- with Senior Company Executives, HR and Finance and Tax Executives
The European Commission has published its near-final draft Delegated Regulation amending the European Sustainability Reporting Standards (ESRS). In light of EU technical consultations conducted following EFRAG's submission in December 2025 containing the draft simplified ESRS, the Commission has made a number of targeted modifications with the primary aim of facilitating the application of the standards by clarifying certain provisions and granting certain additional flexibilities to undertakings.
The Commission has now launched a four-week public consultation on the draft Delegated Regulation, which will close on 3 June 2026. Following this, the Commission has noted it intends to adopt the Delegated Regulation by Q2 2026.
In addition, the Commission has also launched a consultation in relation to the Voluntary European Sustainability Reporting Standards (VESRS), which will run to the same timeline as the ESRS consultation. The draft Delegated Regulation containing the VESRS is also due to be adopted by Q2 2026.
Once adopted, both Delegated Regulations will be subject to a two-month scrutiny period (extendable by a further two months) during which either the European Parliament or the Council may raise objections. The Delegated Regulations are therefore unlikely to enter into force before Q3 or Q4 2026 at the earliest. Undertakings must use the revised ESRS from financial year 2027, with an option to apply them early for financial year 2026.
A Q&A document on the value chain cap has also been published by the Commission, setting out how the voluntary reporting standard would operate within the value chain cap framework and providing guidance on specific issues to assist stakeholders in understanding its application.
Key amendments in the Commission's draft ESRS
The following list summarises some of the key thematic amendments in the Commission's draft ESRS as against the technical advice received from EFRAG:
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Materiality
It has been clarified that undertakings "shall not" report information that is not material, except in certain clearly defined circumstances - a deliberate tightening of the language to prevent assurance providers from encouraging unnecessary disclosures. A clear definition of the concept of "informed assessment" has been introduced. The new provisions emphasise that a "top-down" approach to materiality allows undertakings to avoid unnecessary work and generally avoid assessing the materiality of each individual impact, risk, or opportunity.
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Fair presentation
Fair presentation is proposed to apply to the sustainability statement as a whole, rather than to individual datapoints, and makes clearer that applying the ESRS results in fair presentation.
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Level of aggregation and disaggregation
The proposed text introduces greater discretion to the undertaking regarding the need to consider specific geographical contexts when carrying out the materiality assessment and clarifies that the level of disaggregation used for assessment purposes does not automatically determine the level at which information must be reported.
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Omission of Information
Drawing on provisions derived from the Omnibus I Directive, the proposed text allows undertakings, in certain circumstances, to omit information, including information that could be seriously prejudicial to their commercial position.
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Anticipated Financial Effects
The proposal recognises that reporting anticipated financial effects will often rely on estimates, and that later updates based on new information should not be treated as reporting errors. Omission provisions can also apply to this type of disclosure, including where reporting could seriously harm the company's commercial position.
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Greenhouse gas emissions
The proposed text gives undertakings the flexibility to use either the financial control approach or the operational control approach when defining the reporting boundary for greenhouse gas emissions, bringing the ESRS closer to global sustainability reporting practice.
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Climate transition plans
Undertakings with transition plans misaligned with 1.5°C must disclose this fact.
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Microplastics, pollutant emissions and substances of very high concern
The proposed text limits the disclosure requirement related to microplastics to primary microplastics; reporting metrics on secondary microplastics would not be required. It further specifies that the decision as to which pollutants are material for reporting purposes should be taken following a managerial assessment that considers the undertaking's activities and sector of operation. A new one-year phase-in is introduced for reporting on substances of very high concern for undertakings that are users of articles containing such substances.
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Asset management activities
New provisions aim to avoid the risk that undertakings carrying out asset management activities are required to report irrelevant information about the investments they manage.
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Due diligence and human rights
Technical modifications have been included to enhance alignment with the due diligence provisions of CSDDD and additional clarifications to state that only 'substantiated' human rights incidents and incidents of discrimination are required to be reported. The draft also changes the reference from judicial and non-judicial proceedings that have been "initiated" to those that are "ongoing."
ESRS and ISSB: no dual compliance route
One notable aspect of the draft amended ESRS is that, despite mounting pressure from groups including German corporates and the ISSB itself, the Commission has not endorsed new measures for simultaneous compliance with the ISSB framework.
The previously proposed route would have allowed CSRD reporters to achieve ISSB compliance by including their impact disclosures (only required under ESRS), but presenting them in a way that keeps the financially material disclosures clearly visible and distinct - essentially ring-fencing the "ISSB-relevant" content so it is not buried within wider impact reporting.
Whilst there was some support for this approach on the basis that it would reduce costs and complexity for companies required to comply with both EU and ISSB rules, there were concerns that it risked subtly privileging financial materiality over impact materiality, thereby undermining the EU's double materiality framework.
For companies seeking dual compliance, the practical consequence is that they will need to apply the official EFRAG-ISSB interoperability guidance - once updated to reflect the simplified ESRS - which identifies the additional disclosures required to satisfy ISSB standards. Notably, certain ESRS-specific reliefs are more permissive than those available under the ISSB framework; companies seeking dual compliance should therefore exercise caution when electing to rely on such reliefs, as doing so risks falling short of full ISSB compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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