ESMA has sent its Final Report to the European Commission with technical advice on simplifying key performance indicators under the Taxonomy Disclosures Delegated Act. The main recommendations are specific: narrow the mandatory operating expenditure (OpEx) KPI to non-capitalised research and development expenditure, remove the weighted-average KPI from group Taxonomy reporting, and add targeted measures to make disclosures more proportionate, clearer, and easier to use.
The advice was coordinated with other European Supervisory Authorities, particularly on the voluntary use of counterparties' OpEx information and group-level reporting. It's now with the Commission for review. Nothing is final yet.
So the question for your team: do you plan around this simplification now, or keep building for the current scope until the Commission decides?
The Case for Planning Around Simplification
The argument starts with workload. A narrower mandatory OpEx KPI means fewer cost categories to trace, classify, and evidence against Taxonomy activities. Anyone who has run an OpEx data collection cycle knows the pain: finance, sustainability, and business unit teams reconciling cost lines that weren't designed to carry Taxonomy tags. Cutting the mandatory scope to non-capitalised research and development expenditure shrinks that reconciliation problem considerably.
Removing the weighted-average KPI from group reporting has a similar logic. Group-level aggregation across subsidiaries with different activity profiles creates a layer of calculation that can obscure more than it reveals. Fewer aggregation steps mean fewer places for errors to enter your Data Processing Register-style lineage documentation, and fewer questions from auditors about methodology.
Proponents also point to a deeper regulatory logic. Disclosures nobody uses still carry assurance costs, control costs, and reputational risk if they're wrong. ESMA's aim is to focus reporting on information that's useful for decision-making. If a KPI doesn't change how an investor allocates capital, the resources spent producing it are better directed at data that does.
There's a program-level benefit too. Compliance teams stretched across overlapping ESG reporting obligations rarely have slack. Freeing capacity from low-value metrics lets you invest in control design, internal review, and remediation of deficiencies for the disclosures that remain.
The Case for Caution
Skeptics' first point is procedural. ESMA has issued advice, not law. The Commission can accept, amend, or reject it, and the timeline for any amended Delegated Act is outside your control. Dismantling data collection processes on the strength of a recommendation is a gamble. If the final text differs, you may be rebuilding capacity you just retired.
The second point is substantive. Simplification and transparency pull in opposite directions at the margin. A narrower OpEx KPI means less of the cost base is visible through a Taxonomy lens. Investors and analysts who relied on the broader measure lose a data point, and comparability between reporting entities and across reporting periods can suffer. ESMA says its proposals preserve relevance, comparability, and reliability, but practitioners reasonably ask how much of that holds when the underlying scope shrinks.
Third, there's the risk of a false economy. The expensive part of Taxonomy reporting is often the foundational work: activity mapping, eligibility and alignment assessments, evidence trails. Trimming a KPI doesn't remove those obligations upstream. If your team strips out the supporting data architecture because one output got simpler, you may find yourself unable to answer investor or supervisory questions that still arrive.
Finally, the voluntary use of counterparties' OpEx information raises a quality question. Voluntary data flowing through financial relationships is only as reliable as the controls behind it. Without clear assurance expectations, you've traded a mandatory burden for an optional one with ambiguous standards.
Where Practitioners Actually Land
Most experienced teams are settling on a middle position: prepare for simplification, but don't act on it prematurely.
In practice, that means a few things. They're running scenario analysis on both outcomes, one assuming the narrowed OpEx KPI and the simplified group approach are adopted, one assuming the current structure holds. The goal isn't prediction; it's knowing the delta in effort and data requirements for each case.
They're also separating decisions by reversibility. Pausing new investment in OpEx categories that would fall out of scope is low-regret. Decommissioning existing data feeds is not. Documentation, process maps, and control descriptions are cheap to keep and expensive to recreate.
Auditors and assurance providers are part of the conversation early. If you're subject to limited assurance over sustainability information, your provider will have views on how scope changes affect procedures and fees. Surfacing that now avoids a surprise during the reporting cycle.
Some teams are also using the moment to challenge their own data ownership. If simplification arrives, the question becomes who owns the remaining KPIs, how they're reviewed, and whether the controls around them are strong enough to carry more scrutiny, since a smaller disclosure set draws sharper attention to each number in it.
Our Take
Plan for simplification, but don't bank on it.
The direction is clear, and ESMA's coordination with other European Supervisory Authorities suggests the advice reflects a broad supervisory view rather than a single agency's preference. A narrower mandatory OpEx KPI and a simpler group approach are credible outcomes. Building your roadmap as if the current scope will last forever is as risky as assuming the new one is settled.
The sound approach is to protect the foundation and flex the output. Keep your activity mapping, evidence trails, and governance structures intact. Treat KPI scope as the variable. If the Commission adopts the advice, you'll have capacity to redirect. If it doesn't, you've lost nothing.
The tradeoff to accept is that you'll carry some redundant effort in the interim. That's the price of staying ready for either outcome, and it's cheaper than rebuilding.
One more caution. Simplification is not a reason to relax controls over what remains. Fewer disclosures mean each one carries more weight with investors and supervisors. If you reduce your reporting footprint, raise the quality bar on what's left: tighter review, clearer methodology, defensible evidence. That's how you capture the efficiency gain without handing back the credibility ESMA is trying to preserve.
