European Sustainability Reporting — Omnibus Legislative Developments and Revised European Sustainability Reporting Standards (July 17, 2026)

Because the scope threshold for enterprise-level reporting (Article 40a) differs from that for entity- or group-level reporting (Articles 19a or 29a), enterprise-level reporting may be required regardless of whether a subsidiary is within the scope of the CSRD in its own right (i.e., under Articles 19a or 29a). In addition, if a subsidiary itself is within the scope of the CSRD (i.e., under Articles 19a or 29a), it is also required to report about its own material impacts, risks, and opportunities. Reporting at the enterprise level in accordance with Article 40a does not necessarily satisfy a subsidiary’s reporting obligation under Articles 19a or 29a. For example, an E.U. entity that is within the scopes of both (1) Articles 19a or 29a and (2) Article 40a as an E.U. subsidiary of a non-E.U. parent would not be able to satisfy the Article 19a or 29a reporting requirements through the publication of a group report prepared under ESRS-TC for the purpose of Article 40a reporting.

Under the Content Directive, the EC will be required to periodically review the revised scope thresholds, and, if appropriate, make proposals to amend the thresholds. The purpose of the reviews is to adjust for the effects of inflation and to assess whether the scope thresholds result in sufficient sustainability information for E.U. policy objectives.

The EC will issue guidelines on content and criteria for entities’ reporting, which will address the description of due diligence, actual and potential adverse impacts identified, and the appropriate measures taken with respect to those impacts. In June 2026, the EC launched a public consultation on these guidelines, which is open until July 24, 2026.

For more details on changes to the initial CSDDD, see Deloitte’s January 14, 2026, Heads Up.

The adopted text is broadly consistent with the May 2026 draft delegated act but reflects several refinements made on the basis of public feedback, including extending transitional relief for anticipated financial effects, offering greater flexibility related to the structure of the sustainability statement, and removing the overlap between the concepts of “informed assessment” and “decision-usefulness” in the materiality provisions.

The revisions are intended to reduce administrative burdens for E.U. businesses while maintaining high-quality, decision-useful disclosures. The revised ESRS are shorter and clearer, introduce new flexibilities, and streamline key processes. In its press release, the EC notes that the revised standards “reduce the number of mandatory datapoints by over 60% and the total number of datapoints by more than 70%.”

 

Connecting the Dots

Though the revised ESRS reduced the number of datapoints relative to ESRS Set 1, a reduction of datapoints does not necessarily translate to a proportional reduction in reporting or assurance effort. Entities should evaluate the extent to which the revisions and reductions to datapoints in the revised ESRS affect various aspects of their preparation and reporting processes when determining the overall impact on the preparations needed.

While retaining the overall architecture of the ESRS framework, including the cross-cutting standards (ESRS 1, General Requirements, and ESRS 2, General Disclosures) and sector-agnostic topical standards, the revised ESRS provide significant simplifications to improve readability, proportionality, and decision-usefulness. In addition, sector-specific standards will no longer be developed.

The principal changes to the current ESRS Set 1 include the following:

