The European Commission announced the publication of new drafts of its proposed revised European Sustainability Reporting Standards (ESRS) and Sustainability Reporting Standards for Voluntary Use, opening a consultation to finalize the adoption of its simplified sustainability reporting standards for large and small companies.

While the new draft ESRS include modifications from the recently published technical advice by EFRAG, the proposed standard may be most notable for changes that were not included, most notably following media reports that the Commission had considered introducing much closer alignment with the IFRS Foundation’s ISSB standards, which could have diminished the prominence of the European standard’s “double materiality” approach which focuses reporting both on the risks and impact of sustainability issues on an enterprise, as well as on the enterprises’ impacts on environment and society.

The adoption of the new standards would form the final major step in the Commission’s initiative to simplify sustainability reporting requirements for companies under its Omnibus I initiative, launched early last year.

The Omnibus package was approved by EU lawmakers earlier this year, dramatically reducing the number of companies covered by the EU’s mandatory Corporate Sustainability Reporting Directive (CSRD) by 90% by removing companies with less than €450 million in revenue and 1,000 employees, compared to the prior 250 employee threshold. For companies under the CSRD threshold, the initiative introduced a limit on sustainability-related information requests from larger companies to information included in a planned new voluntary reporting standard, to be based on the Voluntary Standard for SMEs (VSME) endorsed last year by the EU Commission.

For companies remaining within the scope of the CSRD, the Omnibus initiative sought to significantly simplify and scale back sustainability reporting requirements through the introduction of a revised ESRS. The Commission mandated the European Financial Reporting Advisory Group (EFRAG), the preparer of the initial ESRS, with developing technical advice to revise the ESRS in line with the proposals simplification objectives.

EFRAG submitted its finalized proposed revision of the ESRS in December 2025, with key changes including a reduction in mandatory datapoints of 61%, and the elimination all voluntary disclosures, resulting in a total datapoint reduction of over 70%.

The Commission’s new draft ESRS proposal maintains most of the changes from EFRAG’s technical advice, while adding some “targeted modifications,” which the Commission said were primarily aimed at clarifying certain provisions, and adding some new flexibilities for companies.

Among the key changes is a modification to the ESRS’ greenhouse gas (GHG) emissions reporting requirements, providing companies with the flexibility when determining which entities’ emissions are included in a company’s GHG inventory to use either a “financial control approach,” or an “operational control approach” in which the company has financial control of the entity, or operational control even if only partly owned, respectively. The Commission noted that this change would align the ESRS more closely with global sustainability reporting standards.

The proposal also introduces a new requirement for companies that report transition plans with targets that are not compatible with 1.5°C to be transparent about this.

For smaller companies outside the scope of the CSRD, despite the VSME’s development prior to the launch of the Omnibus process, and its design for use by companies with less than 250 employees, the Commission noted that “changes made to the VSME standard to develop the voluntary standard have been kept to a minimum and were primarily made to ensure alignment with the revised set of ESRS.” The Commission said that while the VSME was originally designed for SME’s retaining close alignment with the VSME for the new voluntary standard “is considered proportionate for undertakings with up to 1000 employees,” in the context of the Omnibus’ recalibration of reporting obligations.

Modification in the new voluntary standard include reductions in the number of datapoints relative to the VSME, to align with the revised ESRS, adding clarifications to which datapoints are included in the value chain cap protecting smaller companies from information requests from larger companies, and specifying that companies with 10 or fewer employees can treat some more challenging environmental disclosures as voluntary under the value chain cap.

The consultation on the new draft standards will remain open until June 3, with the Commission planning to adopt the delegated acts as soon as possible after the consultation closes. Once adopted, the delegated acts will be transmitted to the European Parliament and the Council for scrutiny, and if neither legislative body objects or extends the scrutiny period, will enter into force after two months.

Click here to access the drafts and consultation.