European Commission consults on revised ESRS and sustainability reporting standard for voluntary use
What you need to know
On 6 May 2026, the European Commission published two consultations on:
(i) draft revised European Sustainability Reporting Standards (ESRS), and
(ii) a Voluntary Sustainability Reporting Standard for smaller companies (Voluntary Standard).
The draft revised ESRS build on the December 2025 technical advice from the European Financial Reporting Advisory Group (EFRAG) to the Commission on amending the ESRS adopted in December 2023. The Commission is proposing targeted adjustments to EFRAG's advice to further ease reporting burdens. The mandatory datapoints in the ESRS have been reduced by over 60% and total datapoints have been reduced by over 70%.
The Voluntary Standard provides a framework for sustainability reporting by companies not subject to mandatory reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) ((EU) 2022/2464). The Omnibus I Directive ((EU) 2026/470) revised the CSRD including by introducing a “value chain cap” so that companies in‑scope of CSRD cannot require value‑chain partners with 1,000 employees or fewer to provide information beyond that set out in the Voluntary Standard.
The ESRS and the Voluntary Standard represent a significant recalibration of corporate sustainability reporting obligations across the EU, with direct consequences for reporting undertakings, their value chain partners, and users of sustainability data.
Background on ESRS and Voluntary Standard
The European Commission adopted Commission Delegated Regulation (EU) 2023/2772, which contained the first set of ESRS in December 2023 (see First European Sustainability Reporting Standards (ESRS) apply from 1 January 2024).
As part of the EU's February 2025 sustainability Omnibus Package, EFRAG were asked to suggest amendments to streamline the ESRS. In December 2025, EFRAG provided technical advice to the Commission suggesting amendments that would reduce the mandatory datapoints in the ESRS by 61%. For an overview of the key changes suggested by EFRAG, see EU sustainability reporting Omnibus reaches destination as Content Directive agreed.
The next step was for the Commission to prepare a Delegated Act revising the first set of ESRS based on EFRAG’s technical advice. The Commission is required by the Omnibus I Directive ((EU) 2026/470) and previously known as the Content Directive), by 18 September 2026.
In January 2025, EFRAG published a voluntary reporting standard (known as VSME) for non-listed micro-, small-, and medium-sized undertakings (i.e. companies with up to 250 employees) (see AGC Update Issue 61). In July 2025, the European Commission endorsed EFRAG's Voluntary SME reporting standard (VSME) through Commission Recommendation (EU) 2025/1710.
The Omnibus I Directive included provisions to address the 'trickle down' issues faced by smaller companies that receive requests for information to support CSRD reporting by their larger value chain partners. The Omnibus I Directive introduced a “value chain cap” so that companies in‑scope of CSRD cannot require value‑chain partners with 1,000 employees or fewer (protected undertakings) to provide information for CSRD reporting purposes beyond what is set out in the Voluntary Standard. The Omnibus I Directive also empowered the European Commission to adopt a voluntary reporting standard for undertakings falling below that threshold.
Consultations on the revised ESRS and Voluntary standard
On 6 May 2026, the European Commission launched two consultations on:
- A draft delegated regulation amending the ESRS Delegated Regulation (EU) 2023/2772. The draft revised ESRS are included as Annexes to the draft delegated regulation.
- A draft delegated regulation containing Annexes that set out the draft Voluntary Standard, which is based on the VSME with minimal modifications to ensure alignment with the revised ESRS.
Key measures proposed by the consultation on the revised ESRS
The European Commission's draft takes into account EFRAG's December 2025 technical advice. The Commission is proposing targeted adjustments to EFRAG's advice to further reduce reporting burdens.
Key amendments proposed by the Commission to the ESRS:
- Introduce further distinctions between mandatory and voluntary datapoints. In particular, the revised ESRS provide that undertakings may include supplementary information stemming from other legislation, or generally accepted reporting standards or frameworks even where that information is not material.
- Clarify the materiality assessment to make it clear that undertakings should not disclose information prescribed by an ESRS disclosure requirement or datapoint if that information is not material. That combined with the 'top down approach' to materiality assessment in paragraph 27 should avoid assessment of every impact, risk or opportunity and therefore over-disclosure.
- Permit the non-disclosure of commercially prejudicial information and trade secrets (subject to certain conditions being met). These provisions align the ESRS with the new statutory protections for value chain partners under articles 19a(3) and 29a(3) of the Accounting Directive (2013/34/EU).
- Give greater flexibility in defining the GHG emissions reporting boundaries to be selected and applied by undertakings, thereby aligning with global sustainability reporting standards. Non-material subsidiaries excluded from consolidated financial statements can also be excluded from sustainability reporting boundaries.
- Require enhanced transparency where climate transition plans are not aligned with the 1.5°C Paris target, although production and publication of transition plans remain voluntary.
