European Commission adopts revised ESRS and voluntary standard

Background

On 3 July 2026, the European Commission (EC) adopted the finalised version of the revised European Sustainability Reporting Standards (ESRS). There will now follow a two-month scrutiny period, which can be prolonged by an additional two months, where the delegated act will be passed to the European Parliament and the Council of the EU. The new regulation will enter force once this scrutiny period is over, and the reporting requirements will be mandatory for reporting periods beginning on or after 1 January 2027. At the same time, the EC has also adopted a new voluntary reporting standard for entities not captured by mandatory reporting requirements.

This completes a long revision process which has involved technical advice and consultation with the European Financial Reporting Advisory Group (EFRAG) and stakeholders, which has aimed to simplify the requirements of ESRS reporting and reduce the burden on reporting entities.

Summary of new requirements

The final technical requirements that have been adopted are largely the same as those included in the draft delegated act, with some limited updates including:

• Greater flexibility in presentation of the ESRS report – the new ESRS allows alternatives to the previous four-section ESRS statement
• Climate-related scenarios – the new ESRS allows for entities to use climate-related scenarios that were developed for other purposes to meet ESRS E1 requirements
• Anticipated financial effects – the new ESRS extends the relief on anticipated financial effects for an additional year. Wave one entities will now not be required to provide any disclosures on the anticipated financial effects until reporting for the 2028 financial year. Other entities will not be required to provide any disclosures on the anticipated financial effects for the first two years of their reporting.

Transition requirements

The key change that has been introduced is related to the transition requirements. With the draft delegated act, reporting entities had the option for FY26 to apply ‘old’ ESRS, or to adopt the revised ESRS early in full. The final delegated act now introduces a third option, in which reporting entities can apply the old version of ESRS, but with eight specific reliefs from the revised standards. The eight reliefs are as follows:

• The new ‘top down’ approach for the double materiality assessment
• The new undue cost and effort relief for performing the double materiality assessment, including the limitations on value chain information
• The reliefs related to new acquisitions or disposals of subsidiaries during the reporting period
• The relief for non-significant activities when calculating metrics
• The relief for partial reporting scope of the value chain in metric calculations
• The relief for joint operations where a reporting entity does not have operational control from metric calculations
• The relief on the presentation of EU Taxonomy disclosures in a separate appendix to the sustainability statement
• The option to provide an executive summary to the sustainability statement to communicate key messages about its material impacts, risks and opportunities

For details of the simplifications proposed by EFRAG in their technical advice, please refer to ‘Sustainability Alert 2025-19’. For details of the additional changes added by the EC, please refer to ‘Sustainability alert 2026-03’.

The EC believes there will be a reduction in reporting costs of more than 30% for each reporting entity as a result of the ESRS simplification.

Effective date

The new ESRS requirements are mandatory for application for reporting periods starting on or after 1 January 2027. Prior to that, the new requirements may be applied for reporting on periods starting from 1 January 2026, applying one of the transitional options listed in the previous section.

Next steps

The scrutiny period for the new delegated act will last for two months, which can be extended for a further two months to allow time for scrutiny by the European Parliament and the Council of the EU. If no objections are raised during the scrutiny period, the delegated act will be published in the EU Official Journal and enter into force. 

Our thoughts

We are pleased to see the ESRS simplification project being finalised. It is important to give EU and global entities the certainty to be able to invest in data and reporting processes and enable high-quality sustainability reporting. It remains to be seen how many entities will elect to use the new requirements in full for reporting on the 2026 period, or whether the cost savings will be as extensive as the EC believes. It also is unclear how many smaller entities that are not captured by the scope of CSRD will choose to report using the voluntary standard.