European Commission publishes draft simplified ESRS for public feedback

On 6 May 2026, the European Commission launched a one-month public consultation on the draft delegated act that will replace the current European Sustainability Reporting Standards (ESRS). The initiative — formally titled Revised European sustainability reporting standards — delivers on the simplification mandate set by the Omnibus I Directive (EU) 2026/470, which entered into force on 18 March 2026 and required the Commission to adopt amended standards within six months.

The revised standards will apply from financial year 2027. Undertakings that are already reporting under the current ESRS may choose to apply the simplified framework voluntarily for financial year 2026.

Key figures at a glance

According to EFRAG’s cost-benefit analysis, the cumulative savings across all in-scope undertakings are projected at approximately EUR 4.7 billion over the period 2027–2031, including value chain effects. The savings rate begins at 28% in 2027, rises to 38% in 2028, and stabilises at 33–36% from 2029 onwards.

Regulatory timeline

The path from Omnibus I political agreement to enforceable standards spans roughly 18 months. Here is how the process has unfolded and what remains ahead.

Member States must transpose the Omnibus I provisions amending the CSRD into national law by 19 March 2027. This means companies should expect the revised ESRS and the transposed directive to take effect in close succession.

What the delegated act changes

The draft replaces Annex I (the standards themselves) and Annex II (the glossary) of Delegated Regulation (EU) 2023/2772. The Commission built on EFRAG’s technical advice but introduced targeted modifications in 13 areas to further ease implementation without undermining the CSRD’s policy objectives. The following cards summarise the most consequential changes.

Projected cost savings over 2027–2031

EFRAG’s cost-benefit analysis projects significant cost reductions for in-scope undertakings once the revised framework is fully operational. The chart below illustrates the annual savings rate relative to baseline reporting costs.

These estimated savings are based on EFRAG’s proposed standards and may differ under the Commission’s final delegated act. Including value chain effects, cumulative savings rise from EUR 3.7 billion to approximately EUR 4.7 billion over the five-year period, corresponding to roughly 44% of baseline costs.

Voluntary standard for smaller companies

Alongside the revised ESRS, the Commission has published a separate draft delegated act establishing a voluntary reporting standard for companies not subject to mandatory CSRD requirements. This standard introduces a “value chain cap”: undertakings reporting under CSRD cannot require value chain partners with 1,000 employees or fewer to provide information beyond the scope of the voluntary standard.

The draft is based on EFRAG’s 2024 Voluntary SME Standard (VSME), which the Commission endorsed through a recommendation in 2025. This mechanism is designed to shield smaller suppliers — particularly those in emerging markets — from disproportionate data requests while maintaining the information flow that CSRD reporters need for their value chain disclosures.

How the Commission adjusted EFRAG’s technical advice

While the revised ESRS largely follow EFRAG’s technical advice submitted on 2 December 2025, the Commission introduced modifications in response to consultations with the Member State Expert Group on Sustainable Finance, the Accounting Regulatory Committee, and eight EU bodies including ESMA, EBA, EIOPA, the ECB, and the European Environment Agency.

The most significant departures from EFRAG’s draft concern the wording of materiality provisions. Where EFRAG used permissive language (“is not required to report”), the Commission has adopted prescriptive wording (“shall not report”) for non-material information. This shift is intended to reduce over-reporting and prevent assurance providers from inadvertently encouraging undertakings to disclose information that is not decision-useful.

What this means for reporting companies

Companies currently preparing their first sustainability statements under the original ESRS face a strategic decision. Wave 1 reporters — public interest entities with more than 500 employees — have been operating under the “quick fix” transitional regime (Delegated Regulation (EU) 2025/1416) for FY 2025 and FY 2026, which permitted them to omit certain datapoints in ESRS E4, S2, S3, and S4.

Once the revised delegated act is published in the Official Journal, these companies may choose to apply the simplified standards for FY 2026 instead of the original ESRS. For Wave 2 companies entering scope under the revised CSRD from FY 2027, the simplified ESRS will be the only applicable framework.

Regardless of the timeline, the underlying data requirements remain. Companies that have built robust double materiality assessment processes and structured their data collection against the original ESRS will find the transition manageable. Those that delayed implementation while waiting for regulatory clarity will now need to accelerate.

Implications for financial institutions

The revised ESRS address several concerns specific to the financial sector. The new provisions on asset management activities remove the risk that firms managing third-party investments must report irrelevant information about those holdings. The alignment with ISSB on GHG reporting boundaries provides consistency for companies reporting under both EU and international frameworks — a material consideration for institutions with global operations.

For banks and asset managers subject to the Sustainable Finance Disclosure Regulation, the simplified ESRS may also affect the data available from portfolio companies. Reduced mandatory datapoints could limit entity-level disclosures that feed into product-level SFDR indicators, requiring financial institutions to rely more heavily on estimates and proxies until the revised framework matures.

At Generation Impact Global, we track every ESRS revision at datapoint level and map changes across dependent regulations — SFDR, EU Taxonomy, and the CSDDD — so that reporting systems reflect current requirements without manual reconciliation.

The simplified ESRS represent the most substantial change to EU sustainability reporting since the CSRD was adopted in December 2022. For a comprehensive overview of the standards, see our ESG reporting guide.