3 December 2025 - CISL EU Sustainable Finance Lead Tsvetelina Kuzmanova reflects on the opportunities Europe has to align sustainability reporting with the real-world challenges faced by companies, investors and policymakers.
As the EU’s new sustainability reporting rules begin to take effect, many companies are navigating their first year of disclosing under the European Sustainability Reporting Standards (ESRS). This week, we are awaiting European Financial Reporting Advisory Group (EFRAG)’s publication of the revised ESRS as part of the Omnibus process to simplify and streamline reporting requirements. The update to these standards marks an important moment. It is a chance to strengthen clarity and usability without losing sight of the purpose of sustainability reporting: enabling better decisions, greater accountability and meaningful progress.
At the University of Cambridge Institute for Sustainability Leadership (CISL), we have taken a closer look at how the first wave of reports is landing, where they fall short and why these insights matter for the next phase of the ESRS. This reflection builds on the evidence we submitted to EFRAG during its simplification review and on our experience working with finance professionals, sustainability leaders and policymakers across Europe.
A promising start, but gaps remain
This is the first year of ESRS reporting and companies are understandably navigating a steep learning curve. Some are already providing detailed and decision-useful disclosures, particularly on transition plans. However, many reports remain long, repetitive and low on actionable insight.
Across the reviewed reports, two patterns stand out. Many companies over-report on immaterial topics (such as EU Taxonomy activities accounting for 0.0 percent of turnover, micro CapEx items listed as standalone green activities, partial energy disclosures reporting only electricity, omitting all other energy sources) and under-report on what truly matters. At the same time, transition plans often remain descriptive rather than operational, with limited clarity on milestones, investment needs or internal accountability. This is consistent with early sector-wide assessments, which show that most companies provide high-level narratives but lack quantification of decarbonisation levers or future capital requirements.
A key recommendation is to focus on outcomes rather than word counts. Companies need support to move from narrative-heavy responses to concise, strategic disclosures. Better guidance, practical examples and case studies of outcome-based reporting would help.
Why the data matters
ESRS disclosures are often described as tools for investors, and they certainly are, but their usefulness goes much further. Policymakers rely on them to identify regulatory gaps. Civil society organisations use them to track accountability and progress. Academics and think tanks use them to understand system-level change. Our own research at CISL, including the Competitive Sustainability Index, shows that sustainability performance and economic competitiveness are increasingly linked. None of this is possible without consistent, comparable data over time.
We also see clear value for companies themselves. Preparing transition plans drives governance reform, improves internal coordination and clarifies strategic priorities. We have already observed this in our work with businesses across Europe.
What needs to stay and what needs fixing
Our submission stressed the importance of preserving essential elements of the standards. These include transition plan disclosures, biodiversity integration and governance transparency, particularly G1-5 on business lobbying and political influence. These are foundational to trust and long-term transformation.
At the same time, several areas need strengthening:
- Materiality assessments must be explained clearly so users can understand and trust both the process and outcomes.
- Circular economy data, particularly embedded emissions and product-level impacts, remains weak. CISL’s latest research has identified this as a key barrier to scaling circularity.
- Comparability and boundaries vary widely, especially in value chain reporting, making it difficult to assess corporate performance across sectors.
- Risk disclosures, especially on physical climate risk, remain limited. Early reviews show that monetised climate risk reporting is extremely rare, even though the financial impacts are already material for several sectors.
There are also emerging concerns around the new VSME standard. Several investor groups have warned that VSME falls short of the full ESRS in granularity, double materiality and value chain coverage, which raises questions about its suitability for companies that are part of larger supply chains.
The path forward
As the ESRS evolves, we must stay focused on what is at stake. These standards are not about transparency for its own sake. They are about enabling better decisions within companies and across the economy. Transition plans, risk disclosures and structured data are not bureaucratic burdens. They are the foundations of a more resilient and sustainable future.
Simplification is welcome where it improves clarity, removes duplication and reduces administrative load. But simplification should not remove the elements that make reporting meaningful or weaken the ability to track progress over time. If reporting becomes a narrative exercise without data, we risk undermining the outcomes the ESRS was designed to support.
The next phase of ESRS should be easier, it should be smarter, more strategic and better aligned with the real-world challenges faced by companies, investors and policymakers.
For further insights, read CISL's Competitive Sustainability Index
