Why sustainability reporting complexity needs to be killed

As the sustainability reporting season comes to a close for thousands of European companies reporting for the first time under CSRD, several months of data collection, number crunching and difficult conversations with finance and legal teams are finally behind us.

The company’s sustainability performance, and its ability to convey a compelling, credible message, will determine how it ranks as a sustainable business, how it attracts talent, secures financing and wins customers.

But five years after I first wrote about this topic, the question is no longer just “how did we get here?” It is “has the EU finally fixed it, and what does that mean for your strategy?

Just keep reading.

What is sustainability reporting?

Financial reports give shareholders and stakeholders information about a company’s activities and financial performance. They are mandatory, and failure to report results in penalties, fines, or legal consequences.

Beyond financials, companies voluntarily, and increasingly by legal obligation, share non-financial information to explain the value they create for stakeholders beyond profits. This is sustainability reporting: a structured disclosure of a company’s environmental, social and governance performance, risks, and strategy.

The Global Reporting Initiative (GRI) was the first globally adopted framework to systematically standardize sustainability reporting. The EU’s Corporate Sustainability Reporting Directive (CSRD) made it mandatory for thousands of European companies tarting with fiscal year 2024 reporting for large public-interest entities already subject to NFRD, under the European Sustainability Reporting Standards (ESRS).

In 2019, Larry Fink, BlackRock’s CEO, put it plainly in his annual letter to CEOs: without a sense of purpose, no company — public or private — can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. Seven years later, the regulatory framework has caught up with that logic.

Why sustainability reporting matters

There are 5 reasons that explain why companies create sustainability reports:

What gets measured gets improved. Sustainability reporting forces companies to quantify their real impacts — not just describe them in qualitative narratives.

It is a risk management tool. Identifying material ESG risks before they become financial ones is the point. Climate transition risk, supply chain exposure, regulatory liability — all of these show up in a well-constructed sustainability report before they show up in the P&L. I wrote about how ESG ratings translate this risk into investor language.

It enables transparency with capital markets. Despite political pressures, 84% of investors globally believe companies should maintain or increase their investment in climate adaptation, according to PwC’s Global Investor Survey 2025. But the message has shifted. Only around 39% of investors say they rely heavily on sustainability disclosures to evaluate risk and opportunity yet 78% believe that providing this information has a very or moderately positive impact on investor engagement. 

In other words: the report matters less than you think, but the absence of credible data matters more than you think. Investors use MSCI, Sustainalytics and CDP to feed ESG data into their models. If you are not in those systems with quality data, you are invisible to a growing share of capital.

It builds trust — or exposes greenwashing. Concrete data, externally verified, is the line between credibility and greenwashing. The report is the evidence. The sustainability leaders who have built durable reputations have done so by reporting what they actually do, not what they aspire to.

It creates competitive advantage. Companies with credible sustainability strategies attract better financing conditions, stronger talent pipelines and more resilient supply chains.

“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.”

arry Fink, BlackRock’s CEO — Annual Letter to CEOs, 2019

How we made sustainability reporting complicated

The logic was sound. The execution became a bureaucratic arms race.

Over the past two decades, companies faced an expanding universe of voluntary frameworks: CDP, DJSI, GRI, SASB, TCFD, TNFD, ISSB, UN Global Compact, EU Taxonomy, SBTi  and up to 182 frameworks according to WBCSD. Each with its own questionnaire, timeline, methodology and scoring logic.

Fig: Five of the major sustainability frameworks as of 2018 (Conference Board). Today, companies navigate up to 182 different frameworks (WBCSD, 2020)

The result: sustainability teams spending months collecting data, reconciling numbers across frameworks, and producing reports that few people read and fewer act on.

Companies spent an average of 4 months preparing sustainability reports, with 50% averaging 95 pages (WBCSD, 2020). The first wave of CSRD reports in 2025 averaged 115 pages. The longest: +400 pages. Only 25% of companies published fewer than 70 pages, according to EFRAG’s State of Play 2025. Interestingly, report length appears only weakly correlated with both company size and the number of material topics disclosed.

