The new ESRS – a smokescreen? Insights from Julian Göbel

The planned changes to the European Sustainability Reporting Standards (ESRS) are currently creating uncertainty in many companies. While the public debate often speaks of significant simplification, a closer look reveals a more nuanced picture. Although the current drafts contain fewer individual disclosure requirements, many elements have been restructured, consolidated, or moved to other parts of the standards.

For companies that have already started implementing the ESRS, this creates a new challenge. Rather than simply eliminating requirements, the focus is often on migration, reinterpretation, and adapting existing reporting structures. This particularly affects organizations that have already built their processes and must now decide how to handle the proposed changes.

We spoke with Julian Göbel, our Envoria Chief Sustainability Officer & Managing Director, about why the announced simplification does not automatically mean less effort in practice, where the biggest uncertainties currently lie, and why many companies continue to adhere closely to the ESRS framework despite potential simplifications.

Julian, we’re currently hearing a lot that the new ESRS will include significantly fewer data points. Does that really mean less effort for companies?

The figure of around 60% fewer data points initially sounds like a substantial relief. That’s also how it is often presented right now. In practice, however, this impression can quickly become misleading. When you look at the drafts in detail, it becomes clear that many requirements have not simply been removed, but rather shifted, consolidated, or restructured.

In that sense, the discussion around “60% fewer data points” can feel like a smokescreen. The number may be correct on paper, but it says little about how much work is actually required within a company. The structure of the standards has changed significantly, and that is precisely where additional effort arises. Companies don’t just need to reduce existing reporting structures – in many cases, they need to reassign them entirely.

A good example is the consolidation of many disclosures in ESRS 2. Topics such as policies, actions, targets, or metrics have been removed from the individual environmental, social, and governance standards and centralized as general disclosure requirements. While this reduces the number of individual data points within the topic-specific standards, the underlying requirements remain. In practice, this means that the same information is still needed – just in a different place. In some cases, new reporting structures need to be created or existing ones adjusted.

Where does the greatest additional effort arise in practice due to the new drafts?

The biggest effort currently lies in migration. Companies that have already worked with the 2023 ESRS cannot simply continue using their existing structures. Numbering has changed, content has been merged, and some requirements are formulated less specifically than before. This makes mapping more complex.

This is exactly where it becomes clear why the often-cited “60% fewer data points” does not automatically translate into less effort. When requirements are consolidated or moved to other standards, existing data must be reassigned, re-documented, and in some cases reassessed.

In addition, requirements that appear to have been removed often still exist – just in a different form. One example is disclosures on financial impacts. In the original standards, there were dedicated disclosure requirements across multiple topic areas. In the new drafts, these disclosures have been consolidated in ESRS 2. The underlying expectation remains, but it is no longer addressed in the same place. For companies, this means additional work, as data needs to be restructured and re-documented.

Have any fundamental concepts of reporting changed with the new drafts?

Yes, and this is often underestimated. The new drafts align more closely with the logic of financial reporting. Concepts such as “fair presentation” or the stronger focus on financial control indicate that the ESRS are moving closer to IFRS and ISSB standards.

While this improves comparability in the long term, it also means that existing boundaries need to be reassessed in the short term. For example, if the reporting boundary aligns more closely with financial control, this can affect data collection – for instance in relation to investments or across the value chain. For many companies, this results in additional adjustments, even though the number of data points has formally been reduced.

What role does the materiality assessment play in the new ESRS drafts?

The materiality assessment becomes more flexible, but not necessarily simpler. In the original standards, the assessment was highly structured and in some cases very detailed. The new drafts allow more flexibility, for example by enabling evaluations more strongly at the topic level.

This can reduce effort, but at the same time shifts more responsibility onto the company. It must justify why a topic is considered material or not. This becomes particularly relevant in voluntary reporting or for companies that are not directly subject to reporting obligations. In those cases, it is no longer just about covering all data points, but about determining which information is actually relevant for banks, customers, or internal management.

In your view, are there areas that will remain particularly complex despite the simplification?

Yes, and this becomes very clear when comparing the individual standards. Many companies are already relatively advanced when it comes to climate, as established methodologies have been used for years. In other areas, things are significantly more challenging.

In the environmental area, data points have been reduced – for example for pollutants or water metrics – but the underlying requirements remain. Values still need to be collected, assessed, and documented, albeit partly in a more aggregated form. The water standard has also consolidated several metrics, without eliminating the underlying information. In addition, it clarifies that a resilience analysis is mandatory.

The biodiversity standard remains particularly complex. Even the original version was considered very demanding, and the simplified drafts only reduce it to a limited extent. Requirements are formulated more flexibly, but remain technically challenging. For many companies, this area will continue to be one of the biggest hurdles.

What does this mean for companies that have already started implementation?

For these companies, the situation is particularly challenging right now. They have already built processes, collected data, and defined structures. Now they must decide whether to adapt these structures, continue running them in parallel, or wait for the final standards.

An additional issue is that there is currently no official, detailed migration guidance from EFRAG. The drafts show what the new standards are expected to look like, but not how existing ESRS 2023 reports should be transitioned into the new system. This means companies must decide for themselves how to consolidate data points and adjust their documentation.

This is precisely why, in practice, transitioning to the simplified ESRS can require more effort than the initial setup.

How is Envoria addressing this situation, particularly with regard to CSRD software?

We are currently seeing that many companies are in a transition phase. Some are already working with the existing ESRS, while many are waiting for the final simplified standards. In our CSRD software, we fully retain the existing ESRS while also mapping the new drafts. At Envoria, we are therefore running two parallel tracks. Envoria customers can work flexibly with the different ESRS standards.

In addition, we are planning an optional migration function to support the transition. This will primarily focus on mapping data points that have been moved within the ESRS framework. However, where data points have been consolidated or fundamentally restructured, our migration function can only provide limited support. In those cases, companies will still need to make their own content-related decisions.

In your view, will companies continue to use ESRS even if they are no longer required to do so?

We are already seeing this. Many companies continue to align with ESRS, even if they are no longer formally required to report. Reasons include requirements from banks, investors, or customers, as well as internal management needs.

Sustainability data is increasingly used for financing, supply chains, and strategic decision-making. In such cases, a heavily simplified standard like VSME is often not sufficient. At the same time, many companies are waiting for the final version of the new ESRS before defining their reporting structure.

As a result, many companies are currently working with multiple scenarios at once. They maintain existing structures, prepare for new requirements, and try to remain flexible at the same time.

And finally, Julian, how would you summarize the current situation?

The simplification of the ESRS is not just a reduction, but above all a reorganization. The number of data points is decreasing, but requirements are being consolidated, generalized, and shifted into higher-level structures.

This results in less detailed prescription within the standards, but more need for interpretation within companies. The real challenge is therefore not reporting less, but dealing with greater uncertainty and more structural work.

If you want to put it bluntly, the discussion around “60% fewer data points” is, in part, a smokescreen. On paper, there is less – but in practice, for many companies, it initially becomes more complex.

Fewer data points in this case do not automatically mean less effort – often, they primarily mean more migration.

Thank you very much for your insights and perspectives!