The European Commission has published new draft versions of its revised European Sustainability Reporting Standards (ESRS) and the Sustainability Reporting Standards for Voluntary Use, launching a consultation process aimed at finalizing simplified sustainability reporting requirements for both large and smaller companies.
The updated ESRS reflect several adjustments from EFRAG’s recent technical advice. However, equally significant are the changes that were not included, following earlier reports suggesting the Commission had considered stronger alignment with the IFRS Foundation’s ISSB standards. Such alignment could have reduced the emphasis on Europe’s “double materiality” principle, which considers both how sustainability issues affect companies and how companies impact the environment and society. The final standards represent a key milestone in the EU’s broader effort under the Omnibus I initiative to streamline sustainability reporting requirements.
Earlier this year, EU lawmakers approved the Omnibus package, which significantly reduced the scope of the Corporate Sustainability Reporting Directive (CSRD) by around 90%. The revised scope now excludes companies with fewer than €450 million in revenue and fewer than 1,000 employees, compared to the previous threshold of 250 employees. For companies outside CSRD scope, the initiative limits sustainability-related data requests from larger firms to a new voluntary reporting standard based on the Voluntary Standard for SMEs (VSME).
For companies still within CSRD scope, the Omnibus initiative focuses on simplifying reporting obligations through a revised ESRS. EFRAG was tasked with developing technical recommendations, which were submitted in December 2025. These proposals include a 61% reduction in mandatory data points and the removal of all voluntary disclosures, resulting in an overall reduction of more than 70%.
The Commission’s draft retains most of EFRAG’s proposed simplifications, while introducing targeted adjustments to improve clarity and provide additional flexibility. One key change relates to greenhouse gas emissions reporting, allowing companies to choose between a financial control approach or an operational control approach when defining emissions boundaries. This is intended to better align ESRS with global reporting frameworks.
The proposal also introduces a new transparency requirement for companies whose transition plans are not aligned with a 1.5°C pathway, requiring them to disclose this misalignment.
For smaller companies outside CSRD scope, the Commission notes that changes to the VSME-based voluntary standard have been kept minimal to maintain alignment with the revised ESRS. While the original VSME was designed for companies with fewer than 250 employees, it is now considered proportionate for entities with up to 1,000 employees under the Omnibus framework.
Adjustments to the voluntary standard include reduced data requirements, clarification of value chain cap protections limiting data requests to smaller firms, and provisions allowing companies with 10 or fewer employees to treat certain environmental disclosures as voluntary.
The consultation on the draft standards will remain open until June 3. The Commission aims to adopt the delegated acts shortly thereafter, after which they will be reviewed by the European Parliament and the Council. If no objections are raised, the standards will enter into force following a two-month scrutiny period.
