Sustainability alert

European Commission publishes updated draft version of revised ESRS

08 May 20265 min read
Contents

Executive summary

On 6 May, the European Commission (EC) published the draft delegated act (DA) to adopt simplified European Sustainability Reporting Standards (ESRS), following a long revision process.

The new drafts build on the technical advice received from the European Financial Reporting Advisory Group (EFRAG) and aim to significantly reduce the burden of sustainability reporting for companies, while maintaining the quality of disclosures. The have also released a new draft voluntary sustainability reporting standard for companies outside the scope of the Corporate Sustainability Reporting Directive (CSRD).

Background

Since November 2024, the EC has been working to introduce proposals to amend three key pillars of the European Green Deal through an Omnibus package. These key pillars are the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD) and the Taxonomy Regulation.

The Omnibus package, released in February 2025, has resulted in several sets of proposals to date – revising the existing ESRS is one element of the proposals. EFRAG were tasked by the EC to provide technical advice for the adoption of a delegated act which will revise and simplify the existing ESRS, and on 31 July 2025, EFRAG issued Exposure Drafts (EDs) revising all 12 existing ESRS. Following a public consultation period, on 3 December 2025, EFRAG submitted its technical advice to the European Commission (EC) on the draft simplified ESRS.

The EC have now built upon this technical advice to introduce the new DA with the intent of greatly reducing the cost of sustainability reporting for European companies.

Summary of key changes

For details of the simplifications proposed by EFRAG in their technical advice, please refer to our Sustainability Alert 2025-19. The new updates and clarifications proposed by the EC are summarised below:

Area Key Changes
Materiality and materiality assessment
- Proposed text emphasises that an undertaking is not expected to meet the information needs of every specific individual user of the sustainability report. It stresses the objective of the reporting standards is to provide decision-useful information, and clearly defines the concept of an “informed assessment”
- The text clearly states that undertakings “shall not” include information that is not material in its sustainability reporting, except in certain specified circumstances
- The proposed text specifically allows for an undertaking to omit certain information when disclosure could be seriously prejudicial to the commercial position of the undertaking
- The EC have emphasised that the “top-down” approach to the double materiality assessment (DMA) allows undertakings to avoid unnecessary work and avoid assessing each individual impact, risk or opportunity (IRO)
- The revised text includes provisions aiming to reduce the risk that asset management undertakings are required to report information that is not relevant to the investments that they manage
- Undertakings are allowed greater discretion to consider specific geographical contexts for their operations when carrying out the DMA. It is also clarified that the level of disaggregation required for the DMA is not necessarily the level of disaggregation required for reporting
Fair presentation
- The new text clarifies that the fair presentation concept is applied to the sustainability statements as a whole, and not to each datapoint individually
Anticipated financial effects
- The draft DA acknowledges that reporting of anticipated financial effects is an area that involves estimates and that these estimates can be updated in future to reflect new and updated information
- It clarifies that this ‘year-on-year’ update of estimates does not constitute an error
GHG emissions
The new proposals align more closely with other global sustainability reporting standards, and allow undertakings the flexibility to apply either the financial control or operational control approach when determining the reporting boundary
Other specific topics
The proposals include new clarifications and requirements for specific items, including:
- A requirement for undertakings to be transparent in disclosure of climate transitions plans with targets that are not compatible with the 1.5°C warming target.
- Entity-specific considerations to decide which pollutants are material for an undertaking to report
- A phase-in period of one year for reporting on substances of very high concern
- Limiting disclosure requirements on microplastics to primary microplastics
- Clarifying that only “substantiated” human rights incidents or instances of discrimination are required to be reported, making specific reference to “ongoing” judicial and non-judicial proceedings


Despite some pressure from other organisations, the new proposals do not include new measures for simultaneous compliance with the ISSB reporting standards.
The EC stated in their announcement that they are expecting reporting cost savings of more than 30% per company as a result of these new proposals.

Voluntary sustainability reporting standard

A new draft has also been released of the voluntary reporting standard for undertakings not required to report under the scope of the CSRD. This is based on the voluntary standard for small and medium enterprises (VSME) released by EFRAG in December 2024. The differences between the new draft voluntary sustainability reporting standard and the VSME standard are minimal and primarily focused on alignment with the revised ESRS.

The EC has stated in its announcement that CSRD scope companies cannot require entities within their value chain which have fewer than 1,000 employees to provide information beyond that which is required by the voluntary standard. This restriction is referred to as a ‘value chain cap’.

Next steps

The new DA is subject to a 4-week public consultation, during which time stakeholders across Europe will review and provide feedback on the revised ESRS.

Our thoughts

We are pleased that the EC has released the new draft ESRS, and can now move forward to finalise and adopt the new requirements. Until we see application of the new standards in practice, it may be too early to comment on whether the EC’s stated 30% cost saving is achieved. However, following more than a year of development and uncertainty for reporters, a finalised set of ESRS will allow companies to invest in and develop their sustainability reporting capabilities to provide high-quality reporting to stakeholders.

We have published several other alerts related to the Omnibus package. For more information, click here: 

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