Europe adopts slimmed-down ESRS and voluntary standard
The European Commission has formally adopted the revised European Sustainability Reporting Standards (ESRS), together with a new voluntary sustainability reporting standard (VSME) for smaller companies outside the scope of the CSRD. Adopted on 3 July as part of the Omnibus I simplification package, the revised ESRS cut mandatory datapoints by more than 60% and total datapoints by more than 70%, with the Commission expecting associated reporting costs to fall by over 30% per company, in line with its targets. There should be few surprises, as the adopted text closely follows the draft consulted on in May, which itself closely followed EFRAG’s technical advice, with final adjustments confined to added flexibility.
The revisions remove optional “may” datapoints entirely, everything that remains mandatory moves into the main body of the standards, and the old minimum disclosure requirements on policies, actions and targets become general disclosure requirements. Underneath the tidying sits a shift in philosophy, with materiality positioned as the central organising principle and a “top-down” double materiality assessment now clearly permitted — companies are being trusted to judge what matters rather than work through a checklist.
Preparers also gain more freedom over presentation, including the option of an executive summary, while ISSB (including SASB) and GRI standards have been added as sources of guidance for entity-specific information.
The VSME, meanwhile, establishes a single, proportionate reference framework for voluntary reporting. It also introduces a “value chain cap”: at least in theory, companies in scope of the CSRD cannot demand more sustainability information from value-chain partners than that covered by the voluntary standard.
For digital reporting, a leaner, mandatory-only disclosure should translate into a simpler, more navigable XBRL taxonomy, lighter tagging obligations, and clearer resulting data. The explicit ISSB references also strengthen the prospects for mapping between the ESRS and ISSB digital taxonomies. Attention now turns to EFRAG’s digital reporting workstream, which will need to align the ESRS XBRL taxonomy with the revised standards before mandatory tagging under the ESEF program can be subject to due process and relevant consideration by ESMA and the European Commission.
The standards are not yet law. Both delegated acts now go to the European Parliament and the Council for a two-month scrutiny period, extendable by a further two months, entering into force shortly after publication in the Official Journal if not rejected. The revised ESRS apply for financial years beginning on or after 1 January 2027, with early adoption permitted for FY2026, once the act is in force.
Read more from the Commission, and see the accompanying press release and EFRAG’s statement.
