The European Commission has approved the final revised European Sustainability Reporting Standards (ESRS), a key milestone in the development of CSRD's corporate sustainability reporting framework. The framework has been updated and forms part of the EU's Omnibus I simplification package, and also contains a voluntary sustainability reporting standard for companies not subject to the mandatory reporting. The decision is likely to change the EU sustainability reporting landscape and ease the burden on firms of reporting requirements.

Its delegated acts with the final standards will now be sent to the European Parliament and Council of the European Union. When there is no objection by either institution within the timeframe set for scrutiny, the standards are formally adopted. The updated framework is one of the last key pieces of regulation in the Commission's work to rationalise sustainability reporting requirements across the EU.

Final Standards are largely the same as the Draft Proposal.

The adopted ESRS are generally similar to those contained in the draft ESRS published by the Commission in May 2026. The final text does include some clarifications, however, to enhance legal clarity and facilitate implementation by companies impacted.

One of the most significant changes is the clarification of what constitutes a "asset manager. The final standards will not mandate disclosure of sustainability information for investments on behalf of clients under a fiduciary relationship. The Commission says that the information is about the clients' rather than asset managers' activities.

According to the Commission, the purpose of this clarification is to avoid any duplication of sustainability reporting requirements and avoid placing the unnecessary burden on the investment management sector that is operating in the EU regulatory framework.

There will be a significant reduction in the scope of CSRD as a result of the omnibus reform.

EU lawmakers earlier this year approved the Omnibus I package of the revised reporting standards. By increasing the threshold for CSRD's applicability, the legislative package drastically reduces the number of companies that must adhere to the CSRD.

The new regulations will take effect with annual revenues exceeding €450 million and an employee base of over 1,000 — excluding companies that are typically smaller. This is a big step up from the previous limit of 250+ employees.

According to the European Commission, these changes cut down on the number of businesses impacted by mandatory CSRD reporting by about 90%, which aligns with the Commission's goal of reducing compliance costs while maintaining the disclosure obligations for the largest companies that are required by CSRD.

The smaller companies are expected to adhere to a Voluntary Reporting Framework.

The Commission has also a voluntary sustainability reporting standard for companies that are no longer subject to the mandatory scope of the CSRD.

The new structure is on the basis of the Voluntary Standard for Small and Medium-sized Enterprises (VSME) which was endorsed by the Commission last year. The voluntary framework was originally for companies of less than 250 employees, but the Commission has scaled it up to be proportionate to companies with up to 1,000 employees, as outlined by the new reporting thresholds in the Omnibus reforms.

The Commission highlighted that minimal changes were made to the VSME to ensure consistency and ease the voluntary reporting by companies aiming to supply sustainability information to investors, lenders or business partners.

The Recommendations are based on the Report of the EFRAG.

The revision of the ESRS is the result of a long process of technical work done by the European Financial Reporting Advisory Group (EFRAG), which first prepared the reporting standards that are the basis of the CSRD.

Since the start of the Omnibus initiative, the Commission has directed EFRAG to look at the standards and to recommend ways to streamline reporting requirements without sacrificing the rigor and quality of sustainability reporting.

In December 2025, EFRAG finally provided its final technical advice, which included a 61% reduction in the number of required disclosures of datapoints, and the elimination of all voluntary disclosures. These proposals would cut down overall reporting datapoints by over 70%.

Most of these recommendations have been retained in the Commission’s final adopted standards.

More alignment to Global Reporting Standards

Consistency with international sustainability reporting frameworks (such as the International Sustainability Standards Board (ISSB)) is one of the main goals for the updated ESRS.

The proposed new GHGs reporting rules offer companies more flexibility in deciding who should be in their GHGs inventory. For defining the reporting boundary of the greenhouse gas emissions, organisations have at their disposal two options: a financial control approach and an operational control approach.

The change will help to align European and international sustainability reporting standards, and will allow companies to have more flexibility in the approach they take to emissions accounting.

This is an extra requirement for Climate Transparency.

In addition to the updated GHG reporting rules, the adopted ESRS also include a new transparency disclosure on corporate climate transition plans.

Newly introduced regulations will require companies to explicitly state in their sustainability reports that their transition plans do not align with 1.5°C limits to global warming if they have such plans, which include emissions reduction targets.

This step will help give investors and other stakeholders a clearer view of how companies are managing their climate transition efforts, while allowing flexibility for companies to design their transitions, the Commission said.

Next Legislative Step

The delegated acts will then be subject to scrutiny by the European Parliament and the Council after the Commission has formally adopted both the revised ESRS and the voluntary sustainability reporting standard.

The revised standards will enter into force and will become the new reporting framework for companies impacted by the Corporate Sustainability Reporting Directive, and will offer a simplified voluntary reporting framework for companies not mandated to report.