The European Commission announced on Friday the adoption of the finalized revised European Sustainability Reporting Standards (ESRS) for companies covered by the EU’s mandatory Corporate Sustainability Reporting Directive (CSRD) and its voluntary reporting standard for smaller companies.
The adoption of the new standards may 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 delegated acts underlying the new standards will be transmitted to the European Parliament and Council, and enter into force if neither legislative body objects.
The finalized adopted ESRS, while largely unchanged from a draft submitted by the Commission in May, contains a few meaningful clarifications, including one indicating that asset managers are not required to disclose sustainability information on investments managed on behalf of clients.
The Omnibus package was approved by EU lawmakers earlier this year, dramatically reducing the number of companies covered by the EU’s mandatory sustainability disclosure regulation, the 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 revision of the ESRS in December 2025, which proposed a reduction in mandatory datapoints of 61%, and the elimination all voluntary disclosures, resulting in a total datapoint reduction of over 70%.
In May, the Commission released its draft ESRS and voluntary standards. The draft ESRS standard maintained 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.
One of the key changes was aimed at bringing the ESRS into closer alignment with the IFRS Foundation’s ISSB standards, by modifying the ESRS’ greenhouse gas (GHG) emissions reporting requirements to provide 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 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.
In the newly adopted ESRS, the Commission added another clarification on reporting requirements for asset managers, allowing firms “that manage investments subject to a fiduciary duty on behalf of clients” are not required to disclose information in relation to those investments, as they are relevant to the activities of the client, rather than to those of the asset manager. The Commission added that the clarification would help to “avoid disproportionate administrative burden and the duplication of sustainability reporting requirements.”
The voluntary standard for companies outside the scope of the CSRD adopted by the Commission was substantially similar to its proposed standard in May. Despite being based on the VSME, which was developed prior to the launch of the Omnibus process and designed for use by companies with less than 250 employees, when presenting its new draft voluntary standard, the Commission said that it kept changes at a minimum relative to the VSME, adding that the new voluntary standard “is considered proportionate for undertakings with up to 1000 employees,” in the context of the Omnibus’ recalibration of reporting obligations.
Click here to access the adopted ESRS and voluntary sustainability reporting standards.
