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Society comments on Simplified ESRS Exposure Drafts

The amendments improve interoperability/alignment with IFRS S1 and S2 by aligning language, adopting the financial control approach for GHG boundaries and incorporating several IFRS reliefs. They also introduce practical considerations for carrying out a DMA, clarify the role of materiality as a general filter, and streamline topic lists, which should simplify the process and reduce unnecessary documentation. The proposed changes should therefore result in shorter, more decision-useful reporting by eliminating confusion and trimming boilerplate disclosures. However, more guidance is needed around the thresholds that can be used to determine which impacts are included in the sustainability statement, to avoid undue scrutiny from assurance providers.

A blue and black logo AI-generated content may be incorrect.                                                                                                        The Investor Relations Society

Office 605 Birchin Court, 20 Birchin Lane

London EC3V 9DU

 

Chiara Del Prete, Chair, EFRAG Sustainability Reporting TEG,

European Financial Reporting Advisory Group (EFRAG)

35 Square de Meeûs

1000 Brussels (fifth floor)

Belgium

 

By email: EFRAGSecretariat@EFRAG.ORG and via online questionnaire

 

29th September 2025

Dear Chiara,

Re: EFRAG Questionnaire for public input on simplification of ESRS

Thank you for giving us the opportunity to respond to your questionnaire on your proposed simplified ESRS Exposure Drafts. This response is made on behalf of the UK’s Investor Relations Society (‘the IR Society’).

The IR Society represents Members working for publicly listed companies and investor relations focused service providers, to assist them in the development of effective two-way communication with the markets. It has approaching 800 Members, drawn mainly from the UK, including the majority of the UK FTSE 100, many of the FTSE 250 constituents and some from AIM-listed companies, as well as those listed overseas.

The IR Society’s mission is to promote best practice in investor relations; to support the professional development of its Members; to represent their views to regulatory bodies, the investment community and Government; and to act as a forum for issuers and the investment community. 

Our response has therefore been primarily constructed through the lens of a corporate issuer, and as such reflects the views of those very much at the ‘coal face’ of investor engagement and corporate reporting – both financial and non-financial.

Given the format of the consultation (an online questionnaire), we have submitted our comments via the online questionnaire, which is appended hereto.  Our comments are limited to those aspects/questions of most relevance to our Members, which relate to DMAs (Q11), conciseness/readability/connectivity (Q13) and international interoperability (Q21). 

We hope you find our comments comments useful. Please do not hesitate to make contact if you have any questions.

Yours sincerely,

 

Liz Cole

Head of Policy and Communications

Investor Relations Society

(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)

 

 

 

 

APPENDIX – ONLINE QUESTIONNAIRE

(Society answers are in blue)

 

 

11. Clarifications and simplification of the Double Materiality Assessment (DMA) (ESRS 1 Chapter 3) and materiality of information as the basis for sustainability reporting

Rationale for the changes

The Amendments have clarified the requirements in ESRS 1 Chapter 3 about materiality of information and simplified the DMA process. They are described in Lever 1 of simplification in the Basis for Conclusions (see BfC Chapter 4).

Link here to access the Log of Amendments, ESRS 1, Chapter 3 if you would like to review the detailed Amendments and their rationale.

The Explanatory Memorandum (EM) which accompanies the EC Omnibus proposals (page 5) identified the following objective for this lever: “[the simplification] will provide clearer instructions on how to apply the materiality principle, to ensure that undertakings only report material information and to reduce the risk that assurance service providers inadvertently encourage undertakings to report information that is not necessary or dedicate excessive resources to the materiality assessment process”.

