CSRD in flux: From burden to opportunity – or a slow fade?

Stephen Butler

Investor Engagement and ESG Director

2025 is proving to be a watershed year for the Corporate Sustainability Reporting Directive (CSRD). Timelines have shifted, the rules are being rewritten, and the tone is changing from rigid prescription to pragmatic proportionality.

There are three big signals from Brussels:

Stop-the-clock delays – large companies in Wave 2 now start in 2028, with listed SMEs following in 2029.
Quick fix for early reporters – Wave 1 gets a year’s breathing space on tricky disclosures like anticipated financial effects.
Two new proposals from EFRAG – simplified SME standards and European Sustainability Reporting Standards (ESRS) 2.0 amendments for everyone else.

Together, they mark a pivot from burden to balance. The question is: can companies use this flexibility to build better sustainability programmes – or will we see ambition quietly shrink?

Full CSRD compliance was always going to be a big ask for SMEs. The new ESRS LSMEs draft offers a lighter, more proportionate path:

Five core modules: general info, environment, social, governance, business conduct
Simplified materiality assessment
Optional extras and phased requirements
50% lower estimated cost than full ESRS

It’s open for consultation until November. The final version lands in 2026. It’s voluntary – unless your regulator or your largest customers tell you otherwise.

ESRS 2.0: less grind, more grip

After one year of pain points, EFRAG has listened. ESRS 2.0 pares back the complexity while keeping the rigour. We welcome the intent: moving away from disclosure-as-box-ticking and towards reporting that reflects how businesses actually think about sustainability.

The highlights:

Top-down materiality – start with what you know matters, skip the exhaustive bottom-up trawl
Granularity cuts – fewer sub-sub-topics, less repetition
Executive summary option – lead with your story
Value chain relief – proxies, sector averages, partial reporting allowed
Integration freedom – put Policies, Actions and Targets alongside your impacts for a coherent narrative

This is where the stakes rise. Used well, these changes free up resources to focus on strategic sustainability. Used badly, they risk hollowing out reports and making year-on-year comparisons meaningless.

The tension is clear: efficiency vs credibility, pragmatism vs ambition.

What to do now
Whether you were in Wave 1 or years away from mandatory CSRD, now is the moment to:

test your materiality process against the new top-down approach
identify where flexibility can add clarity – and where it could damage trust
decide how to use your executive summary to tell a distinctive, credible sustainability story
engage in the consultation – shape the rules before they’re locked in.

Our take

EFRAG is signalling that sustainability reporting is growing up. It’s now less about ticking every box. It’s more about telling a focused, authentic story. But freedom demands responsibility.

If you use the space well, you can create reporting that works harder for your stakeholders – and for your business.

If you waste it, you’ll be left with a thinner, less convincing narrative in a market that still demands proof.

For further details, please don’t hesitate to reach out to our Director of Reporting, Stephen Butler.