EU Commission Adopts Revised ESRS: Less Reporting, But Not Less Preparation

Companies covered by the EU's Corporate Sustainability Reporting Directive ("CSRD") will soon be required to report under revised reporting standards. On July 3, 2026, the European Commission adopted the revised European Sustainability Reporting Standards (the “ESRS”). According to the Commission, the revised ESRS are shorter and clearer and reduce mandatory data points by more than 60%. The Commission expects these changes to reduce reporting costs by more than 30% per reporting company.

Materiality and Materiality Assessment

The revised ESRS sharpen the approach to materiality. The standard now specifies that covered companies "shall not" report information that is not material, except in clearly defined circumstances. This is a notable change from the prior formulation that a company was "not required to" report immaterial information. 

The revised standards also emphasize that a "top-down" approach to materiality assessment may allow covered companies to avoid unnecessary work and, in general, avoid assessing the materiality of each individual impact, risk, or opportunity. In addition, the standards clarify that the objective is to provide decision-useful information, not to satisfy the specific information needs of every individual user. 

For corporate and ESG counsel, this recalibration warrants prompt review and revision of existing materiality assessment methodologies to align with the narrower and more purposive orientation of the revised framework.

Anticipated Financial Effects

The Commission has acknowledged that reporting anticipated financial effects necessarily involves estimations and that subsequent revisions to those estimates do not constitute reporting “errors.” The revised standards also provide additional phase-in relief for both qualitative and quantitative anticipated financial effects disclosures, giving companies more time to develop internal estimation processes and controls.

Human Rights Incidents and Incidents of Discrimination

Previously, the ESRS required companies to report, when considered “material” (from a double materiality perspective), all “identified” human rights incidents and all “complaints” and “incidents” relating to the company's own workforce. This in some cases led to significant confusion in what must be reported.

The revised ESRS narrow the relevant reporting obligation to “substantiated and verified” instances and narrow the definition of “complaints” to remove the prior reference to judicial and non-judicial proceedings that have merely been “initiated.” The standards also now clarify that not all reported instances are necessarily meet this thresholdsubstantiated incidents. 

This change reduces the risk that companies will be required to disclose preliminary allegations, unresolved claims, or proceedings that have not yet resulted in substantiated findings. 

Climate Transition Plans — 1.5°C Compatibility 

The revised standard introduce a new transparency requirement for companies that report transition plans with targets that are not compatible with the 1.5°C target: such companies must be transparent about that incompatibility. Previously, the 1.5°C target was seen as a minimum baseline for all climate scenario analyzes being disclosed under the CSRD.

Consistency with the European Climate Law

The climate standard continues to require disclosure of transition plans, targets, and actions aligned with the EU's broader objective of achieving climate neutrality by 2050, as well as climate-adaptation goals under the European Climate Law.

Voluntary Reporting

Adopted alongside the revised ESRS, the voluntary reporting standard creates a framework for sustainability reporting by smaller companies outside the CSRD’s mandatory scope. In practice, it also serves an important burden-reduction function by establishing a value chain cap: companies subject to the CSRD may not require smaller value-chain participants partners to provide more sustainability information than is contained incovered by the voluntary standard.

Practical Implications

TFor corporate and ESG counsel advising companies subject to the CSRD, the revised ESRS present several immediate action items. Companies should consider reviewing and updatinge their materiality assessment to reflect the mandatory “shall not report” framing, whether they already do or wish to apply the clarified top-down approach and the renewed focus on decision-useful information including some delays in and reliefs from reporting information that was previously reported or would have been required under the prior ESRS. 

The revised ESRSdelegated acts will now be senttransmitted to the European Parliament and the Council of the EU for scrutiny. The measures will apply once the two-month scrutiny period, which may be extended by a further two months, has ended. The revised ESRS are expected to apply for financial years beginning on or after January 1, 2027, with early adoption for financial year 2026 permitted for “wave one” reporting companiesonce the delegated act enters into force.

Commission adopts revised sustainability reporting standards to reduce administrative burdens for EU businesses while maintaining high-quality disclosures

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