EFRAG Report Tracks the Evolution of ESRS Reporting

After two ESRS reporting cycles, the focus is shifting from implementation to the quality and comparability of disclosures. EFRAG’s findings give preparers a benchmark for assessing their own reporting while the standards themselves are being revised.

EFRAG has published the second edition of its State of Play report on the implementation of the European Sustainability Reporting Standards (ESRS). The study examines assured FY2025 sustainability statements and provides a comprehensive evidence base on how companies are applying mandatory reporting under the Corporate Sustainability Reporting Directive (CSRD).

The report shows a second-year reporting practice that is becoming more stable, but still uneven: material topics are now clearer, while targets, incentives and granular data do not yet cover all areas companies identify as material.

A Broader View of ESRS Practice

EFRAG analysed 905 FY2025 sustainability statements prepared under ESRS and subject to third-party assurance. The sample has expanded from 656 statements in the first edition, reflecting the broader reporting population captured by the April 2026 cut-off.

The analysis covers 18 questions across cross-cutting standards, environmental and social topical standards and, for the first time, governance disclosures. EFRAG used an AI-assisted approach with manual validation and notes that errors or omissions may remain.

The report also sits within the current European debate on simplified ESRS. EFRAG links the study to the European Commission’s recently closed consultation on the Draft Delegated Act regarding simplified ESRS and presents it as a factual, data-driven view of current reporting practice.

Materiality Is Becoming Stable

FY2025 statements show limited change from the first ESRS cycle, which is expected because companies reported under the same ESRS Set 1 standards. E1 Climate Change, S1 Own Workforce and G1 Business Conduct remain the centre of ESRS reporting. They were identified as material by 99%, 99% and 95% of companies respectively.

Among the 554 companies included in both the FY2024 and FY2025 samples, the average number of material topics increased from 6.3 to 6.6. Companies applying ESRS for a second time are therefore identifying a slightly broader material scope.

Double materiality assessment is also becoming more iterative. EFRAG found that 82% of companies updated their DMA from FY2024, with changes ranging from minor corrections and IRO recalibrations to scoring changes and full re-runs linked to scope changes.

The dominant method is hybrid. Across the FY2025 sample, 67% of companies used a hybrid DMA approach, 28% used a bottom-up approach and 5% used a top-down approach.

Materiality Is Not Always Matched by Targets

A central issue in the report is the gap between topics companies identify as material and the extent to which those topics are covered by targets and incentives.

Companies identified an average of 6.4 material topics, but set measurable, time-bound targets across only 3.3 topics. Targets therefore cover roughly half of what companies describe as material.

Climate and workforce topics are the exceptions. E1 Climate Change and S1 Own Workforce are the most frequently covered by targets: 98% and 82% of companies respectively report at least one target in these areas. Coverage falls sharply for other topics.

The same pattern appears in remuneration. EFRAG found that 63% of companies embed sustainability targets into executive incentive schemes, leaving 37% without a formal link between sustainability performance and executive remuneration.

EFRAG presents two possible readings of this gap. It may show that companies have not yet embedded all material topics into strategic management. It may also mean that some companies define materiality broadly for reporting purposes, while setting targets only where topics are actively managed.

Climate Planning Shows Clearer Progress

Climate disclosures show stronger signs of structured management. The share of companies disclosing a Climate Transition Plan rose from 55% in FY2024 to 69% in FY2025.

EFRAG also expanded its analysis of decarbonisation targets. In FY2025, 57% of preparers declaring climate change mitigation as material disclosed near- and long-term decarbonisation targets compatible with a 1.5°C pathway. This analysis covers companies for which climate change mitigation is material, not only those with a formal Climate Transition Plan.

Non-climate environmental topics are becoming more visible, but the data remains less granular. Materiality increased slightly for E2 Pollution, E3 Water and Marine Resources, E4 Biodiversity and Ecosystems and E5 Resource Use and Circular Economy. Where E2 to E5 are material, more than two-thirds of companies report metrics only at global, company-wide level, and less than 10% report at regional level.

Social and Governance Disclosures Remain Uneven

Social reporting remains anchored in S1 Own Workforce, which is material for almost all companies. EFRAG’s gender pay gap analysis shows an average unadjusted gap of 14.3% in favour of men. Only 12% of companies supplement this with an adjusted pay gap that reflects workforce characteristics such as geography and roles.

Among undertakings for which S2 Workers in the Value Chain and/or S3 Affected Communities are material, 89% have formal human rights policies covering Workers in the Value Chain and/or Affected Communities.

Governance receives a fuller baseline in this edition. Supplier relationship management, including payment practices, is material for 54% of undertakings. Among these companies, 81% explicitly reference ESG criteria in supplier selection, most often through codes of conduct. Only 7% provide SME-specific average payment terms.

Reports Are Shorter, but Navigation Is Limited

Average sustainability statement length decreased from 115 pages in FY2024 to 95 pages in FY2025. EFRAG cautions that the scale of the decrease is partly affected by sample composition and the April 2026 cut-off.

Country differences remain significant. EFRAG’s country-level analysis shows that Spain averages 162 pages, compared with 56 pages for Sweden and 64 for Finland. The north-south divide in report length observed in the first edition has not closed.

Sustainability statements account for an average of 34% of total annual report length. Yet only 6% of companies include a dedicated executive summary. Shorter reports are therefore not automatically easier to use.

Practical Reading for Preparers

For preparers, the State of Play report is useful as a benchmark. It shows which ESRS practices are becoming common and where companies still disclose selectively.

The findings can help teams test their own reporting against market practice: whether material topics are supported by targets, whether sustainability performance is linked to incentives, whether environmental metrics are geographically disaggregated, and whether social and governance disclosures go beyond policies.

This is especially relevant before the next reporting cycle. The report does not prescribe a template, but it helps preparers identify where their ESRS statement may need stronger evidence, clearer explanations or better navigation for users.

What to Watch Next

The findings come while the ESRS are being revised. EFRAG submitted its technical advice on draft simplified ESRS to the European Commission on 3 December 2025. The Commission then published a draft delegated act for public feedback on 6 May 2026, with the consultation open until 3 June 2026.

The revised ESRS have not yet been adopted and will not enter into force until they are published in the Official Journal. After adoption by the Commission, the delegated act will still be subject to scrutiny by the European Parliament and the Council.