European Commission Publishes Revised ESRS for Consultation

On 6 May 2026, the European Commission (Commission) launched a consultation on the draft final versions of the revised European Sustainability Reporting Standards (ESRS), alongside a new voluntary reporting standard for smaller companies. In this article, we summarise the background to the ESRS revision process, the changes proposed by the Commission, the draft voluntary standard, and the next steps in the legislative process.

Background to the Revised ESRS

The EU Corporate Sustainability Reporting Directive (EU CSRD) requires in-scope EU undertakings, including EU subsidiaries of non-EU parent companies, to report on sustainability matters in accordance with the ESRS, which are required to be adopted by the Commission. 

As a reminder, the Commission is the executive branch of the EU, which proposes new laws, enforces EU policies, and represents the EU internationally. 

The ESRS, a crucial part in establishing an in-scope entities’ disclosure obligations, set out the specific requirements and datapoints that companies subject to the EU CSRD will or may need to report. The first set of ESRS was adopted in July 2023. 

In February 2025, the Commission proposed its first Sustainability Omnibus Package (Omnibus), which consisted of a set of legislative measures designed to reduce administrative burdens for impacted companies by amending a range of existing EU sustainability frameworks, including the EU CSRD. The Omnibus involved substantive changes to the EU CSRD, as well as a commitment to revise and simplify the ESRS. Following adoption of the Omnibus, the Commission instructed EFRAG — an independent EU advisory body tasked with developing the related reporting standards — to provide technical advice to the Commission concerning simplification, due by 30 November 2025 (which was ultimately submitted on 2 December 2025, following a consultation process). 

The majority of the substantive amendments contained in the Omnibus were accepted by the two other EU governmental bodies, the European Parliament and Council, and entered into force on 18 March 2026, marking the finalisation of the Omnibus legislative process.

The Commission committed to adopting a delegated act amending the existing ESRS within six months of the entry into force of the Omnibus (i.e., by 17 September 2026). This timeframe is intended to allow in-scope companies to apply the revised ESRS for financial years beginning on or after 1 January 2027. The Commission, however, may adopt the delegated act ahead of this timeframe. 

Key Features of the Draft Revised ESRS

According to the Commission, the draft revised ESRS reduce mandatory datapoints by over 60% and total datapoints by over 70%. Key drafting changes include: 

• introducing additional flexibility through new reliefs and phase-ins; 
• simplifying the materiality assessment with a more proportionate, principle-based approach; 
• enhancing interoperability with global sustainability reporting standards; and
• improving consistency with other EU legislation.

The Commission has made additional targeted modifications to EFRAG’s technical advice, with the principal aim of clarifying provisions and granting additional flexibilities to undertakings (rather than proposing significant substantive changes). 

Selected modifications include: 

• clarifications on materiality and fair presentation (including that fair presentation applies to the sustainability statement as a whole rather than to each datapoint); 
• new provisions allowing omission of information that would be “seriously prejudicial” to the undertaking’s commercial position; 
• clarifications that anticipated financial effects are likely to involve estimates that may be updated without constituting an “error”; 
• flexibility to use either the financial control or operational control approach for greenhouse gas emissions reporting (although certain requirements relating to leased assets remain in place); 
• transparency requirements where transition plans are not aligned with a 1.5°C target;
• a one-year phase-in for reporting on substances of very high concern by users of articles containing such substances;
• clarifications that only “substantiated” human rights and discrimination incidents are reportable; and 
• increased technical alignment with the EU Corporate Sustainability Due Diligence Directive (EU CSDDD), for instance by including reference to the EU CSDDD in the due diligence process description in ESRS 1.

Draft Voluntary Standard for SMEs

In parallel with the revised ESRS, the Commission has published a draft voluntary sustainability reporting standard intended to support reporting by small and medium enterprises (SMEs) that are not subject to mandatory EU CSRD requirements. The draft is based on EFRAG’s 2024 voluntary SME standard (VSME), which the Commission endorsed by recommendation in 2025.

The Commission’s voluntary standard introduces a “value-chain cap”, meaning EU CSRD in-scope undertakings cannot require value-chain partners with 1,000 employees or fewer to provide information beyond that set out in the voluntary standard. The cap covers the disclosures marked as “necessary” in both the basic and comprehensive modules of the voluntary standard, but does not extend to disclosures marked as “voluntary” or as “necessary if applicable”. The cap also applies to non-EU undertakings in the value chain of the reporting undertaking, an important feature for groups with international supply chains.

Sustainability Reporting Standards for Non-EU Undertakings

The current consultation does not cover the separate set of sustainability reporting standards for non-EU parent undertakings (NESRS) that fall within the scope of the EU CSRD. The NESRS will apply to large non-EU groups generating significant turnover in the EU and with at least one large EU subsidiary or branch, and will sit alongside the revised ESRS that apply to EU undertakings.

The Omnibus package postponed the Commission’s deadline for adopting the NESRS in order to align their development with the revised ESRS and to allow EFRAG to focus on the ESRS simplification process. In its 2026 Work Plan, EFRAG anticipates delivering advice to the Commission by the end of January 2027, following a public consultation and the preparation of an Exposure Draft. The Commission will then consult on, and ultimately adopt, the NESRS following submission of EFRAG’s technical advice. Groups with non-EU parents should continue to monitor developments closely. Although the substantive content of the NESRS, and the timing of any consultation, remain to be confirmed, they will likely be influenced by modifications made through the revised ESRS process. EFRAG has indicated that internal preparatory work will begin once a stable draft of the delegated act on the ESRS is available.

Next Steps

Stakeholders may submit feedback on both draft delegated acts until 3 June 2026. The Commission has indicated that it will adopt the two delegated acts “as soon as possible” after the consultation closes. The acts will subsequently be sent to the Parliament and the Council for scrutiny under the no-objection procedure, which lasts two months and is extendable by a further two months at the request of either institution, before entering into force.

Once in force, the revised ESRS will apply to financial years beginning on or after 1 January 2027. Undertakings that are already subject to sustainability reporting under the existing regime for financial year 2026 may opt to apply the revised ESRS for that financial year instead, which could allow early adopters to benefit from the simplifications a year earlier.

This article was prepared with the assistance of Samantha Banfield and James Thompson at Latham & Watkins. 

Latham & Watkins will continue to monitor developments relating to the European sustainability reporting and disclosure landscape.