European Commission published a proposal of revised sustainability reporting standards (ESRS)

This initiative follows the December‑approved revision of the CSRD directive and is part of a package of measures aimed at reducing the administrative burden associated with sustainability reporting.

Key changes in ESRS

The new ESRS proposals bring significant simplification and flexibility for large companies that fall under the CSRD directive:

• Preservation of the double materiality principle: Despite considerations of closer alignment with the global ISSB standards, the European standards retain their unique approach. Companies will therefore continue to report both the sustainability risks and impacts on the business and the business’s impacts on the environment and society.
• Radical data reduction: The number of mandatory data points is reduced by 61 % and all existing voluntary disclosures have been eliminated, resulting in an overall drop of data points by more than 70 %. This should lower companies’ reporting costs by over 30 %.
• Flexibility in GHG emissions reporting: Companies can now choose to disclose greenhouse‑gas emissions based on financial control (according to ownership share) or operational control (if they have factual power over the entity). This step enhances alignment with international standards.
• Transparency of transition plans: If a company reports a climate transition plan with targets that are not aligned with the 1.5 °C limit, it must disclose this fact transparently.

SMEs: Voluntary standard and supplier protection

For companies that are not subject to mandatory CSRD reporting (companies with fewer than 1,000 employees and turnover below 450 million EUR), the Commission has prepared a voluntary standard based on the 2024 technical draft of EFRAG. The revised draft of the voluntary standard was only minimally adjusted to align with the newly streamlined ESRS, and remained understandable even for small entities.

An important element is the protective “cap” for the value chain (value chain cap). Large companies falling under CSRD will not be able to demand more information from their suppliers with fewer than 1,000 employees than what this voluntary standard defines.

For micro‑enterprises with fewer than 10 employees, the revised standard offers further simplification in the form of voluntary reporting mainly of environmental data, whose collection can be more demanding.

The public consultation will run until 3 June 2026, after which the Commission will adopt the standards and submit them to the European Parliament and the Council of the EU for approval. If no objections are raised by these bodies, the new rules will enter into force after a two‑month period.

Source: EC, 2026