- Limit disclosure requirements relating to microplastics to primary microplastics (i.e. those plastics that are made to be small as opposed to secondary microplastics which are the result of disintegration of larger plastic products). As regards emission of pollutants more broadly, the revised ESRS shift from a prescriptive list-based approach to allowing reporting entities to identify which pollutants are material for reporting purposes.
- Include a one-year phase-in for reporting on substances of very high concern (SVHCs) by downstream users.
The Commission has also made targeted changes to improve coherence with the Corporate Sustainability Due Diligence Directive (CS3D) and to clarify reporting on human rights incidents, anticipated financial effects, and asset management activities.
Reporting companies have been pressing for closer alignment of the ISSB's sustainability reporting standards but the Commission has not included further changes over concerns that doing so would have diluted the EU's double materiality approach to sustainability reporting.
Who is affected?
The simplified ESRS will apply to all undertakings subject to mandatory sustainability reporting under the CSRD.
Key measures proposed by the consultation on the Voluntary Standard
The draft regulation provides a standardised framework for voluntary sustainability disclosures by undertakings not subject to mandatory reporting. It also establishes the reference level for the value chain cap. Alongside the consultation, the Commission has published Q&A on how the value chain cap will work.
The Voluntary Standard comprises a basic module which is designed for use by micro undertakings (e.g. companies with 10 employees or fewer) and a comprehensive module that builds on the basic module and covers environmental, social, and governance metrics.
Disclosures under the Voluntary Standard are classified under four categories ('necessary' – i.e. must be reported by a company applying the standard, 'necessary if applicable', 'voluntary', and 'consider when reporting sector information').
The draft delegated regulation specifies that in-scope companies can only require protected undertakings to provide the information corresponding to disclosures marked as “necessary”; they cannot require companies in their value chain to provide information in the other categories.
Protected undertakings have a statutory right to refuse information requests exceeding the value chain cap. Reporting undertakings which choose to request information exceeding the 'necessary' information in the Voluntary Standard must inform protected undertakings of their statutory right to decline to provide such extra information.
Some of the disclosures marked as “necessary” for companies with 11 to 1,000 employees are designated as “voluntary” for undertakings with 10 or fewer employees so that they are given extra protection from the trickle down effect.
Undertakings that voluntarily apply the standard are not obliged to seek assurance for the reported information.
Who is affected?
The draft delegated regulation directly affects all undertakings with up to 1,000 employees that sit in the value chains of in-scope reporting entities, as well as the reporting undertakings themselves, which must ensure that their information requests do not exceed the value chain cap.
The Voluntary Standard is also relevant to undertakings outside the CSRD's scope that may wish to report voluntarily to improve access to sustainable finance, enhance competitiveness, or manage stakeholder expectations.
Timeline and next steps
Both consultations are open until 3 June 2026 and the Commission intends to adopt both delegated regulations as soon as possible after the consultations close. Once adopted, the delegated acts will be subject to two months of scrutiny by the European Parliament and Council under the 'no objection' procedure, which can be extended by a further two months. Both draft regulations are expressed to enter into force on the third day following their publication in the Official Journal.
The revised ESRS will apply to financial years beginning on or after 1 January 2027, which is when the sustainability reporting framework introduced by the Omnibus 1 Directive will apply. Undertakings that are required to report under CSRD for FY 2026 (previously known as Wave 1 companies) may choose to apply the revised ESRS early.
The value chain cap in the Voluntary Standard takes effect for financial years beginning on or after 1 January 2027 in respect of value chain reporting by undertakings that are required to produce sustainability reports.
Protected undertakings (i.e. SMEs benefiting from the value chain cap) which opt to report on a voluntary basis, may apply the Voluntary Standard from the date of its entry into force.
Practical implications and recommended actions
The consultations mark a pivotal stage in the EU's sustainability reporting reform. The combined effect is to streamline the reporting framework for large in-scope undertakings whilst simultaneously introducing a legally enforceable floor to protect smaller entities in value chains.
Companies should consider taking the following steps:
- Assess CSRD scope and impact. Undertakings should confirm whether they remain in scope under the revised thresholds and evaluate how the simplified ESRS alter their reporting obligations, particularly with respect to the reduction in mandatory datapoints.
- Review value chain data-gathering processes. Reporting undertakings that collect sustainability data from suppliers and other value chain partners should urgently review their questionnaires and data requests to ensure compliance with the forthcoming value chain cap.
- Engage with the consultation. Stakeholders are encouraged to respond to the consultations and to raise any practical concerns regarding the proposed measures, including the adequacy of the proportionality safeguards for micro-undertakings.
If you require support on whether you remain in-scope of CSRD and/or to understand your revised obligations, please get in touch with any of the contacts below.
