The reporting landscape in the EU has, to say the least, undergone significant transformation since the first ESRS draft was released in April 2022. Companies under the initial scope of the Corporate Sustainability Reporting Directive (CSRD) have had a steep learning curve, navigating dense EU documents, sharpening internal competences, reshaping their understanding and approach to sustainability, and even reorganising teams to support reporting efforts. Just when it seemed that rules were agreed upon, standards adopted and practice rolled out, the European Commission released the proposed Omnibus directive – covering sustainability reporting (CSRD), sustainability due diligence (CSDDD) and the Taxonomy regulation in 2025.
The European Commission proposes, through the Omnibus directive, substantial changes to the timeline of implementation and the scope of companies covered by CSRD. The first element touching on the implementation timeline was already adopted, while the other proposed changes to the CSRD are yet to be agreed upon. In parallel the European Commission also adopted a delegated act to revise the content of first set of ESRSs. The key developments are:
Agreed:
- Stop the clock amendment, adopted in April 2025, delays the implementation of CSRD by two years for large companies that meet two of the following criteria – over 250 employees, a net turnover of over EUR 50 million or a balance sheet over EUR 25 million – (so called “wave 2” companies) and for listed SMES (so called “wave 3” companies). These organisations will now start reporting from FY 2027 and FY 2028, respectively.
Being negotiated:
- Revised CSRD scope: Through the proposed Omnibus directive a new threshold is suggested where only companies with over 1,000 employees and either a net turnover over EUR 50 million or a balance sheet over EUR 25 million would fall under the Directive. The final threshold will be subject to further negotiations.
Delegated act:
- Simplified content: The European Comission has asked EFRAG to suggest a revised version of the first set of ESRSs. EFRAG has published a first draft that is now in consultation open for feedback from stakeholders. In the draft revision the mandatory datapoints have been halved and voluntary datapoints almost completely deleted. The content and structure of ESRS have been reworked for more clarity, fewer repetitions and stronger alignment between topical standards. The European Commission has also decided to not proceed with the development of sector-specific standards.
What to make of these developments?
ESRS
Purpose of revised ESRS
The revision of the first set of ESRS was made with the clear purpose to reduce administrative burden for companies, harmonise sustainability regulations, streamline the ESRS, simplify disclosure requirements and make the standards more readable and practical for reporting companies. These are valuable goals, but simplification can also reduce transparency. Let’s look at the merits and limitations of this draft revision.
A sharper double materiality
Double materiality assessment remains at the core of sustainability reporting, with both impacts and risks to be considered. The process has, in the draft, been refined and simplified, amendments have clarified that reporting should focus on datapoints directly linked to each material IRO. The new approach moves away from box-ticking and endless scoring, toward a DMA grounded in the company’s business model, industry practice and “reasonable and proportionate evidence”. This shift, if kept, should lead to more focused, meaningful reporting.
Substantial streamlining of disclosures
The draft revised ESRS have a more concise and consistent structure. Redundancies have been removed, and non-essential details have been shifted to guidance documents. Application requirements follow directly after the disclosure requirements they refer to, avoiding back-and-forth scroll and making it easier for companies to understand reporting expectations. The fact that companies may choose to include an executive summary and appendices for taxonomy information and other complex metrics are welcome suggestions.
Enhanced interoperability and alignment
The draft revision published on July 31st would improve alignment between ESRS and other frameworks, particularly IFRS’ ISSB. Harmonised terminology such as “fair representation” or “reasonable and supportable assumptions and information” helps reduce duplications for global companies. In light of the Commission’s decision to not proceed with the development of sector-specific standards, references to GRI and ISSB sector standards are welcome. They can be valuable sources to support companies’ DMA and or developing entity-specific disclosures.
More focus on narrative, less on metrics
Disclosures on policies, actions and metrics have been simplified, giving more emphasis to narrative. The same goes for data, where metrics that can only be partially estimated can be reported. The hierarchy between direct data and estimates has also been removed, allowing for flexibility when lacking reliable data from value chain. Even anticipated financial effects could become more descriptive and mostly rely on qualitative information, depending on the option ultimately chosen by EFRAG after the stakeholder consultation. This more pragmatic approach focuses on quality of information, even if not quantitative or fully complete. The downside is that this could hinder comparability and encourage subjective estimations. Estimations and partial data could counter the goal to provide users of the sustainability statement with useful information for decision-making.
Less granularity and technical guidance in topical standards
This was expected from the wide deletion of datapoints announced in February. Fewer datapoints are translated into less disaggregated quantitative and qualitative information. While the overall essence of the topical standards was kept in the draft revision, granular information on gender, persons with disabilities, social protection or follow-up of whistleblower mechanisms has been lost. Additionally, the technical guidance of the environmental standards has in the draft been deleted or moved to Non-Mandatory Illustrative Guidance (NMIG), which may lead to companies disregards technical recommendations that are necessary to properly frame the reported information.
The legislative changes to the CSRD
Delayed implementation delays transparency and may pause companies’ efforts
From its beginning, CSRD has been evolving while being implemented. The postponed implementation will give companies time to get clarity on the updated reporting standards and predictability on reporting expectations before publishing their first sustainability reports. Yet, stalling for too long may hamper the momentum many organisations have built on during the past two years. As companies have gotten ready for their first ESRS-report, working synergies have been created, data systems adopted, IROs identified and relevant management processes developed. This is an unnecessary delay sending the wrong message about companies’ ambitions and encouraging minimum-level compliance.
Reduced scope may weaken accountability and shrink value chain visibility
By proposing to limit the scope to only the largest companies, the European Commission is sending the wrong message to companies. Organisations falling out of scope of CSRD would start reporting, on voluntary bases with the Voluntary SME standard. While this may be a good starting point for the smallest enterprises, it is largely insufficient for medium and larger organisations. The VSME does not require a double materiality analysis, limits environmental information to climate change and has an incomplete approach to workers in the value chain or affected communities. Additionally, this would lead to a substantial reduction in non-financial data available for investors or other users of sustainability statements.
Keep momentum and prepare for what’s ahead
The draft revision of the ESRS still has the essence and building-stones of sustainability reporting. While the new ESRS are not final, it sends a clear signal of where final ESRS amendments are heading to. We encourage companies to use these changes as an indication of how their reporting will probably need to adjust, instead of pausing their efforts while the final revised ESRS are adopted.
For more information, visit our webinar on the Omnibus proposal here and a summary of ESRS amendments here.