ESRS Simplified: Where Things Stand in 2026

On 30 July 2025, the European Financial Reporting Advisory Group (EFRAG) published a significantly revised Exposure Draft of the European Sustainability Reporting Standards (ESRS). This marks the most substantial update since the ESRS were adopted in 2023. The revisions apply to all 12 sector-agnostic standards and are part of the European Union’s Omnibus Simplification Package, aimed at making sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD) more practical, streamlined, and aligned with global standards.

From exposure draft to final technical advice

Following the public consultation period, which ran from 31 July to 29 September 2025, EFRAG incorporated stakeholder feedback and submitted its final technical advice on the simplified ESRS to the European Commission on 3 December 2025. This marked the completion of EFRAG's workplan under the simplification mandate it received from the Commission earlier in the year.

The final draft goes slightly further than the exposure draft. Mandatory datapoints have been reduced by 61% compared to the 57% figure quoted in the July exposure draft, and all voluntary ("may disclose") datapoints have been removed entirely. The total length of the standards has been cut by more than 55%. EFRAG also published complementary materials in December 2025, including the Basis for Conclusions and a Cost-Benefit Analysis.

Why are the ESRS being amended?

EFRAG initiated the revisions in response to feedback from companies preparing to report under CSRD–particularly smaller firms and first-time reporters–who raised concerns about the cost and feasibility. The updates are also part of the European Commission’s broader effort to reduce administrative burden without compromising on relevance, comparability, or alignment with the European Green Deal.

To achieve this, six strategic simplification “levers” were applied across all 12 cross-cutting and topical standards:

1. Clarifying content and structure: Improved consistency in formatting, language, and layout to enhance usability.
2. Confirming materiality requirements: Reaffirmed that disclosures are only required when a topic is material, and simplified the materiality assessment process.
3. Recalibrating the content: Reduced the number of required datapoints and removed all voluntary disclosures.
4. Reducing granularity of requirements: Consolidated overlapping or excessively detailed requirements.
5. Introducing phase-ins and reliefs: Expanded transitional reliefs and cost/effort exemptions, with clearer guidance on how and when these may be applied.
6. Improving interoperability: Strengthened alignment with frameworks such as the ISSB IFRS S1 & S2.

Collectively, these levers aim to retain the ESRS’s core intent: ensuring comprehensive and comparable sustainability reporting while making the framework more practical and proportionate, especially for SMEs and new reporters.

Key updates across standards

The scale of simplification in the final draft is significant:

• Mandatory datapoints reduced by 57%
• Total datapoints reduced by 68% due to the removal of voluntary (“may”) disclosures
• Over 55% reduction in total length of the standards

Each of the ten topical standards (E1–E5, S1–S4, G1) has been updated. Notable changes include:

• E1 Climate Change: Clearer disclosures on transition plans, Scope 1–3 emissions, energy mix, and removals; greater alignment with 1.5°C pathways and SBTi methodology. E1 retains a disclosure requirement for anticipated financial effects, though the number of datapoints has been reduced.
• E2–E5 Environmental Standards: Objectives and disclosures have been streamlined and merged; EU policy references updated. Disclosure requirements for anticipated financial effects have been removed from E2–E5, with E1 being the only environmental standard to retain them.
• S1–S4 Social Standards: Harmonised structure across workforce, value chain workers, affected communities, and consumers; stronger human rights alignment.
• G1 Business Conduct: Streamlined focus on ethics, anti-corruption, lobbying, supplier conduct, and whistleblowing, with flexibility to report only on material topics.

In addition, the draft introduces structural simplifications designed to improve clarity:

• Merged disclosure objectives: Previously separate paragraphs on impacts, actions, risks, and financial effects have been consolidated.
• Harmonised layout: A consistent reporting logic now applies across all topical standards.
• Executive summary option: Companies may include a high-level overview at the start of their sustainability statement, with detailed data moved to appendices.‍
• Fair presentation over checklists: The expectation shifts from ticking boxes across a long list of datapoints to applying clearer judgement about what is material and why.

Materiality: Top-down approach confirmed

The revised ESRS 1 confirms that companies may take a top-down approach to the double materiality assessment. A conclusion on the non-materiality of a topic can now be derived without further granular scoring, based on an analysis of strategy and business model. Simpler aggregation choices and a clearer distinction between material and non-material topics are built into the revised framework.

The clarification on the "gross vs. net" impact materiality question also remains in the final draft. Companies are allowed to consider the outcomes of mitigation or prevention actions already implemented when determining the severity and likelihood of potential negative impacts, provided there is supportable evidence that those actions are effective.

Anticipated financial effects: the question is resolved

The exposure draft presented two options for how companies should disclose the financial implications of sustainability risks and opportunities. Following the public consultation, EFRAG adopted a modified version of one of those options: companies are required to provide both quantitative and qualitative information about anticipated financial effects, unless certain circumstances exist. This approach substantially aligns the disclosure requirements with IFRS S1, improving interoperability between the ESRS and the global baseline.

