While ECB, EBA, ESMA and EIOPA focus in particular on cross-cutting and environmental standards, the European Union Agency for Fundamental Rights (FRA) opinion assesses whether the proposed simplifications of ESRS preserve essential safeguards for people adversely affected by corporate activities, and do not compromise the protection of human rights or the quality of disclosures.

FRA applies a risk-based human rights approach, grounded in the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

FRA’s full opinion is particularly relevant for HR and compliance professionals: https://fra.europa.eu/en/news/2026/fra-issues-legal-opinion-proposed-simplified-european-sustainability-reporting-standards

Here’s a short summary :

What changed / Why it matters for fundamental rights

• The recent simplification of the ESRS aimed to ease the reporting burden on companies, particularly smaller entities, while seeking to retain the essential safeguards that underpin effective sustainability disclosure.
• The sustained focus on a human rights risk-based framework aligned with the approach articulated in the UNGPs is welcome for its potential to enhance focus and practicality.
• However, a more streamlined regime also carries risks, including the possibility of inconsistent application or reduced transparency where companies interpret materiality too narrowly.
• The draft simplified ESRS introduce extensive reductions in mandatory data points, broaden the reliance on reliefs and phase ins, and increase the use of estimates and proxies in value chain reporting.
• Social metric reductions affect gender equality, non-employee transparency, work life balance, and occupational health and safety, while climate and pollution disclosures have become less prescriptive.
• These changes matter because they may render making severe or systemic human rights impacts less visible, particularly where they occur deep in value chains or affect marginalised groups.
• Moreover, simplifications in climate and pollution reporting may slow the detection of harms affecting fundamental rights to health, decent work, and a safe environment.

FRA are also apposed to relocating human rights policy disclosures to a single, cross-cutting item ( GDR-P), since it risks reducing human rights to generic statements. The GDR-P disclosures should require to remain explicitly disaggregated by rightsholder group (own workforce, value chain workers, affected communities and consumers), setting out group-specific commitments and the associated governance and due diligence approaches, rather than a single, undifferentiated policy statement.

In addition, FRA identifies three clusters of changes that could significantly weaken transparency on gender outcomes:

1️⃣ Gender pay gap (S1‑15)

The simplified ESRS would require companies to disclose only the unadjusted gender pay gap — a single aggregate figure showing the raw difference in average pay between men and women.

No adjusted analysis.

No breakdown by age, category, or country.

This falls short of both GRI and the Pay Transparency Directive, which requires deeper analysis and action when unexplained gaps exceed 5%.

Without granularity, companies may appear compliant while lacking the insight needed to detect discrimination or structural bias.

2️⃣ Removal of gender‑disaggregated data

Several mandatory gender breakdowns disappear in the simplified standards, including:

▪️ non‑guaranteed‑hours employees (S1‑5)

▪️ participation in performance and career development reviews, and average training hours (S1‑12)

▪️ uptake of family‑related leave (S1‑14)

These deletions reduce visibility into gender‑specific outcomes — especially for women in precarious roles or with limited access to development opportunities.

They also diverge from GRI requirements and weaken the ability to identify structural barriers.

3️⃣ From “parental leave” to “maternity leave” (S1‑10)

Replacing parental leave with maternity leave narrows the scope of social protection disclosures.

EU law — notably Directive (EU) 2019/1158 — promotes shared caregiving, granting each parent at least four months of parental leave.

By focusing only on maternity leave, the simplified ESRS risk reinforcing the stereotype that childcare is primarily a women’s responsibility, sidelining fathers and undermining gender equality objectives.

🔍 Why this matters

Taken together, these revisions reduce the ESRS’ ability to reveal gender disparities.

Without mandatory gender‑disaggregated data, companies will struggle to identify patterns such as:

▪️ women’s over‑representation in variable‑hour or part‑time roles,

▪️ unequal access to training and career development,

▪️ structural barriers affecting women differently across operations and value chains.

Intersectional inequalities — increasingly recognised in EU policy — also become harder to detect when disclosures are limited to aggregate figures.

💬 Final thought

Transparency is not a burden; it is a prerequisite for progress.

If we want to close gender gaps, our reporting standards must illuminate inequalities — not obscure them.

Let’s keep pushing for the data and the standards that make equality real.

The European Central Bank (ECB) has published its opinion on the draft simplified ESRS. As a long‑standing supporter of the EU’s sustainability reporting framework, it welcomes the simplification achieved, calling it “a good starting point” as reporting practices mature.

ECB focused on the standards most relevant to the ECB’s mandate: ESRS 1, ESRS 2, E1 (Climate Change) and E4 (Biodiversity and Ecosystems), essential for identifying, assessing and managing financial risks stemming from climate‑ and nature‑related physical and transition factors.

Over 90% of ECB‑supervised banks have identified these factors as material sources of financial risk.

Banks depend on reliable sustainability data to assess creditworthiness, price products and evaluate collateral.

The ECB stresses that the revised ESRS must ensure transparency, high‑quality information and comparability to support sound risk management, financial stability and effective capital allocation.

⭕ Reliefs, phase‑ins and exemptions

A key challenge is balancing simplification with the EU’s CSRD objectives.
The ECB warns that the permanent reliefs, phase‑ins and exemptions — many going beyond IFRS/ISSB — risk creating data gaps, reducing comparability and weakening interoperability with international standards.

This could undermine investor confidence and place EU companies at a competitive disadvantage globally.

The ECB recommends time‑limiting reliefs and removing the additional 3‑year phase‑in for anticipated financial effects (AFEs), which would delay the data until 2030.

ECB also notes that, following Omnibus I, the revised ESRS will apply only to Europe’s largest companies, which generally have the resources to meet these requirements.

⭕ Assurance standards

ECB staff stress the importance of swiftly adopting assurance standards, as these will be essential for improving the quality and comparability of disclosures under the revised ESRS.

⭕ VSME

ECB staff highlight concerns about using the VSME as the voluntary standard for companies outside the CSRD scope.

The VSME was designed for non‑listed SME companies with fewer than 250 employees, whose sustainability risks and complexity differ significantly from larger companies (with up to €450m turnover and/or 1 000 employees).

👉 The revised ESRS are a more suitable voluntary option, as they can flexibly accommodate companies of different sizes and complexities thanks to their materiality‑driven approach, and the ESRS are now more streamlined in terms of datapoints.

While ECB staff support voluntary reporting under the revised ESRS, they stress the need for guidance and safeguards to limit greenwashing risks.

Voluntary use must not allow cherry‑picking, which could enable companies to disclose only favorable information while obscuring material negative impacts or risks.

⭕Additional information for the financial sector

For credit institutions, most ESG risks, impacts and opportunities are concentrated in the downstream part of the value chain, as they are related to the activities of the clients that they fund.

ECB recommend the addition of guardrails so that the new DMA value chain flexibilities do not lead to the non-identification of material IROs which would ultimately compromise a fair presentation and lead to financial risks not being disclosed and managed by banks.

Regarding greenhouse gas emission reduction targets under ESRS E1-6: complementing the disclosure of a GHG intensity target with information on the associated absolute figure as per ESRS Set 1 is necessary to achieve a fair presentation, to enable a better understanding of the target and to avoid misleading users (given that intensity targets might show a decrease whereas in fact absolute emissions are expected to increase).

Exempting the financial sector from providing transparency on their emissions reduction commitments could give rise to systemic greenwashing risk and create opacity, possibly resulting in an underestimation of risks by investors and the misallocation of funds.

 

The link to full opinion: https://www.ecb.europa.eu/pub/pdf/other/ecb.staffopinion_europeansustainabilityreportingstandards202602.en.pdf