Understanding ESRS in 2025: A Comprehensive Guide to European Sustainability Reporting Standards

Introduction

The European Sustainability Reporting Standards (ESRS) are transforming how businesses across the European Union disclose their sustainability performance. As part of the Corporate Sustainability Reporting Directive (CSRD), these standards ensure that companies provide consistent, transparent, and comparable ESG (Environmental, Social, and Governance) data.

As of January 2024, the first set of ESRS has been officially in force, marking a major milestone in the EU’s sustainability agenda. In this updated 2025 guide, we explain what ESRS entails, highlight the latest developments, and share how your organization can stay compliant and ahead of evolving ESG expectations.

What Are the ESRS?

The European Sustainability Reporting Standards (ESRS) were developed by the European Financial Reporting Advisory Group (EFRAG) in collaboration with the European Commission. Their goal: to standardize sustainability reporting across the EU and provide stakeholders with a reliable picture of corporate sustainability performance.

The Foundation: Double Materiality

At the core of the ESRS is double materiality—companies must report both:

1. How sustainability issues affect their financial performance, and

2. How their business activities impact the environment and society.

This dual lens ensures a complete and transparent view of a company’s sustainability footprint.

Key Components of ESRS

The ESRS framework includes 12 standards: two general standards and ten topical standards.

• General Standards – ESRS 1 (General Requirements) and ESRS 2 (General Disclosures) establish overall principles and require a double materiality analysis.

• Environmental Standards – ESRS E1–E5 cover Climate Change, Pollution, Water and Marine Resources, Biodiversity, and Circular Economy.

• Social Standards – ESRS S1–S4 focus on Own Workforce, Workers in the Value Chain, Affected Communities, and Consumers/End-Users.

• Governance Standard – ESRS G1 addresses governance, ethics, and business conduct.

Sector-specific standards are currently being developed by EFRAG and are now expected for release by June 2026, following a two-year postponement announced in 2024. These standards will further expand the framework's applicability to industries such as banking, energy, and agriculture.

How ESRS Works

The ESRS reporting structure covers four categories:

• General information – overall sustainability strategy and governance.

• Environmental information – impacts on natural resources, emissions, and energy use.

• Social information – employee relations, diversity, and value-chain labor practices.

• Governance information – transparency, ethics, and internal control systems.

Each standard contains Disclosure Requirements (DRs) supported by nearly 1,200 data points—ranging from qualitative narratives to quantitative indicators. Companies must determine which DRs apply through their double materiality analysis.

General Information

Environmental Information

Social Information

Governance Information

Determining What to Report

Under the European Commission’s Delegated Act (December 2023):

• All companies must report General Disclosures (ESRS 2).

• Other thematic disclosures depend on double materiality outcomes.

• For ESRS E1 (Climate Change), companies must justify exclusion—the burden of proof is reversed.

Tip: Ensure that your materiality process is well documented, as it will be a key focus of limited assurance engagements starting with 2025 reports.

Recent Regulatory Developments in 2025

Postponement for Wave 2 and Wave 3 companies: In April 2025, the "stop-the-clock" directive entered into force, granting a two-year postponement for Wave 2 companies (large non-listed EU companies) and Wave 3 companies (listed SMEs). This means:

• Wave 2 companies now report starting in 2028 (for FY2027 data) instead of 2026

• Wave 3 companies now report starting in 2029 (for FY2028 data) instead of 2027

Omnibus package proposal: The European Commission proposed amendments in February 2025 that would significantly reduce CSRD scope by raising thresholds to companies with 1,000+ employees and €450M+ revenue. These proposals are currently under negotiation and could fundamentally reshape which companies are subject to ESRS requirements. Companies should monitor these developments closely as they may affect their reporting obligations.

How to Implement ESRS in Your Organization

1. Conduct a Double Materiality Analysis

This is the foundation of ESRS compliance. Assess how environmental and social issues influence your business, and vice versa. Use cross-departmental input and external stakeholder engagement to ensure accuracy and credibility.

2. Digitize Your Data and Reporting

Sustainability data must be digitally tagged in XBRL format for submission through the European Single Access Point (ESAP). ESAP is scheduled to become operational in July 2027, with a phased rollout for different types of information. Companies should begin preparing their data infrastructure now to ensure readiness for electronic filing requirements.

3. Leverage Specialized Software

Implementing AI-supported ESG and CSRD software like ECO-OS's ESG Accounting Platform streamlines data collection, validation, and reporting. The ESG AI Engine automates responses to disclosure requirements, cross-references company policies with ESRS datapoints, and generates initial drafts of new policies and procedures based on industry best practices.

4. Build Awareness and Accountability

Provide training to ensure all departments understand their roles in sustainability reporting. ESG data collection and validation are no longer confined to sustainability teams—they are enterprise-wide responsibilities.

5. Prepare for Audit Readiness

Starting with their first CSRD-compliant reports, companies must obtain limited assurance on their sustainability disclosures. For Wave 1 companies (large listed entities), this applies to FY2024 reports published in 2025. The requirement will eventually transition to reasonable assurance in future years.

Aligning with Global Standards

The ESRS are designed for interoperability with international standards such as ISSB (IFRS S1/S2) and GRI. By 2025, EFRAG, ISSB, and GRI have aligned many data points to reduce duplication, allowing multinational organizations to meet multiple reporting obligations through one process

The Future of ESRS

The ESRS framework is continuously evolving:

• Sector-specific standards for industries such as banking, energy, and agriculture are now expected by June 2026, following a two-year postponement.

• Scope adjustments are under active negotiation through the Omnibus package, which could significantly reduce the number of companies required to report by raising employee and revenue thresholds.

• Implementation support from EFRAG continues to expand, with ongoing guidance clarifying data granularity, reporting boundaries, and practical application questions.

• Digital infrastructure development continues toward the 2027 ESAP launch, while AI integration is redefining how companies collect, validate, and report ESG data.

Given these ongoing changes, staying informed about regulatory updates and maintaining flexible reporting systems will be essential for sustained compliance.

How ECO-OS Helps You Stay Compliant

With reporting now digital, data-intensive, and subject to assurance, businesses need reliable technology. The ECO-OS ESG AI Engine simplifies the process through:

• A chat-based interface that makes it easy to find, draft, and refine responses to questions on demand

• Checking alignment with ESRS, GRI, and ISSB frameworks, and more

• Highlighting disclosure gaps and building a library of fully aligned reusable responses.

Conclusion

The ESRS have ushered in a new era of transparency, comparability, and accountability in corporate sustainability. For companies subject to CSRD, 2025 marks the first real test of ESRS-aligned reporting.

By understanding the latest guidance, digitizing your data, and leveraging AI-powered tools like the ESG AI Engine, your organization can not only stay compliant but also strengthen stakeholder trust and demonstrate leadership in sustainability.