The Omnibus I directive: now law

The broader legislative context has also advanced significantly. The Omnibus I directive, which formally amends the CSRD and the CSDDD, was published in the EU Official Journal on 26 February 2026 and enters into force on 18 March 2026.

This is the outcome of the provisional agreement reached between the European Parliament and the Council in December 2025, following trilogue negotiations that opened in November 2025.

Key changes introduced by the Omnibus directive include:

Narrowed CSRD scope. The CSRD now applies to EU companies with more than 1,000 employees and net annual turnover exceeding €450 million. For non-EU companies, the threshold is €450 million net turnover generated within the EU, plus either an EU branch or subsidiary generating at least €200 million annually. This represents a significant reduction from the original scope.

Relief for companies no longer in scope. Member States have the option to exempt "Wave 1" companies from reporting obligations for financial years between 2025 and 2026, if those companies will no longer fall within scope under the new thresholds.

Value chain cap. Companies reporting under the CSRD cannot request information from suppliers or other entities in their value chain that have fewer than 1,000 employees beyond what is required under the voluntary reporting standard for non-listed micro, small, and medium-sized enterprises (VSME). This caps the trickle-down compliance burden on smaller players.

Financial holding companies excluded. The Omnibus directive introduces a new scope exclusion for parents of groups that are financial holding undertakings.

Sector-specific ESRS replaced with guidance. The requirement for the European Commission to adopt sector-specific ESRS has been replaced with an option for the Commission to provide sector-specific guidance that illustrates how the standards apply. Any such guidance would be developed in consultation with relevant stakeholders.

Limited assurance maintained. The requirement for reasonable assurance of sustainability reports has been removed. Limited assurance requirements are retained, with the Commission required to adopt harmonised limited assurance standards by 1 July 2027.

What remains unresolved

Several issues cannot be addressed through the current ESRS delegated act process and will continue to be handled at EU legislative level. These include the finalisation of the XBRL taxonomy (which EFRAG has confirmed will wait until the ESRS are closer to final adoption), and the development of updated implementation guidance, which was postponed to allow for further discussion and to reflect the revised standards.

Additionally, the formal application of the new ESRS delegated act is still contingent on transposition by Member States. EU Member States have until 19 March 2027 to transpose the CSRD-related provisions of the Omnibus directive into national legislation.

What should companies do now?

With the Omnibus directive now in force and the delegated act on simplified ESRS expected by mid-2026, companies should be making targeted preparations.

1. Reassess whether you are in scope. With the CSRD threshold moving to 1,000 employees and €450 million net turnover, some companies that were preparing to report may no longer be required to. Member States may also exercise the option to exempt certain Wave 1 companies from 2025 and 2026 reporting. Confirm your position under the new scope before making further investment in compliance infrastructure.

2. Begin mapping your disclosures against the simplified standards. Even though the delegated act is not yet final, the direction of travel is clear. Conduct a gap analysis against the draft simplified ESRS, noting eliminated datapoints, merged disclosure objectives, and structural changes. Identify which disclosures remain in scope for your material topics and where your current data infrastructure is sufficient.

3. Revisit your materiality assessment. The top-down approach is now confirmed. Reassess your double materiality process with the simplified guidance in mind, and document your reasoning clearly. The emphasis is on judgement and fair presentation rather than exhaustive scoring.

4. Review your value chain data approach. Under the value chain cap, requests to suppliers with fewer than 1,000 employees should not exceed the VSME scope. Segment your supply chain accordingly, and focus data collection efforts on high-impact geographies, products, and services rather than seeking comprehensive data from all upstream and downstream partners.

5. Prepare for the financial effects disclosure requirement. The final approach requires both quantitative and qualitative information on anticipated financial effects, with limited exemptions. Assess your current systems and data capabilities against this requirement ahead of first application.

6. Monitor the delegated act. A four-week call for feedback on the delegated act is expected in Q2 2026. The Commission is required to adopt it within six months of the Omnibus directive entering into force, which points to a deadline of around mid-September 2026. Companies should track this process closely and be ready to integrate any final changes into their reporting approach.

Timeline and next steps

• Public consultation open: 31 July – 29 September 2025
• EFRAG final recommendations to European Commission: End of November 2025
• Revised ESRS adopted via Delegated Act: Late 2025
• Effective date: Applies to financial years beginning on or after 1 January 2026 (first reports published in 2027)

Until the delegated act becomes effective, companies currently reporting under CSRD should continue to do so using the ESRS as adopted in 2023, taking into account the additional reliefs provided by the "stop-the-clock" directive and the "quick fix" amendments adopted in 2025.

These developments mark a decisive shift in how the EU expects companies to approach sustainability disclosure. The framework remains rigorous, and double materiality is not going away, but the emphasis has clearly moved from volume to judgement. Companies that build strong, well-documented materiality processes now will be better placed when the simplified standards come into force.

How can companies stay informed?

Zevero will continue to track developments and share further analysis as the delegated act advances through the Commission process. For more information, reach out to our experts.