Sensible sustainability

About two years ago, my colleague Richard Peters wrote about the EU’s new rules for sustainability reporting (see Sense and sustainability, August 2024). How have companies been handling the new standards, and what’s changed in the meantime?

 

Two years on: How companies are handling ESRS

One of the things I like best about living in Europe is its strong green streak. By that I mean environmental consciousness—extensive recycling programs, emphasis on accessible public transit, and the like. And this consciousness isn’t limited to private citizens or nonprofit organizations, either. The Continent’s richly varied business landscape features many companies who are keenly aware that their business operations—purchasing supplies, manufacturing products, providing services, using infrastructure, etc.—have an impact on the environment, both locally and globally. In a bid for environmental protection and transparency, they want ways of quantifying, measuring, and reporting that impact.

Cue the EU legislative machinery: It’s for precisely those reasons that lawmakers drew up a framework, the Corporate Sustainability Reporting Directive (CSRD), which entered into force two years ago. To comply with that law, companies whose business within the EU meets certain size and scale thresholds have to apply the European Sustainability Reporting Standards (ESRS).

Last year was the first time companies had to publish ESRS-compliant reports, providing data on 2024. I fully expected to read that businesses were chafing under this new layer of bureaucracy and administrative burden. To my surprise, surveys reveal that their experiences have been mixed. True, implementing ESRS has been more demanding than initially anticipated. It involves various business functions, gathering reliable data from along the whole value chain (which for many companies stretches across multiple countries), and an unfathomable number of data points.

But I’m pleased to see that businesses have acknowledged upsides, too. Companies are doing the double materiality assessment and identifying impacts, risks, and opportunities because this is required under CSRD, but they’re also finding that these exercises yield some of the most valuable outputs for internal decision-making and strategy. This internal focus carries over to stakeholder engagement, which is mostly limited to in-house voices and immediate financial audiences, with relatively little outreach to wider societal stakeholders. However, surveys in 2025 indicate that one of the things companies are planning to use their CSRD data for is to respond to growing investor and regulator interest.

 

Easing the administrative burden

I think it’s natural for there to be some growing pains; after all, ideas rarely go like clockwork when they’re first implemented. And indeed, there was enough pushback about the reporting burden that EFRAG and the European Commission proposed—and, by late 2025, technically agreed on—some considerable simplifications to ESRS. The streamlined set of standards, which will apply from the 2026 reporting cycle onward, reduces mandatory data points by well over half and removes all voluntary ones.

As a quick aside, I have to say I’m impressed by the democratic spirit of cooperation this demonstrates. A representative government enacted legislation, it was rolled out, issues and problems were raised, feedback was heard, and action was taken to find some middle ground. It might be slow, it’s often messy, but it’s a great process when it works.

 

What’s next

At any rate, momentum is clearly toward fewer data points and closer alignment with global standards such as International Financial Reporting Standards (IFRS) S1 and S2. There’s also a push for a stronger focus on drawing up sustainability statements that fairly represent a company’s specific situation rather than regurgitating exhaustive checklists.

For reporting teams—and for language service providers like Klein Wolf Peters who support them—this means that high‑quality narrative, a comprehensible explanation of methods and assumptions, and consistent terminology in every language version are becoming at least as important as the underlying quantitative disclosures. To be a responsible player in their industry and the global economy, companies need their stakeholders around the world to understand what they’re doing and why; the key to that is clear and trustworthy communication.