Decoding the ESRS Update: What it Means for Sustainability Reporting

The European Financial Reporting Advisory Group (EFRAG) has released a draft update to the European Sustainability Reporting Standards (ESRS), offering a more streamlined and focused approach to ESG disclosures under the Corporate Sustainability Reporting Directive (CSRD). As the public consultation closed on 29 September 2025, and the final text is expected to be submitted to the European Commission in October, now is the time for reporting teams to prepare for what’s ahead.

We have analysed the update in detail. In this blog post, we break down the key updates, explain how they may affect your reporting approach, and share practical considerations for what to do next.

How We Got Here

Earlier this year, two proposals - the Omnibus and ‘stop-the-clock’ - introduced changes to the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy, and the Corporate Sustainability Due Diligence Directive (CSDDD). 

The ‘stop-the-clock’ proposal, which was approved in April, postponed reporting requirements by two years for in-scope companies that are yet to start reporting. Meanwhile, the Omnibus proposal aimed to simplify and reduce reporting burdens. 

Until July, the details of these simplifications were unclear. That changed with the release of EFRAG’s draft update to the ESRS. Although not yet final, this draft gives us a strong indication as to where the revised guidance will ultimately land. 

Why the ESRS Revision Matters

As the cornerstone of CSRD reporting, the ESRS provides a common framework for how thousands of companies across Europe disclose their environmental, social, and governance (ESG) impacts and risks. The draft revision aims to reduce unnecessary complexity while enhancing the decision-usefulness of disclosures.

In practical terms, the update brings:

• Fewer mandatory data points
• Clearer expectations around materiality
• Greater flexibility in how disclosures are structured

These changes are designed to ease the reporting burden, particularly for companies early in their CSRD journey, while still preserving the credibility and comparability that stakeholders require.

Highlights of the Proposed Changes

Here’s a closer look at the most impactful elements of the draft revision.

Example for Disclosure Requirement E4-5 – Metrics related to biodiversity and ecosystems change

1. Significantly Reduced Volume of Mandatory and Voluntary Disclosures
The total number of data points has been reduced by 68%, and the number of mandatory disclosure requirements has dropped by 57%. 

In addition, one of the most significant updates is the removal of voluntary data points from the core standards. These have now been moved to a separate guidance document, reducing the complexity of what needs to be disclosed by default.

This means companies can concentrate efforts on reporting information that’s material to their operations and value chains.

2. Revised Approach to Materiality and Topical Requirements

Some of the structural burdens around topic-by-topic disclosure have also been lifted:

• Requirements like IRO-1 (Impact, Risk, and Opportunity) and SBM-3 (resilience assessment) are no longer required at the individual topic level. Instead, they are addressed across topics in ESRS 2.
• This offers greater narrative coherence and allows for more integrated thinking across environmental and social issues.

3. Clarified meaning between ESRS topics
The original framework made the distinction between ESRS topics somewhat unclear. With the revision, the structure of the Standards has been updated and streamlined compared to the original framework. This streamlining places ESRS 2 at the core for cross-cutting themes. The revised drafts explicitly clarify the boundaries and interactions between individual Environmental Standards.

In Detail: What’s Changed in E2, E3, and E4

ESRS E2 – Pollution
The Pollution standard is now more clearly defined. Notably:

• GHG emissions are excluded from E2 and remain under ESRS E1.
• E2 focuses on emissions of pollutants to air, water, and soil, including substances of concern and substances of very high concern (SoCs/SVHCs).
• Transfers of water pollutants to external treatment plants are still considered part of downstream pollution, reinforcing the importance of full value chain visibility.

ESRS E3 – Water and Marine Resources
This section now includes several mandatory metrics:

• Water withdrawal, consumption, discharges, reuse, and storage are now mandatory reporting points.
• Water intensity metrics and financial risk assessments are no longer required.
• Companies operating in high water stress areas without relevant policies or targets in place must disclose this explicitly.

ESRS E4 – Biodiversity and Ecosystems
The E4 updates reflect growing expectations around nature-related disclosure:

• “Near a biodiversity-sensitive area” is now defined by potential negative impact.
• Metric on threatened species added alongside land degradation and soil sealing.
• Where E4 is deemed material, disclosures should align with Nature Positive Initiative’s State of Nature metrics such as ecosystem condition and extent, and metrics about drivers of biodiversity change, and ecosystem services.
• Site-level reporting is strongly encouraged, especially for measuring state-of-nature impacts.

Implications for Reporting Team

The ESRS update offers a valuable opportunity to recalibrate your sustainability reporting strategy. Here’s how the draft changes may affect your approach:

• Streamlined Processes: Fewer mandatory disclosures mean more flexibility to prioritise what’s most relevant to your business model, sector, and geography.
• Better Alignment with Internal Data: Many companies already collect site-level data on water use, biodiversity, or pollution. The updated standards make it easier to use existing information, rather than reinventing measurement frameworks.
• Clearer Expectations for Materiality: The revisions reinforce the importance of conducting a robust double materiality assessment, and doing so across topics, not just within silos.
• More Clarity on Supply Chain Expectations: Traceability in supply chain policies is now explicitly required, though the associated risk and impact assessments remain non-mandatory at this stage.

What Happens Next

• EFRAG will deliver its final technical advice to the European Commission by 30 November 2025
• Following that, the European Parliament and Council will begin review
• There’s a strong likelihood that the final adopted standard will closely resemble the current draft

How Natcap Can Help

For many companies, this update will come as a relief, but also a call to action. With greater freedom comes the need for clearer internal prioritisation and more consistent application of materiality.

At Natcap, we work with organisations to streamline and automate their nature reporting and disclosures. Our team of experts can help you: 

• Conduct and update double materiality assessments
• Design disclosure strategies across sites and supply chains
• Prepare for mandatory metrics in water, pollution, and biodiversity

Whether you’re revising your existing sustainability reporting strategy or preparing your first CSRD-aligned disclosure, we’re here to support you with tools, data, and advisory expertise.

Final Thought

The proposed ESRS updates represent a significant step toward more focused, practical, and impactful sustainability reporting. They offer a real opportunity for companies to shift from compliance-driven exercises to more strategic, stakeholder-oriented communication.