• Mandatory (“shall”) disclosure requirements — Simplifying and reducing the number of mandatory (“shall”) disclosures and presenting all requirements in the main body of the standards. Under ESRS Set 1, some mandatory disclosure requirements were presented within appendixes to the standard.
• Application requirements — Reducing and simplifying application requirements and presenting them as boxed content alongside the related section or disclosure requirement. Under ESRS Set 1, application requirements were part of a separate appendix that accompanied each standard.
• Optional (“may”) disclosures — Eliminating optional (“may”) disclosures. ESRS Set 1 contained over 100 “may disclose” provisions which have been removed to make a clearer distinction between mandatory and voluntary information.
• Minimum disclosure requirements (MDRs) — Repositioning the MDRs as general disclosure requirements, to further emphasize the materiality of information.
• Topical standard — Streamlining the topical standards to provide fewer and clearer requirements.
• Presentation flexibility — Introducing more flexibility regarding how information can be presented, including the option to provide an executive summary on key sustainability messages. The revised standards also allow an undertaking to depart from the prescribed structure if it provides a reasoned explanation.
• Materiality of information — Putting greater emphasis on the materiality of information as an overarching principle and simplifying the double materiality assessment requirements. The revised text explicitly permits entities to apply a “top-down” approach that allows an undertaking to conclude on materiality on the basis of its strategy and business model without assessing every individual impact, risk, and opportunity. However, if the materiality or nonmateriality of one or more impacts, risks, or opportunities is not evident on the basis of this analysis, the entity is required to perform a specific assessment of the impacts, risks, or opportunities in question.
• Fair presentation — Including the fair presentation principle in the objective of the ESRS. The revised ESRS now require the sustainability statement, taken as a whole, to achieve fair presentation.
• Clarification of the level of aggregation and disaggregation — Giving entities greater discretion regarding the need to consider specific geographical contexts when performing the materiality assessment. The revised ESRS also clarify that the level of disaggregation used for materiality assessment does not imply that information must be reported at that same level of disaggregation.
• Omission of information — Allowing entities to omit information in certain circumstances under new provisions derived from the amendments to the initial CSRD in the Content Directive.
• Clarification of guidance — Clarifying guidance in several areas including anticipated financial effects, microplastics, greenhouse gas emissions, pollutants, discrimination, and human rights incidents.
• Due diligence — Making technical modifications regarding due diligence to better align with the CSDDD.
• Asset management activities — Introducing new provisions to avoid the risk that entities carrying out asset management activities will be required to report information that is not relevant regarding the investments that they manage.
• Additional reliefs — Introducing additional reliefs for the preparation and presentation of sustainability information, building on the phase-ins already present in ESRS Set 1. For example, the revised ESRS include relief for undue cost or effort that permits an entity to use reasonable and supportable information that is available without undue cost and effort.
• Interoperability with the International Sustainability Standards Board (ISSB) and Global Reporting Initiative (GRI) standards — Enhancing interoperability by adding references to the ISSB standards (including the Sustainability Accounting Standards Board [SASB] standards) and the GRI standards as sources of guidance for identifying entity-specific information.

The delegated act has been submitted to the European Parliament and the Council of the EU for a two-month scrutiny period, which may be extended by an additional two months. Each institution may reject but cannot amend the delegated act. Upon completion of the scrutiny period, if not rejected, the delegated act will enter into force after its publication in the Official Journal of the European Union.

If not rejected, the revised ESRS will be effective for financial years beginning on or after January 1, 2027, with early adoption permitted for financial years starting between January 1, 2026, and December 31, 2026, as soon as the delegated act enters into force. Once in force, the delegated act will be binding in its entirety and directly apply in all member states (i.e., the delegated act does not need to be transposed by member states). Mandatory application will be required to the extent that the CSRD is transposed in the member states in which they fall within the scope. If an entity elects to early adopt the revised ESRS, it may apply one of two transitional provisions: (1) full application of the revised ESRS or (2) application of ESRS Set 1, with certain reliefs provided in the revised ESRS as listed in Article 2 of the revised ESRS.

Note that EFRAG has launched ESRS Knowledge Hub, an interactive online platform designed to support companies, practitioners, and stakeholders in navigating the ESRS and broader sustainability reporting materials developed by EFRAG.

The primary differences between the delegated act on the Voluntary Standard and the VSME standard are as follows:

• The delegated act aligns the content of the Voluntary Standard with the revised set of ESRS, thereby reducing the number of datapoints compared with the VSME standard.
• The delegated act clarifies certain provisions related to the application of the value chain cap and indicates which datapoints are included under the cap. Specifically, the value chain cap only refers to disclosures that are labeled as “necessary” in the Voluntary Standard, and Annex II of the draft delegated act shows the datapoints subject to the value chain cap.
• The delegated act provides relief for undertakings with 10 employees or less by specifying that certain disclosures, particularly more challenging environmental disclosures, are above the value chain cap. Such undertakings are not required to provide information that is above the value chain cap.

As noted above, the delegated act is subject to a two-month scrutiny period by the European Parliament and the Council of the EU, which may be extended by an additional two months. If not rejected during the scrutiny period, the delegated act will enter into force three days after its publication in the Official Journal of the European Union and would apply beginning in financial year 2027 for the value chain reporting of entities subject to mandatory sustainability reporting. In addition, from the date it enters into force, the standard applies to entities that are not subject to mandatory sustainability reporting under the CSRD and that wish to report on sustainability on a voluntary basis.