The administrative cost for a large listed company to comply with ESRS: approximately €740,000 per year in recurring costs plus €430,000 in initial investment, according to EFRAG’s own estimates.

The compliance machine had become the product for many organizations.

Sustainability reporting software: the AI opportunity most companies are missing

The technology to automate sustainability reporting exists and is maturing fast. According to Verdantix’s Green Quadrant: ESG & Sustainability Reporting Software 2025, the market now has clear leaders, Wolters Kluwer, Workiva, Sphera, Watershed and Sweep among them — with strong momentum players like Nasdaq and Position Green closing the gap.

These platforms can map disclosures across ESRS, GRI, CDP and ISSB simultaneously, automate data collection from ERP systems, flag inconsistencies, and use AI to draft narrative sections aligned with specific standards. What took four months in 2020 can increasingly be structured in weeks.

And yet most large companies are still running CDP responses on Excel. S&P CSA questionnaires are still being answered through email chains across twelve departments.

The barrier is often less the software cost itself than the organizational transformation required to use it effectively. It is organizational inertia and a rational fear: investing in a tool that nobody ends up using. Innovation cycles in large corporations move slowly. Procurement adds months. And by the time a platform is approved, the team that championed it has often moved on.

The result is a compounding missed opportunity. AI-assisted reporting does not just save time — it surfaces inconsistencies that manual processes miss and that auditors and rating agencies will find anyway. A tool that cross-references your Scope 3 data against your CDP response, your ESRS E1 disclosure and your transition plan in real time does not just reduce hours. It makes the strategy visible — or exposes the absence of one.

The Omnibus I simplification makes this more urgent, not less. With 61% fewer mandatory data points, the marginal cost of also responding well to CDP, MSCI and S&P CSA drops significantly — but only if the underlying data infrastructure is in place. Companies that use simplification as an excuse to reduce investment in data systems will find themselves exposed when the next regulatory cycle tightens.

The technology is ready. The question is whether the organization is willing to make the internal changes — data governance, cross-functional ownership, finance integration — that make it worth using.

CSRD: the consolidation that was supposed to fix this

The EU’s Corporate Sustainability Reporting Directive entered into force in 2023 and began applying to Wave 1 companies for fiscal year 2024. It was the most ambitious attempt yet to consolidate sustainability disclosure into a single, auditable framework.

CSRD introduced the European Sustainability Reporting Standards (ESRS) — 12 standards built on the principle of double materiality: companies must report both how sustainability issues affect their business, and how their business affects people and the planet.

The intent was right. The original ESRS contained over 1,200 possible data points. Companies complained, consultants proliferated, and the reporting burden grew instead of shrinking.

Omnibus I: the EU pulls the trigger

In February 2025, the European Commission proposed the Omnibus I package. By February 2026, the EU Council had approved it.

The changes are significant:

• CSRD scope reduced by 90%, now applying only to companies with more than 1,000 employees and €450 million in annual turnover
• Mandatory ESRS data points cut roughly 60%
• Most voluntary ESRS datapoints removed or consolidated
• Estimated administrative savings: €6 billion annually according to the European Commission

EFRAG also delivered simplified ESRS standards in December 2025, reducing overall length by over 55%.

For many CFOs, this reads as a victory. For some, it is a trap.

The real capability gap is no longer disclosure volume. It is materiality discipline: the ability to identify which sustainability issues genuinely affect enterprise value, operational resilience and long-term competitiveness, and which do not. Under the original ESRS architecture, many companies responded by disclosing everything (and still a few are following this approach). Under the simplified framework, that approach becomes harder to defend. The strategic advantage now comes from knowing where sustainability is financially material, operationally relevant, and capital-intensive, and concentrating management attention there.