Description of the changes

To meet this objective, EFRAG has introduced the following changes which aim to strike a balance between simplification and the necessary robustness of the Double Materiality Assessment (DMA):

  1. A new section presenting practical considerations for the DMA has been drafted, including the option of implementing either a bottom-up or top-down approach (Chapter 3.6 of ESRS 1)
  2. More prominence has been given to materiality of information as a general filter and all the requirements are subject to it.
  3. The relationship of impacts, risks and opportunities, and topics to be reported has been clarified (ESRS 1, paragraph 2 and 22)
  4. It has been explicitly allowed to include information about non-material topics (ESRS 1, paragraph 108) if they are presented in a way that avoids obscuring material information
  5. Emphasis is put on ESRS being a fair presentation framework, to reinforce the effectiveness of the materiality principle and avoid excessive documentation effort due to a compliance and checklist approach to the list of datapoints (DP); an explicit statement of compliance with ESRS is included in (ESRS 1, Chapter 2)
  6. To avoid excessive detail in reported information, it has been clarified that all the disclosures can be produced either at topical level or at impacts, risks and opportunities (IRO) level, depending on the nature of the IROs and on how they are managed
  7. The list of topics in AR 16 (now Appendix A) has been streamlined by eliminating the most detailed sub-sub-topic level and has now an illustrative only and non-mandatory status.
  8. More emphasis has been put on the aggregation and disaggregation criteria for reporting information at the right level. Explanations have been provided with respect to the consideration of sites for the DMA and reported information, so as to avoid long lists of sites being included in the sustainability statement.

Please do not comment here in “Gross versus Net” as it is covered by the next question.

Do you agree that the proposed amendments have sufficiently simplified the DMA process, reinforced the information materiality filter and have succeeded in striking an acceptable balance between simplification and robustness of the DMA? Do you agree that the wording of Chapter 3 of ESRS 1 is sufficiently simplified?

  • I agree
  • I partially agree and partially disagree
  • I disagree
  • I would like to skip this question and provide my feedback in Part 3

 

I [we] partially agree and partially disagree.

Explanatory comments: The amendments introduce practical considerations for carrying out a DMA, clarify the role of materiality as a general filter, and streamline topic lists. These steps simplify the process and reduce unnecessary documentation. The proposed changes should result in shorter, more decision-useful reporting by eliminating confusion and trimming boilerplate disclosures. It's refreshing to see more clarity around a bottom-up approach being possible, which accommodates different approaches better. There's a noticeable simplification between ESRS 2 and topical standards and a close alignment to IFRS S1/S2 as well as fewer data points overall. 

However, it would be useful if the standards could be more prescriptive around which thresholds can be used to determine which impacts will be covered in the sustainability statement. Currently this seems a little vague, which may lead to some confusion and/or undue scrutiny from assurance providers. We also note that some complexity remains in the linkage of impacts, risks and opportunities to reporting topics, which may still challenge preparers.

In relation to interoperability, it might also be helpful to consider whether guidance could be provided to assist companies in scope for ISSB reporting on how best to extract and apply financially material topics from a DMA to a single materiality assessment required by IFRS S1 and S2 and/or standards on which these will be built such as the UK SRSs.

13. Improved readability, conciseness and connectivity of ESRS Sustainability Statements

Rationale for the changes

Starting with the input gathered from the first-time adopters, EFRAG has introduced several changes to support the production of more readable and concise sustainability statements, that are better connected with corporate reporting as a whole. This corresponds to Lever 2 of simplification in the Basis for Conclusions (BfC) (Chapter 4).

Description of the changes

EFRAG has clarified the flexibility that preparers have in preparing their statements. The Amendments describe the possibility of including an 'executive summary' at the beginning of the sustainability statement and have put greater emphasis on the use of appendices to separate more detailed information from key messages. The amendments have also clarified the concept of ‘connected information’, discouraging fragmentation and/or repetition of information (ESRS 1, Chapter 8).

Do you agree that these proposed Amendments, when combined with the other changes in the Amended ESRS, provide an appropriate level of flexibility to support more relevant and concise reporting, as well as to promote better connectivity with corporate reporting as a whole?

  • I agree
  • I partially agree and partially disagree
  • I disagree

 

I [we] agree.

