Strategic advantages of ESRS in the current sustainability market

The emphasis is moving away from exhaustive disclosure and toward structured, decision-useful information that reflects what actually matters for the business. For companies navigating this transition, the more relevant question is not whether ESRS still matters, but how it can be used more strategically.

From volume to focus: what actually changed

The most visible change is the reduction in data points. The draft simplified ESRS removes all of the  voluntary disclosures and cuts 61 percent of the mandatory set, resulting in an overall reduction of 71 percent in total data points. This is a significant adjustment in scope, but it does not fundamentally alter the intent of the framework.

The ambition remains to establish a strong reporting standard grounded in double materiality. What has changed is the level of granularity required to achieve that goal. In some areas, such as biodiversity, there are valid questions about whether ambition has been reduced. However, at a system level, the shift is better understood as a recalibration rather than a rollback.

The earlier version of ESRS was designed to be comprehensive, often leading companies to prioritize completeness over clarity. The revised version moves toward a more focused and proportionate model, where relevance becomes the guiding principle. This changes not only what companies report, but how they approach reporting as a whole.

Complexity is shifting, not disappearing

For companies that remain in scope, the expectation is not necessarily less work, but a different type of work. One of the most important changes concerns the double materiality assessment, which becomes somewhat lighter in execution but remains central to the entire framework.

Companies still need to develop and maintain a robust methodology to identify and assess impacts, risks, and opportunities. The simplifications reduce some of the operational burden, particularly in areas such as value chain analysis and data collection, but they do not remove the need for structured analysis. Instead, they place greater emphasis on prioritization and internal consistency.

At the same time, the revised ESRS shows improved alignment with global standards such as ISSB. This increases interoperability and reduces the need for parallel reporting processes, which has been a significant challenge for many organizations. The overall effect is a shift away from exhaustive coverage toward a model that prioritizes usability and proportionality.

For companies, this introduces a different kind of challenge. The task is no longer to include as much as possible, but to identify what is materially relevant and ensure that it is connected, traceable, and decision-useful.

Out of scope does not mean out of the market

One of the most debated consequences of the simplification is the number of companies that are now out of scope. For some organizations, particularly those with limited prior experience in sustainability reporting, this may lead to a reduction in effort. It would be unrealistic to assume that all companies will continue at the same level without regulatory pressure.

However, regulatory scope and market expectations are not aligned in the same way. Even as formal obligations are reduced, the demand for sustainability information remains. Banks, investors, and business partners continue to request detailed data, often driven by their own reporting and risk management requirements.

This creates a divergence in how companies respond.

“Some will step back from structured reporting, while others will continue to invest in it, not because they are required to, but because their position in the market depends on it.“

Andreas Rasche, Professor of Business in Society, Copenhagen Business School

In this sense, sustainability reporting is increasingly shaped by commercial dynamics rather than regulation alone. As a result, the conversation is shifting. Instead of focusing solely on compliance, companies are beginning to assess how reporting supports their broader positioning in value chains and financial markets.

Voluntary does not mean simplified

For companies that are no longer in scope, the choice of framework becomes more strategic. 

The final version of the VSME, and the new Voluntary Standard (VS), based on the VSME, will be introduced alongside the simplified ESRS in mid-2026. 

The VSME and the VS offer a practical entry point, particularly for smaller organizations with limited reporting experience. They are designed to be accessible and do not require a full materiality assessment, making them easier to adopt.

For larger companies, the situation is more complex. Organizations with broader stakeholder exposure, more complex operations, or closer integration into regulated value chains often require a more robust framework. In these cases, the simplified ESRS remains relevant even on a voluntary basis.

The key factor is not compliance, but compatibility.

“Companies need a framework that allows them to respond efficiently to requests from banks, investors, and customers without having to rebuild their reporting approach each time. ESRS provides that level of structure and interoperability.”

Simon Taylor, Senior Director, Position Green

This is likely to lead to more voluntary adoption than initially expected, particularly among companies that sit just outside the formal scope. For these organizations, ESRS becomes less of a regulatory requirement and more of a practical tool.

The strategic blind spot: confusing compliance with relevance

One of the most significant risks for companies that move out of scope is the assumption that sustainability no longer requires attention. From a purely legal perspective, this may be true. However, focusing only on compliance overlooks the broader role that sustainability plays in business performance.

Impacts, risks, and opportunities linked to sustainability do not disappear when reporting requirements are reduced. They continue to influence cost structures, supply chain stability, access to capital, and long-term competitiveness. Companies that stop collecting and analyzing relevant data risk losing visibility into these factors.

This creates a strategic blind spot. Without structured data, it becomes more difficult to identify emerging risks, respond to stakeholder expectations, or capture new opportunities. Over time, this can affect both resilience and value creation.te for participation, and companies are expected to demonstrate clear due diligence processes.

Market expectations are driving the next phase

Expectations around sustainability reporting are increasingly shaped by financial institutions and value chain partners. Banks often require emissions data and other ESG indicators as part of lending processes, while investors use sustainability information to assess risk exposure and long-term performance.

In many cases, these expectations are more consistent than regulatory requirements. They are embedded in ongoing business relationships rather than tied to specific reporting cycles.

For companies operating within larger value chains, this creates a clear incentive to maintain structured reporting practices. Even in the absence of formal obligations, the ability to provide reliable, comparable data becomes a prerequisite for participation.

From reporting requirement to strategic tool

The evolution of ESRS highlights a broader shift in how sustainability reporting is understood. It is moving away from a compliance-driven exercise toward a tool that supports decision-making, risk management, and market positioning.

Simplification does not remove the importance of reporting. It refines it. By reducing volume and increasing focus, it creates space for companies to engage more meaningfully with the information they produce.

For those that approach ESRS strategically, this presents a clear advantage. Reporting becomes not just a requirement to fulfill, but a framework for understanding how sustainability factors influence the business and how they can be managed more effectively.

In the current market, that distinction is becoming increasingly important.