The global movement toward consistent, decision-useful sustainability disclosures is accelerating once again. Across jurisdictions, momentum is building to adopt frameworks that allow investors, regulators, and other stakeholders to compare information and hold companies accountable.
Two major developments are converging to shape this future:
• The European Sustainability Reporting Standards (ESRS) simplification draft
• The International Sustainability Standards Board (ISSB) IFRS Sustainability Disclosure Standards (SDS)
Together, they signal a step toward a global baseline for sustainability reporting, and a clear message to companies: regardless of where you operate, it’s time to act.
The ESRS Simplification: Cutting Complexity, Increasing Clarity
In its July 2025 exposure draft, EFRAG proposed sweeping changes to the ESRS, aimed at making sustainability reporting more streamlined and accessible:
• Reduction in datapoints: Mandatory datapoints cut by roughly 50%, voluntary datapoints reduced by more than two-thirds.
• Refined double materiality: A top-down, business-model-driven approach replaces exhaustive “data hunts,” keeping disclosures relevant and focused.
• Improved readability: Technical annexes and EU Taxonomy tables moved out of the main body to make reports easier to navigate.
• Streamlined narrative: Redundancies between ESRS 2 and topical standards are removed.
• Transition reliefs: New adopters benefit from phased requirements and flexibility where data is difficult to obtain.
The simplification also brings ESRS into closer alignment with ISSB’s IFRS S1 and S2 standards—especially in governance, risk management, and financial connectivity. This reduces duplication for companies reporting under both EU and global frameworks.
The IFRS SDS: Building a Global Baseline
The IFRS Sustainability Disclosure Standards (SDS), which were endorsed by the International Organization of Securities Commissions (IOSCO) in 2023, provide a globally recognized foundation for sustainability reporting.
• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
• IFRS S2: Climate-related Disclosures
Both are built on the Task Force on Climate-Related Financial Disclosures (TCFD) framework and grounded in three principles:
1. Financial materiality: Focus on information that could influence investor decision-making.
2. Connectivity: Ensure sustainability disclosures link directly to financial statements.
3. Proportionality: Use reasonable and supportable information without undue cost or effort.
This framework is being adopted, often in phases, by an increasing number of jurisdictions, covering large portions of the global economy. Combined with the EU’s CSRD/ESRS, the overlap between jurisdictions now covers a substantial proportion of global GDP.
The Direction of Travel: Jurisdictional Convergence
Between the CSRD/ESRS and IFRS SDS, many of the world’s major economies are moving toward aligned sustainability disclosure requirements.
This doesn’t mean identical rules, but it does mean a core set of concepts, definitions, and structures will soon underpin sustainability reporting almost everywhere.
The ESRS simplification makes it easier for companies to prepare reports that satisfy both EU and global requirements, reducing the need for costly parallel processes.
Moderate Uncertainty Is Not an Excuse for Inaction
Even when standards are evolving, companies can’t afford to wait. Well, companies could wait; it will simply be more costly in terms of both money and time. Instead, companies should manage this uncertainty like any other strategic risk—through adaptive processes, integration into governance, and progressive system-building.
Actions that create resilience in uncertain reporting environments include:
• Integration into decision-making: Embed sustainability risks and opportunities into corporate governance and risk frameworks.
• Cross-functional collaboration: Engage finance, risk, investor relations, and operational teams to ensure reporting is accurate, consistent, and connected to core business performance.
• Scenario planning: Use reasonable assumptions to explore the impacts of sustainability risks and opportunities, even when precise data is unavailable.
• Progressive system building: Develop data processes and controls incrementally to meet evolving assurance requirements.
What Should Companies Do Now?
1. Start with Climate, Workforce, and Governance
Focus on ESRS E1 (Climate), S1 (Workforce), and G1 (Governance). These areas are top priorities for both the EU and global investors and will remain core disclosure anchors.
2. Strengthen Your Materiality Assessment
A robust, documented double materiality process is the foundation of effective reporting under both ESRS and IFRS SDS.
3. Recalibrate Your Reporting Strategy
Use the simplification as an opportunity to shift from reactive compliance to proactive storytelling, connecting ESG performance to financial strategy.
Act Early to Keep Pace and Create Value
The harmonization between ESRS and IFRS SDS, combined with growing jurisdictional adoption, points toward a near-future where sustainability reporting is universal, comparable, and decision-useful. Companies that act now by building systems, processes, and governance that meet this emerging baseline will keep pace with compliance requirements. They can also leverage their reporting to create business value; delivering short-term gains through operational efficiency and long-term benefits through enhanced trust, improved access to capital, and greater strategic resilience.
If you have questions or are looking for advice on how to move forward in way that makes sense for your organization, get in touch with us. We’re here to help.
