EU launches consultation on revised Sustainability Reporting Standards under CSRD overhaul

The European Commission has published draft revised European Sustainability Reporting Standards (ESRS) alongside a new voluntary sustainability reporting standard for smaller companies, marking the latest step in the EU’s drive to simplify corporate sustainability reporting requirements under its Omnibus I package.

The proposals, published on 6 May, open a month-long public consultation as the Commission moves toward finalising a significantly scaled-back reporting framework under the Corporate Sustainability Reporting Directive (CSRD). The revised standards aim to reduce reporting burdens for businesses while maintaining the quality and consistency of sustainability disclosures across the EU.

The consultation comes after the EU earlier this year approved sweeping changes to the CSRD, dramatically reducing the number of companies required to report under the regulation and introducing new protections for smaller businesses within corporate value chains.

Revised ESRS aim to reduce reporting burden

According to the Commission, the revised ESRS would reduce mandatory datapoints by more than 60% and total datapoints by over 70% compared to the original standards.

The draft standards largely reflect technical advice submitted by the European Financial Reporting Advisory Group (EFRAG) in December 2025. EFRAG’s recommendations included the removal of all voluntary disclosures and substantial reductions in reporting requirements to support the Omnibus simplification agenda.

The Commission said the updated standards are intended to be “shorter and clearer,” while introducing new flexibilities and simplifying the materiality assessment process companies use to determine what sustainability information must be disclosed.

Overall, the changes are expected to reduce sustainability reporting costs for companies by more than 30%.

Double materiality approach remains intact

One of the most notable aspects of the draft ESRS is what was not changed.

Despite speculation that the Commission could align the standards more closely with the IFRS Foundation’s International Sustainability Standards Board (ISSB) framework, the revised drafts retain the EU’s “double materiality” principle.

Under this approach, companies must report on how sustainability issues financially impact their business, and also how their operations affect the environment and society.

The decision preserves a defining feature of the EU sustainability reporting framework and signals continued divergence from more financially focused international reporting models.

New flexibilities for greenhouse gas reporting

Among the targeted modifications introduced by the Commission is a change to greenhouse gas (GHG) emissions reporting requirements.

Under the draft standards, companies would be able to choose between either a “financial control approach” or an “operational control approach” when determining which entities’ emissions are included within their GHG inventories.

The Commission said the change would improve alignment with global sustainability reporting standards and provide additional flexibility for businesses operating across complex ownership structures.

The revised ESRS also introduce a new transparency requirement for companies whose climate transition plans are not aligned with limiting global warming to 1.5°C. These companies would be required to explicitly disclose this misalignment.

Voluntary reporting standard introduced for smaller companies

Alongside the revised ESRS, the Commission has also proposed a new voluntary sustainability reporting standard for companies outside the scope of the CSRD.

The voluntary framework is based on EFRAG’s Voluntary Standard for SMEs (VSME), originally developed for businesses with fewer than 250 employees and endorsed by the Commission in 2025.

However, following the Omnibus reforms – which raised the CSRD threshold to companies with more than 1,000 employees and €450 million in revenue – the Commission said the standard is now considered proportionate for businesses with up to 1,000 employees.

The voluntary standard includes a key “value chain cap,” preventing larger CSRD-reporting companies from requesting sustainability information from smaller suppliers or partners beyond what is included in the voluntary framework.

The voluntary standard also includes a reduction in datapoints, clarifications around value chain reporting obligations, and greater flexibility for companies with 10 employees or fewer, allowing some environmental disclosures to remain voluntary.

Omnibus reforms dramatically reduce CSRD scope

The publication of the revised standards forms part of the EU’s broader Omnibus I simplification package, launched to reduce administrative burdens and improve competitiveness for European businesses.

The reforms significantly narrowed the scope of the CSRD by removing reporting obligations for companies with fewer than 1,000 employees and less than €450 million in annual revenue – a substantial shift from the previous threshold of 250 employees.

As a result, around 90% of companies previously expected to fall under the CSRD are now excluded from mandatory reporting requirements.

Consultation open until 3 June

The Commission’s public consultation on the revised ESRS and voluntary reporting standard will remain open until 3 June.

Following the consultation period, the Commission plans to formally adopt the delegated acts before transmitting them to the European Parliament and the Council for scrutiny under the EU’s no-objection procedure.

If neither institution objects, the revised standards are expected to enter into force after a two-month review period, which can be extended by an additional two months if requested.