The trap: confusing simplification with reduced scrutiny

Here is what Omnibus I does not change.

Institutional investors and banks are not simplifying their questions. They are making them more precise. The reduction in mandatory reporting removes the compliance noise — so the real questions become impossible to hide behind.

CDP still asks whether you have a credible transition plan. MSCI still assesses whether your governance and targets are board-level commitments. Lenders financing green bonds still want to see CAPEX allocated to emissions reduction, not pages allocated to narrative.

Bloomberg ESG Dashboard – data service

The real question was never “how many pages did you publish?” It was always: “do you have a credible transition plan with capital allocated behind it?”

Investors increasingly want to understand whether sustainability commitments are reflected in procurement decisions, operational planning and medium-term CAPEX allocation. A transition plan without visible financial backing is increasingly interpreted as execution risk rather than ambition.

Vestas published a 75-page CSRD-compliant sustainability statement in 2025. MSCI AAA. S&P Sustainability Yearbook Member. CDP Climate B. EcoVadis 72/100. The shortest report in its sector, despite maintaining strong ESG market positioning.

Novo Nordisk published 38 pages CSRD-aligned sustainability statement. MSCI A. EcoVadis Silver, top 15%. Sustainalytics Low Risk.

Neither company achieved top ESG ratings by publishing more. They achieved them by having a strategy that holds up under scrutiny, and reporting only what matters.

What this means for your sustainability strategy

The Omnibus I simplification creates a forcing function. Companies that used volume to obscure the absence of strategy are now exposed.

What remains is the skeleton: do you have a transition plan? Is there CAPEX allocated to emissions reduction in the next 36 months? Can you explain your marginal abatement cost curve to your CFO?

If yes, 60 pages is more than enough. If no, 440 pages will not save you.

The companies that emerge from this regulatory reset stronger are not those that minimized compliance cost. They are those who used reporting as a forcing function to build the internal infrastructure, data systems, financial integration, and board governance, making sustainability decisions useful rather than decorative.

The center of gravity is shifting from disclosure management toward transition execution. Sustainability teams will increasingly be measured not by the number of questionnaires completed, but by whether the company can decarbonize operations, allocate capital to transition priorities and demonstrate measurable progress year after year.

Most leading companies are moving toward more integrated annual reports: a single document that combines financial and sustainability performance and is aligned with the financial reporting calendar. Vestas and Novo Nordisk both publish their sustainability statement as part of their Annual Report. ESRS was designed with exactly this integration in mind.

The sustainability report, as a standalone document produced by a sustainability team in isolation from finance, is gradually becoming less relevant to leading issuers. What replaces it is a sustainability statement that appears in the Annual Report, jointly owned by the CFO and the CSO, and read by the same analysts who review the financial results.

CSRD also leaves behind something valuable: sustainability information increasingly subject to the same governance, traceability and assurance expectations as financial reporting. Only a few years ago, it was common for companies to externally assure just five or ten ESG KPIs while the rest of the report remained largely narrative. That model is disappearing. Sustainability data is increasingly expected to be auditable, internally controlled and connected to financial decision-making.

Conclusions

1. Sustainability reporting played a necessary role in building transparency and accountability. The complexity it generated was a symptom of a system that rewarded disclosure over action.
2. Omnibus I is not a retreat from sustainability. It is a reset that removes cover for companies that were reporting instead of acting.
3. Simplification does not reduce scrutiny. It removes the noise around it. Fewer mandatory disclosures make weak strategies more visible, not less.
4. The companies that will be penalized are not those with shorter reports. They are those with no credible answer when a lender asks: “where is your CAPEX going?”
5. This simplification should free resources for what always mattered: reducing emissions, managing climate risk, and building the operational systems that make sustainability a driver of business value — not a cost center.

The question for every sustainability leader right now is not “how do we comply with less?” It is “now that we can no longer hide behind volume, what does our strategy actually say?”

Updated May 2026. Originally published May 2020.