Sustainability reporting requirements across Europe continue to evolve, with a growing emphasis on making disclosures more proportionate, decision‑useful, and practicable. On 6 May 2026, the European Commission published two closely linked developments that respond directly to these objectives, being a revised draft of the simplified European Sustainability Reporting Standards (‘ESRS’) and a finalised Voluntary Sustainability Reporting Standard (‘VSME’) for smaller undertakings.
Instead of reshaping sustainability reporting requirements, the Commission has prioritised clearer, more proportionate application of existing standards. The result is a clearer framework that reduces interpretative risk, limits unnecessary complexity, and provides greater certainty to both reporters and users of sustainability information. While the two standards serve different audiences, with the ESRS applying to large in-scope undertakings under the CSRD1 and the VSME providing a proportionate framework for smaller companies, they have been calibrated to function together, ensuring consistency across the reporting chain. The VSME also acts as a value chain cap, shaping the information CSRD reporters can request from suppliers and supporting financial institutions in their own regulatory reporting. Despite this shared direction, the changes introduced under each standard differ in focus, reflecting the distinct reporting challenges faced by large undertakings and smaller companies.
The following sections outline the main changes introduced under the revised simplified ESRS and the VSME.
[1] Following the Omnibus I Directive, the CSRD applies to large undertakings with more than 1,000 employees and a net turnover above EUR 450 million.
Revised simplified ESRS Targeted clarifications for practical application
The Commission's revisions to EFRAG's draft of the simplified ESRS focus on clarity, proportionality, and legal certainty, rather than altering the overall direction of the simplification exercise. The most notable adjustments include:
Taken together, these changes are designed to facilitate practical application, reduce interpretative risk and reinforce proportionality, while remaining fully aligned with the CSRD's underlying objectives. The result is a set of standards that is more workable for reporters, without compromising on the integrity of the information ultimately disclosed.
VSME A clearer, more proportionate framework for smaller undertakings
Overall, the Commission's changes preserve continuity with the original VSME, reinforce proportionality for the smallest undertakings, and ensure the standard functions effectively as the statutory value chain cap. The draft strikes a careful balance between providing smaller companies with a credible, structured reporting framework and protecting them from disproportionate information requests further up the value chain.
A step toward streamlined EU sustainability reporting
Looking ahead, both Delegated Regulations are expected to apply for financial years beginning on or after 1 January 2027, with earlier voluntary application possible under each. CSRD reporters may choose to apply the revised ESRS for financial year 2026 instead of the current standards, while the VSME will be available for voluntary use by smaller undertakings immediately upon entry into force.
As Delegated Regulations, both will be directly applicable in all Member States, without the need for national transposition. Together, they signal a clear commitment from the Commission to a more practical, proportionate and consistent sustainability reporting framework across the EU, one that works for reporters and users of sustainability information alike.
Contact us
