Between political stalemate and global compatibility.

At the end of February, the European Commission published the two Sustainability Omnibus Acts. The goal is to conclude negotiations in the Council and European Parliament by the end of the year. While the Member States were able to agree on a position early on, tensions in the Legal Affairs Committee (JURI) led to unplanned delays. If the Council and Parliament fail to reach an agreement by the end of the year, the revision of the European Sustainability Reporting Standards (ESRS) could also face delays.

Tensions in JURI

Divisions are particularly entrenched between the Conservatives and the Social Democrats. Rapporteur Jörgen Warborn (EPP, SE) is pushing for simplifications and relief for companies, while the S&D Group has long resisted any weakening of liability rules and due diligence obligations. A last-minute compromise was only reached in mid-October. However, the vote in the second October plenary session failed. The path to trilogue negotiations is now set to be cleared on 13 November. Whether the Danish Council Presidency will still be able to conclude the dossier this year as planned remains uncertain due to the delay.

EFRAG’s proposal to revise the ESRS

Parallel to the political discussions, the European Financial Reporting Advisory Group (EFRAG) is working on a comprehensive revision of the ESRS. The aim is to simplify the standards, which also include reporting obligations on accidents at work and occupational diseases. The draft presented in July 2025 proposes reducing the number of data points by around 55 percent. The obligations regarding occupational diseases, which companies find difficult or nearly impossible to meet, remain untouched. EFRAG plans to submit its technical recommendations to the European Commission by the end of November.

However, the proposed simplification of the ESRS is not universally welcomed. Critics warn that such reductions could come at the expense of comparability and transparency. The Global Reporting Initiative (GRI) has also voiced concerns. Excessive changes to the ESRS could jeopardise the existing interoperability between ESRS and international frameworks.

Three standards: one goal, different paths

Currently, three frameworks shape global ESG reporting: the European ESRS, those of the International Sustainability Standards Board (ISSB), and the GRI Standards. While the ESRS is tailored to the EU’s regulatory requirements, the ISSB focuses more on investors’ information needs. GRI, on the other hand, takes a broader stakeholder approach and is established in over 100 countries.

In 2024, EFRAG and ISSB published joint guidance on interoperability to avoid overlaps and strengthen comparability. Likewise, EFRAG and GRI have had a cooperation agreement since late 2023 to ensure a high degree of compatibility between their standards. However, this fragile balance could be destabilised by a far-reaching revision of the ESRS.

Risk of misalignment

If Europe diverges too far from global frameworks in the course of the ESRS revision, problems could arise. For internationally active companies, this would mean having to report according to different logics – simplified, EU-internal ESRS on one hand, and ISSB or GRI standards for other markets on the other. This would not only increase administrative effort but also make sustainability data less comparable – the exact opposite of what harmonisation was meant to achieve. In 2026, the European Commission will therefore face the challenge of further developing the European sustainability framework so that it remains practical for companies while keeping pace with global developments.