the environmental, social and governance standards, were presented and were the subject of panel discussions involving EFRAG’s leadership and members of the sustainability reporting governance bodies. Attendees appreciated the lively discussions and clear explanations of how the proposed changes will impact sustainability reporting.

The ESRS Knowledge Hub – an electronic platform hosting all ESRS-related materials – was launched and 2,000 individuals registered on the day.

Patrick de Cambourg, outgoing EFRAG SRB Chair, emphasised in his speech the importance of combining sustainability information with financial information for holistic decision-making by those charged with governance and users.

In her keynote speech, Maria Luís Albuquerque, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, thanked EFRAG for the quality of the work delivered with the revised standards, providing a clearer, more proportionate and less burdensome environment for companies. She confirmed that the Commission aims to adopt the amended ESRS by mid-2026.

For further details, see the feedback report.

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State of Play platform and report

2025 FOCUS

Given the implementation challenges of the first-time application of ESRS and the lack of ESRS practices, the release of the first ESRS sustainability statements in early 2025 offered incredibly valuable insights.

EFRAG’s State of Play 2025 presented a snapshot of the practical realities of CSRD compliance and the ESRS operationalisation. The accompanying platform allows stakeholders to conduct their own analyses and comparisons as well as access the 656 reports collected between 1 January and 20 April 2025.

EFRAG wishes to thank the Boston Consulting Group (BCG) for their valuable support.

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Working with the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) and the Investment Monitoring Platform (IMP)

2025 FOCUS

EFRAG has signed Memorandums of Understanding with both the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) and the Impact Management Platform (IMP) and participates in these groups as an observer from 2025 onwards. Through these collaborations, EFRAG will exchange insights and contribute to the development of an ecosystem that offers technical tools and illustrations of impact materiality and financial materiality to support ESRS reporters.

When it comes to social and human rights matters, this dialogue with international organisations is particularly valuable. It helps reinforce the standardisation and maturity of key concepts and disclosures beyond the ESRS framework. All of this work is carried out with a strong focus on interoperability.

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Working with the CDP

2025 FOCUS

EFRAG and the CDP published on 18 March 2025 a correspondence mapping between the CDP question bank and ESRS E1 Climate change, illustrating a high degree of commonality. The mapping shows how CDP questions correspond to ESRS E1 disclosure requirements, helping companies identify synergies in data collected for both. This initiative supports the efficient implementation of ESRS, reducing reporting burden while enhancing transparency for users of sustainability information.

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