Veyt examined the updated set of European Sustainability Reporting Standards (ESRS) disclosure requirements with relevance to the Guarantees of Origin (GO) and Power Purchase Agreement (PPA) markets.
Key elements of the environmental disclosure remain intact: dual reporting for Scope 2 emissions and market-based method for energy consumption and mix. In contrast, climate change target setting disclosure requirement omitted any explicit mention of market- or location-based reporting, instead directing companies to set targets “compatible with 1.5°C scenario”.
The amended wording now refers the companies to the Science Based Targets Initiative (SBTi) guidelines, where either a location- or market-based method can be used for target setting. Weaker language might create legal uncertainty, per Veyt’s interpretation.
The European Financial Reporting Advisory Group (EFRAG) announced the publication of the revised ESRS, simplifying and scaling back reporting requirements for companies under the EU’s Corporate Sustainability Reporting Directive (CSRD).
EFRAG was mandated by the European Commission in June 2020 to prepare the initial ESRS, which were adopted in 2023. Following the release of the Omnibus package, EFRAG was tasked in March 2025 with developing technical advice to revise the ESRS in line with the proposal’s simplification objectives.
The text has been streamlined and shortened, while mandatory datapoints were reduced to make the ESRS more accessible and implementable. At the same time, the key obligations stemming from the CSRD were preserved.
The simplified ESRS have now been put out for public consultation to gather feedback until 29 September 2025. The finalised standard is expected by the end of November 2025.
You can get an overview of all the amendments in a document here. For better navigation, the simplified ESRS provide application requirements (AR) right under the disclosure requirements (DR).
Disclosure requirement “Targets related to climate change mitigation” underwent changes: explicit reference to set the GHG reduction targets until 2030 and, if possible, until 2050 according to location- or market-based method, is removed. Although companies need to state whether the GHG emission reduction targets are science-based and compatible with limiting global warming to 1.5°C.
Per Veyt’s understanding, this could potentially direct companies to use the SBTi guidance, which requires either location – or market-based target setting. EFRAG recognise that the meaning of “compatible with 1.5°C scenario” is not clarified by the amended standards because of the ongoing legislative process for CSRD.
They also acknowledge that the changes could lead to “less transparency on how targets are set and monitored, which may result in less comparability of information for users”. EGRAG’s 2025 assessment of the sustainability reports defines “1.5°C compatibility” as:
Yet in the absence of clear instructions, the standards risk undermining the effect of the legislative signal on the GO/PPA markets.
Veyt highlights that where entities combine GHG reduction targets, the revised ESRS require specification of which GHG emission Scope (1,2, and/or) are covered by the target, creating more transparency.
More flexibility is provided for the selection of the base year: until 2030, companies can set the base year as either the first year of applying the new sustainability reporting requirements or continue using their currently applied base year for existing targets.
After 2030, the base year must not be more than three years before the start of the new target period. The requirement to review the targets every five years post-2030 and to include a 2050 target is removed.
For the rest, the paragraphs’ wording was amended, while sub-points were streamlined and merged under a single section.
Consult pp. 19-22 for disclosure requirements and pp.54-60 for application requirements.
The requirement to disaggregate renewable energy consumption was removed by refining the amount of breakdown datapoints required under environmental metrics due to “complexity and lack of data” as per EFRAG. Other provisions were deleted, with no bearing on the GO market. Market-based disclosure of renewable energy consumption was preserved.
Consult pp. 22-24 for disclosure requirements and pp. 60-65 for application requirements.
Dual reporting of Scope 2 GHG emissions is maintained, with both market- and location-based methods to be used. EFRAG comments that there were suggestions to allow optional reporting of market-based Scope 2 (as is the endorsed practice in the recently published voluntary sustainability reporting standards for SME (VSME)). However, the suggestion was not accepted to keep reporting in line with the GHG Protocol.
Disclosure of total GHG emissions is removed to align with international reporting standards (GHG Protocol, IFRS S2, ISO).
Reporting of GHG intensity based on net revenue was removed based on feedback received from stakeholders on the related challenges.
Consult pp. 25-30 for disclosure requirements and pp. 65-79 for application requirements.
The simplified ESRS have been somewhat spared from the deregulatory spree. The removal of the obligation to set 2030/2050 GHG reduction targets suppresses the potential long-term demand creation for RES-E GOs/PPAs. While the weakening of the language (depending on one’s interpretation) to set targets through either market- or location-based method could further undermine demand. If the standards are approved in their current form, this could reduce clarity as to how companies plan their future Scope 2 GHG reduction activities.
Furthermore, the fact that location-based Scope 2 reporting was suggested as the default by some stakeholders indicated that it could be important for the GO/PPA market players to provide feedback to EFRAG to preserve market-based disclosure.
As pointed out earlier by Veyt, the divergence of the VSME from ESRS climate change disclosure practices undermines legislative continuity in environmental metrics reporting and has the potential to suppress the GO demand that would have otherwise materialised, had the legislative driver been consistent.
At the same time, the impact of the European sustainability framework and standards on the GO and PPA markets will ultimately depend on the descoping scale (see below). Based on the research estimates, in the upper-bound scenario where all subsidiaries report, between 3,379 and 12,881 entities could be covered, depending on the threshold suggested by the EU institutions.
The numbers are lower if undertakings file sustainability reports at the group level, excluding the subsidiaries: from 2,610 to 7,458 companies. Finally, if assumed that only part of the subsidiaries report (30 %), the reporting company numbers land in the range of 2,840 to 9,084 companies. This compares against the original CSRD scope of estimated 50,000 companies in the EU/EEA.
Further, proposed descoping could unevenly affect different sectors (see below). In effect, companies in sectors where the employee headcount is usually low (e.g., real estate and leasing businesses) could no longer face reporting requirements. The European Central Bank warns that the move could limit the availability of firm-level data, thereby weakening its ability to perform a granular assessment of climate-related financial risks.
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