On July 3, 2026, the European Commission adopted a substantially revised set of European Sustainability Reporting Standards (ESRS). The revisions cut reporting requirements sharply. They also reinforce something harder to fake: sound judgment about what is material.
Companies will report fewer mandatory datapoints. They will need to exercise more judgment about what to disclose. For sustainability and reporting teams, this is a shift from compliance checklist to strategic reporting process.
Key Changes at a Glance
- Mandatory datapoints are down by about 61%.
- Total datapoints are down by more than 70%.
- The European Commission expects implementation costs to fall more than 30% per company.
- Companies get new flexibility on GHG boundaries, commercially sensitive information, and disclosures that would take undue cost or effort.
Fewer datapoints do not mean less scrutiny. Companies still have to show their sustainability statements are fair, balanced, and useful.
Where Things Stand Today
The revised ESRS now go to the European Parliament and the Council of the European Union for review. That process runs two months, with a possible two-month extension. If neither body objects, the standards take effect for financial years starting January 1, 2027.
For financial year 2026, companies currently in scope have three options:
- Continue under the existing ESRS with Quick Fix relief measures.
- Adopt the revised ESRS early.
- Continue under the existing ESRS while applying select transition reliefs.
CSRD Scope Narrows
The Omnibus I Directive also narrows mandatory CSRD reporting. Starting with financial years beginning on or after January 1, 2027, mandatory reporting generally applies only to EU companies that exceed:
- 1,000 employees, and
- 450 million euros in annual net turnover.
Many companies expected to report under earlier CSRD waves may fall outside mandatory scope. Some may still need to produce a 2026 report, depending on how their Member State implements the rules.
Materiality Becomes the Foundation
The biggest change: a top-down double materiality assessment (DMA) now anchors every disclosure decision. Companies start with their business model, strategy, operating context, and sector-specific impacts, then work backward to what needs disclosing, rather than starting from a checklist.
The revised ESRS also make clear:
- Companies don’t need to satisfy every stakeholder’s information request.
- Immaterial information generally should not be reported.
- Fair presentation gets judged across the whole statement, not datapoint by datapoint.
Your DMA becomes the document that supports every disclosure choice. Document your methodology, assumptions, and conclusions well enough to withstand regulatory or assurance review.
Smaller Suppliers Get New Protection
The Commission also adopted a voluntary SME reporting standard based on EFRAG’s VSME framework, along with a “value chain cap.” Companies subject to CSRD generally can’t ask smaller “protected undertakings” for information beyond what the cap specifies. Procurement and supply chain teams should review supplier questionnaires now, well ahead of 2027.
What to Do Now
- Review your double materiality assessment. Make sure it reflects a top-down strategic view with clear documentation.
- Determine your 2026 reporting approach. Align early with auditors, legal counsel, and governance teams.
- Evaluate your disclosures. Sort out what stays mandatory, what becomes optional, and what still matters to investors, lenders, or ratings agencies.
- Review supplier engagement. Update questionnaires to match the new value chain cap.
The revised ESRS reward relevance and sound judgment over checklist completion. Companies that sharpen their materiality work now, focusing on what genuinely matters to their business and stakeholders, will be ready for the next phase of sustainability reporting.
