The European Commission has officially adopted the revised European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD), along with a voluntary sustainability reporting standard for companies that fall outside the CSRD scope. 

This marks a significant milestone in the Commission’s Omnibus I simplification initiative, aimed at reducing the reporting burden while maintaining the quality and comparability of sustainability disclosures. The delegated acts will now be submitted to the European Parliament and Council and will enter into force unless either institution raises an objection. 

Key Highlights 

• Significant Reduction in Reporting Requirements: 
  The revised ESRS substantially reduces mandatory disclosure requirements. Building on recommendations from the European Financial Reporting Advisory Group (EFRAG), the standards reduce mandatory datapoints by approximately 61% and eliminate all voluntary datapoints, resulting in an overall reduction of more than 70%.  

• Narrower Scope of the CSRD: 
  Under the Omnibus package, the number of companies subject to mandatory CSRD reporting has been reduced by around 90%. The revised scope generally applies to larger companies with more than 1,000 employees and annual revenue exceeding €450 million, significantly easing reporting obligations for smaller businesses.  

• Greater Alignment with ISSB Standards: 
  The revised ESRS introduces greater flexibility in greenhouse gas (GHG) emissions reporting by allowing companies to determine their reporting boundary using either the financial control or operational control approach. This change improves alignment with the sustainability disclosure standards developed by the International Sustainability Standards Board (ISSB).  

• Enhanced Transparency on Climate Transition Plans: 
  Companies that publish climate transition plans with targets that are not aligned with the 1.5°C pathway must clearly disclose this, improving transparency around climate commitments.  

• Clarification for Asset Managers: 
  The finalized standards clarify that asset managers acting under a fiduciary duty on behalf of clients are not required to disclose sustainability information for investments managed for those clients. This avoids duplicate reporting and reduces unnecessary administrative burden.  

• Voluntary Standard for Companies Outside CSRD Scope: 
  The Commission also adopted a voluntary sustainability reporting standard based on the Voluntary Standard for SMEs (VSME). While largely consistent with the original VSME framework, the standard is considered proportionate for companies with up to 1,000 employees, providing a practical reporting framework for organizations outside the mandatory CSRD scope.  

Overall, the finalized ESRS represent a major step toward simplifying sustainability reporting in the EU while ensuring that reporting remains decision-useful, internationally aligned, and focused on the most material sustainability information.