The European Commission has opened consultations on revised ESRS and an updated voluntary sustainability reporting standard based largely on the existing EFRAG VSME framework. The proposals significantly reduce disclosure datapoints, simplify materiality assessments, and introduce a new value-chain cap limiting sustainability information requests to smaller companies. The revised framework maintains the EU’s double materiality approach while creating more proportionate reporting pathways for SMEs and companies outside mandatory CSRD scope.
The European Commission has launched a public consultation on revised European Sustainability Reporting Standards (ESRS) together with a draft Sustainability Reporting Standard for Voluntary Use, marking a major step in the EU’s ongoing simplification of sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD). The consultation forms part of the broader Omnibus simplification agenda aimed at reducing administrative burden while maintaining decision-useful sustainability disclosures.
According to the Commission, the revised ESRS reduce mandatory datapoints by more than 60% and total datapoints by over 70%, with expected reporting cost reductions exceeding 30% per company. The revised standards are designed to be shorter, clearer, and more proportionate, while simplifying the materiality assessment process and introducing additional flexibilities for undertakings.
The consultation also confirms that the EU is moving forward with an updated voluntary sustainability reporting framework closely linked to the existing VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) originally developed by EFRAG. Rather than replacing the VSME framework, the proposed voluntary standard largely builds upon it, with targeted amendments to ensure consistency with the revised ESRS and the new CSRD value-chain cap rules.
A key development is the introduction of differentiated reporting modules within the voluntary standard. The framework includes a Basic Module intended primarily for the smallest undertakings, particularly micro-companies, and a Comprehensive Module for larger entities with up to 1,000 employees. The comprehensive module builds upon the basic module while maintaining proportionate disclosure expectations.
The revised voluntary framework also plays a central role in the EU’s new “value chain cap” mechanism introduced under the Omnibus I Directive. Under this approach, companies subject to mandatory CSRD reporting cannot request sustainability information from value chain partners with 1,000 employees or fewer beyond what is included in the voluntary standard. The mechanism is intended to limit the “trickle-down effect” of excessive ESG data requests on SMEs and smaller suppliers.
Importantly, despite speculation around stronger convergence with IFRS Sustainability Disclosure Standards, the Commission’s proposals retain the EU’s core double materiality approach. This means companies will continue to assess and report both how sustainability matters affect enterprise value and how business activities impact society and the environment.
The revised ESRS also include targeted clarifications regarding fair presentation, aggregation and disaggregation of disclosures, anticipated financial effects, materiality assessments, and alignment with the Corporate Sustainability Due Diligence Directive (CSDDD). Additional refinements aim to reduce irrelevant reporting, simplify value chain disclosures, and improve practical usability for preparers.
For companies, sustainability teams, ESG software providers, auditors, and investors, the consultation is highly significant. It may materially reshape future sustainability reporting obligations, reporting scope, value-chain information requests, and interoperability with global sustainability reporting frameworks. The consultation period runs until 3 June 2026, after which the Commission is expected to move toward adoption of the delegated acts.
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