The European Union (hereafter EU) haS shifted its policy in a direction that greatly reduces companies' sustainability-reporting burden. On August 1, the "European Financial Reporting Advisory Group (hereafter EFRAG)" released a revised draft of the European Sustainability Reporting Standards (hereafter ESRS), stating that it had greatly simplified the reporting requirements under the Corporate Sustainability Reporting Directive (CSRD).
Seeking a Balance Between Corporate Competitiveness and Sustainability Reporting
The core of this revision is the easing of the reporting burden. EFRAG removed all voluntary disclosure items and cut reporting data points by 68%. Mandatory data requirements were also reduced by 57%. This standard simplification was pursued as part of the European Commission's "Omnibus I" proposal. This proposal aims to reduce the burden of sustainability-related regulations—not only the CSRD but also the Corporate Sustainability Due Diligence Directive, the Taxonomy Regulation, and the Carbon Border Adjustment Mechanism.
In the revision process, EFRAG focused on organizing sustainability reports to be more readable and concise and on strengthening their connectivity with corporate reporting. It also adopted the same terminology as far as possible to increase interoperability with the sustainability-reporting standards of the "International Financial Reporting Standards (hereafter IFRS)," and it emphasized a "Fair Presentation" framework.
Patrick de Cambourg, chair of EFRAG's Sustainability Reporting Board, explained that "EFRAG is fully aligned with the strategic vision presented by the European Commission," and that "this revision provides what Europe needs at this point—a more focused and practical sustainability-reporting system that maintains ambitious goals while not placing an excessive burden on companies."
[EFRAG releases simplified draft ESRS standards ©ESG.ONL/ESG Today]
The Strategic Meaning in the Global ESG-Reporting Standardization Competition
This ESRS simplification is interpreted as aiming, beyond mere regulatory easing, for the EU's strategic repositioning in the global ESG-reporting-standard competition. Amid the U.S.'s ESG-policy retreat and the accelerating establishment of Asia's own ESG frameworks, the EU is assessed as having presented a "third way" that satisfies both practicality and effectiveness.
In particular, strengthening consistency with IFRS sustainability standards is analyzed as an intention to reduce global companies' multiple-reporting burden. This can be seen as the EU taking a practical approach for the global spread of its own standards.
The ESRS simplification also offers several implications for Korean companies. First, the practical burden on Korean companies operating in the EU is expected to decrease considerably. The 68% reduction in data points allows for great savings in report-writing time and cost. It is also expected to affect the domestic ESG-disclosure standards being developed by the "Korea Sustainability Standards Board (hereafter KSSB)." The KSSB is already preparing Korean-style standards based on IFRS sustainability standards, and the EU's simplification direction can be a reference for enhancing the practicality of Korean standards.
In a situation where Korea's large companies are subject to the CSRD, this simplification is welcome news. CSRD reporting obligations apply in stages from 2025 to Korean companies operating in the EU, such as Samsung Electronics, LG Electronics, and Hyundai Motor, and the reporting burden is expected to decrease greatly under the revised standards.
The Future of Sustainability-Reporting Standards
EFRAG plans to conduct 60 days of public consultation on this draft. The European Commission extended the deadline for EFRAG's technical advice submission, originally scheduled for the end of October, to the end of November. The final standards are scheduled to be finalized at the end of 2025. Experts assess that this simplification will greatly improve the practicality and efficiency of ESG reporting. However, how the delicate balance—reducing the reporting burden while maintaining the transparency of core ESG information—will work in the actual application process remains to be seen.
by Editor N