Proposed revision of the ESRS and VSME: the European Commission favours adjustment over a complete overhaul

Public consultations are open for a short period:

• 3 weeks for the revised ESRS (known as Set 2);

• 4 weeks for the voluntary standard.

The final versions of the standards (via the publication of delegated acts) are expected by the end of June and mid-July respectively, with the revised ESRS due to apply to 2027 reporting (and voluntary application to 2026 data).

ESRS: no challenge to dual materiality

The main message conveyed by the Commission’s draft is likely that it will not introduce any major doctrinal changes.

Contrary to certain rumours, the Commission does not wish to align the ESRS with the primarily financial materiality approach advocated by the ISSB (International Sustainability Standards Board). Dual materiality, as a key component of the CSRD sustainability report, remains in the European Commission’s draft.

The draft reaffirms several important principles:

• companies must not disclose non-material information,

• a top-down approach is explicitly encouraged for conducting the analysis,

• and it is not necessary to assess each impact, risk or opportunity individually to carry out the analysis.

This last point is far from insignificant given the extremely detailed materiality matrices published since the submission of the first CSRD reports in 2025 based on the ESRS.

Another useful clarification: the level of focus used to carry out the materiality analysis is not automatically imposed when drafting the report.

Several significant technical adjustments

The draft also contains several operational changes or statements.

Anticipated financial effects

The Commission specifies that forward-looking information is necessarily based on estimates that are subject to change. Any future revision of such information should not automatically be regarded as a reporting error.

GHG reporting

The Commission wishes for companies to be able to choose between:

• the financial control approach,

• or the operational control approach,

• to define the appropriate scope for reporting greenhouse gas emissions.

The aim is to align more closely with certain international standards.

Climate transition plans

The text recommends greater transparency for companies publishing transition plans that are not aligned with the 1.5°C target (Paris Agreement).

Omissions of information

In accordance with the new provisions arising from the Omnibus I package, the Commission’s draft allows for the omission of information from its CSRD report where such information is likely to seriously harm the company’s commercial position.

Voluntary reporting: the proportionality principle drawn from the VSME is reinforced

As regards the standard on voluntary reporting, the Commission ultimately did not adopt the option of substantially strengthening the standard drafted by EFRAG for listed SMEs (the VSME standard). Some had made this request to the European Commission to ensure greater consistency in the reporting carried out by mid-cap companies when they respond to requests from very large companies, which are themselves subject to the ESRS.

On the contrary, the text further relaxes certain disclosure requirements:

• a reduction in the amount of data;

• clarification of the ‘value chain cap’;

• additional exemptions for companies with 10 or fewer employees regarding certain complex environmental data.

The VSME remains in place and the European Commission does not currently intend to take further action on this matter.

Key takeaways

These proposals reflect a desire to stabilise the European sustainability reporting framework.

For companies already engaged with the CSRD, the message is reassuring:

• the methodological fundamentals remain in place;

• the work carried out on double materiality remains broadly relevant;

• excessively burdensome compliance approaches are not encouraged.

The Commission is not inclined to change its stance: that of seeking an operational balance between regulatory compliance, feasibility and comparability of reporting.