EY Highlights Key Implications of EFRAG’s Technical Advice on Simplified ESRS

The ongoing revision of European Sustainability Reporting Standards has drawn significant attention from both preparers and users of sustainability statements. Against this backdrop, EY has published its assessment of EFRAG’s technical advice on simplified ESRS, highlighting the practical implications of the proposed changes.

The January 2026 issue of EU Sustainability Developments, published by EY, examines the technical advice submitted by EFRAG on the simplification of ESRS Set 1. The publication focuses on the substance of the proposed revisions and the overall direction of change, situating the technical advice within the context of the first Omnibus Simplification Package.

The revised standards follow a formal due process, encompassing public consultation, outreach activities and field tests, and were finalised prior to the submission of the technical advice to the European Commission (EC) in early December 2025.

Direction and Scope of the Proposed Revisions

The revised ESRS proposed in the technical advice remain grounded in the existing architecture of ESRS Set 1. The framework continues to consist of 2 cross-cutting standards and 10 topical standards, covering the same sustainability topics and disclosure areas. No new reporting topics are introduced. Instead, the revision focuses on streamlining requirements, improving clarity and enhancing the usability of both the standards themselves and the resulting sustainability statements.

EY highlights that this approach reflects a recalibration of how requirements are expressed and structured, rather than a change to the fundamental architecture, while significantly affecting how materiality, proportionality and professional judgement are applied in practice. The double materiality principle, the overall scope of disclosures and the link to financial reporting are preserved.

Datapoint Reduction and Structural Simplification

A central element emphasised by EY is the scale of datapoint reduction achieved through the technical advice. Mandatory datapoints are reduced by 61%, while all voluntary datapoints are removed. EY notes that this reduction is driven primarily by a shift away from highly granular narrative disclosures towards a more principles-based approach.

Disclosure requirements are consolidated in the main body of the standards, while application requirements are positioned directly beneath each requirement. This structural change is intended to support consistent interpretation and reduce the need to navigate between different parts of the standards when preparing sustainability statements.

Readability, Presentation and Connectivity

EY draws attention to the increased flexibility introduced for the presentation of sustainability information. The technical advice allows undertakings to include executive summaries, use appendices and exercise greater judgement in aggregation and disaggregation, provided that material information is not obscured.

At the same time, EY underlines that connectivity remains a core requirement. The revised standards continue to emphasise internal connectivity within the sustainability statement, as well as mandatory cross-referencing with the financial statements, reinforcing alignment between sustainability and financial reporting.

Clarifications in Cross-cutting Standards

The EY publication highlights several clarifications introduced in ESRS 1 and ESRS 2, many of which are further contextualised through the accompanying How we see it commentary. These clarifications include the explicit articulation of fair presentation as an overarching objective of the sustainability statement and the more prominent role of information materiality as a filter for determining what is disclosed.

EY underlines that fair presentation is intended to be assessed at the level of the sustainability statement as a whole, rather than at the level of individual datapoints. In this context, entity-specific disclosures are positioned as a mechanism to ensure that material impacts, risks and opportunities are faithfully represented where standardised disclosures alone may be insufficient.

EY also points to the simplified approach to the double materiality assessment, including the option to apply a top-down approach where materiality conclusions are evident from the undertaking’s strategy, business model, sectors and geographies. The How we see it analysis notes a clear shift in emphasis from procedural completeness towards the outcome of the assessment, with a stronger focus on relevance, proportionality and the documentation of key judgements.

The publication further highlights refinements to impact materiality, notably the way prevention, mitigation and remediation actions are considered. EY draws attention to the distinction between gross and net perspectives on impacts, and to the concept of impacts that remain inherently decision-useful for users, even where management actions are effective. This area is identified as one where consistent application and transparent explanation will be particularly important in practice.

Additional clarifications relate to reporting boundaries and the introduction of multiple burden-reduction reliefs. EY highlights that proportionality mechanisms, such as the undue cost or effort principle and partial-scope metrics, are expected to play a central role in practice, while transparency around their use is positioned as a key element to support comparability and market discipline.

Financial Effects and Reporting Boundaries

EY devotes particular attention to disclosures on financial effects under SBM-3. The publication highlights that the requirement to disclose both current and anticipated financial effects of material impacts, risks and opportunities is retained, alongside the introduction of new reliefs and extended phase-in provisions, including for quantitative information until financial year 2029. EY notes that quantitative disclosures may take non-monetary forms or be presented as ranges, and that the omission of quantitative information is permitted only in cases of high uncertainty, subject to appropriate explanation.

The EY analysis also emphasises changes to reporting boundaries, which are particularly relevant for climate-related disclosures. These include the removal of the additive approach for greenhouse gas emissions, in favour of reporting boundaries aligned with financial consolidation; clarifications on the treatment of leased assets, distinguishing between lessee and lessor responsibilities; and reliefs related to acquisitions and disposals.

Applicability and Reporting Timelines

EY notes that the European Commission is currently reviewing the technical advice and is expected to adopt an amended ESRS Delegated Act by mid-2026. The final revised standards may differ from the technical advice submitted by EFRAG. Subject to adoption, the revised ESRS would apply from the 2027 financial year, with an option for voluntary application from 2026.

Until the amended Delegated Act enters into force, EY stresses that Wave 1 undertakings are required to continue reporting under ESRS Set 1, as adopted in 2023, taking into account the relief measures introduced through the “Quick-fix” Delegated Regulation.

Conclusion

As reflected in EY’s analysis, the technical advice on simplified ESRS represents a significant recalibration of reporting requirements, rather than a fundamental redesign of the framework. The emphasis is placed on reducing complexity, improving readability and maintaining alignment with existing reporting principles. The ultimate effect of these changes will depend on the European Commission’s legislative process and the final form of the amended standards.