The European Union’s Platform on Sustainable Finance (PSF) has released its response to the European Commission’s consultation on the revised European Sustainability Reporting Standards (ESRS), highlighting both improvements and potential risks in the updated framework.

The PSF broadly supported the revisions, noting that they contribute to a more proportionate and user-friendly reporting system. However, it cautioned that certain changes could place the ESRS below the baseline of global sustainability reporting standards, particularly in areas such as climate scenario analysis, financed emissions disclosures, and reporting reliefs.

One of the key concerns raised relates to the shift from mandatory to optional scenario analysis, which the PSF indicated could weaken the ability of companies to assess and disclose climate resilience. The group emphasized that ESRS should remain aligned with, and where appropriate exceed, international reporting expectations to maintain credibility and comparability.

The revised ESRS, developed by EFRAG, forms part of the European Commission’s Omnibus I initiative aimed at reducing reporting complexity and administrative burden under the Corporate Sustainability Reporting Directive (CSRD). The updates include a 61% reduction in mandatory datapoints, removal of voluntary disclosures, increased flexibility in the use of estimates, and expanded reliefs and phase-in provisions for companies.

While acknowledging these improvements in usability and structure, the PSF highlighted the need for stronger integration between ESRS and the wider EU sustainable finance framework. In particular, it recommended closer alignment with the EU Taxonomy to reduce duplication and improve consistency in sustainability disclosures.

The PSF also proposed a series of enhancements to strengthen the effectiveness of the framework. These include developing a standardized transition plan template, improving consistency across related regulations such as the Sustainable Finance Disclosure Regulation (SFDR) and Benchmark Regulation, and enabling better connectivity between ESRS and taxonomy-related disclosures.

Another key aspect of the response addresses the future of voluntary reporting. Following recent changes that significantly reduce the number of companies within the scope of the CSRD, the PSF recommended allowing companies to continue using ESRS voluntarily. At the same time, it advised safeguards to prevent inconsistent or selective disclosures that could create comparability issues or increase the risk of greenwashing.

From an ESG reporting perspective, the development highlights a critical balance between simplification and reporting integrity. While reducing complexity can improve adoption and usability, maintaining robust, comparable, and decision-useful data remains essential for investors and stakeholders relying on sustainability disclosures.