Explanatory comments: The amendments support readability and connectivity by allowing an executive summary, encouraging use of appendices, and clarifying the concept of connected information. These measures are consistent with the stated objective of producing more concise and better-integrated sustainability statements and of addressing the issue raised in EFRAG’s Basis for Conclusions July 2025 document described as “The general feeling is that undertakings had difficulties in 'telling their story' with respect to sustainability topics and in sharing their views with their stakeholders.” One point of detail; the amendments to ‘impact materiality’ are rather dense and could benefit from presentational clarity, for example, using bullet points so reporters can more easily identify which factors apply.

 

21. Enhanced interoperability with the ISSB’s standards IFRS S1 and S2

Rationale for the changes

EFRAG has implemented several changes to enhance the level of interoperability with the ISSB’s standards IFRS S1 and S2.  These amendments are described in Lever 6 of simplification in the Basis for Conclusions (BfC) (see Appendix 6). At the same time, however, the Amendments implemented for simplification reasons affect the level of interoperability with IFRS S1 and S2, as resulting from the joint EFRAG IFRS interoperability guidelines (May 2024). For example, reliefs beyond those in IFRS S1 and S2, described above, negatively affect interoperability.

One of the Explanatory Memorandum (page 5) objectives is to further enhance the already very high degree of interoperability with global sustainability reporting standards. EFRAG prioritised the interoperability with IFRS S1 and S2, following the majority input gathered in the public call for input and outreach.

Description of the changes

To achieve this objective, EFRAG implemented the following changes, which aim to achieve a higher level of interoperability while being compatible with the objectives of the Amendments.

  1. In line with IFRS S1, emphasis has been put on ESRS being a fair presentation framework; materiality of information is now as general filter for the reported information.
  2. To remove one of the main interoperability differences, the ESRS E1 GHG emission boundary has been replaced by the financial consolidation approach (ESRS E1 AR19), aligned with the financial control approach in the GHG protocol, while a separate disclosure based on operational control is now required (and aligned with the corresponding disclosure in the GHG protocol) only for entities with more complex ownership structures (ESRS E1, AR 20).
  3. The IFRS reliefs (undue cost or effort, disclosure of ranges for quantitative financial effects) have been implemented, with the exception of the one on omitting commercially sensitive information about opportunities (pending the outcome of Level 1 discussions), the one allowing to omit Scope 3 GHG emissions when impracticable and the one allowing to omit quantitative financial effects when the undertaking does not have the necessary skills (please note that the relief on anticipated financial effects is treated in question 20).
  4. The implementation of reliefs that go beyond the ones in IFRS S1 and S2 results in new interoperability differences (see question 16 sic [17?]).
  5. Language for requirements that are common to ESRS and IFRS S1 and S2 has been aligned whenever possible with the one in IFRS S1 and S2, in ESRS 1, 2 and E1.
  6. The reference to SASB Standards and IFRS Industry-based Guidance as a source of possible (“may consider”) disclosure when reporting entity-specific sector information is now a permanent feature (before it was temporary, i.e. until the issuance of ESRS sector standards).
  7. The datapoint reduction resulted in the elimination of 7 “shall” datapoints aligned with ISSB standards described in Basis for Conclusions (BfC) (Chapter4).
  8. Several changes have been introduced to further advance interoperability in ESRS E1 (Basis for Conclusions (BfC), Chapter 4).

 

Do you agree that these proposed Amendments achieve an appropriate balance between increasing interoperability and meeting the simplification objectives?

  • I agree
  • I partially agree and partially disagree
  • I disagree

 

I [we] partially agree and partially disagree.

Explanatory comments: The amendments improve interoperability/alignment with IFRS S1 and S2 by aligning language, adopting the financial control approach for GHG boundaries, incorporating several IFRS reliefs and removing a lot of duplication. However, as EFRAG acknowledges, reliefs extending beyond IFRS provisions create new differences, which means some interoperability gaps remain. We also note that the text has become more technical, which may create a more lengthy/expensive process for preparers.

Published 29 September, 2025