EUROPEAN SUSTAINABILITY
REPORTING STANDARDS (ESRS)

ESRS (European Sustainability Reporting Standards) are the uniform European principles for sustainability reporting, technically developed by EFRAG (European Financial Reporting Advisory Group) and first adopted by the European Commission in July 2023. These standards establish which environmental, social and governance (ESG) information and metrics companies must disclose to comply with the CSRD (Corporate Sustainability Reporting Directive).

THE STRUCTURE OF THE STANDARDS

The framework consists of 12 universal (sector-agnostic) standards:

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2 cross-cutting standards:

• ESRS 1 – General requirements

• ESRS 2 – General disclosures

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10 topical standards:

• E (Environmental): E1 – Climate change, E2 – Pollution, E3 – Water and marine resources, E4 – Biodiversity and ecosystems, E5 – Resource use and circular economy.  

• S (Social): S1 – Own workforce, S2 – Workers in the value chain, S3 – Affected communities, S4 – Consumers and end-users.  

• G (Governance): G1 – Business conduct.

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THE PRINCIPLE OF DOUBLE MATERIALITY

The cornerstone for companies falling within the new CSRD scope of application is the principle of double materiality. On one hand, all companies are required to disclose the cross-cutting mandatory information (ESRS 2) and, on the other hand, they must publish information deemed material from both a financial and an impact perspective (double relevance):

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1. Impact Materiality (Inside-out): The positive or negative impacts that the company generates on the environment, people and society.

2. Financial Materiality (Outside-in): The risks and opportunities related to ESG factors that can influence the company's financial performance and value.​

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EVOLUTIONS: Omnibus I package and "Simplified" ESRS ​

Since 2023, the ESRS framework has undergone significant recalibrations. This process is driven by Omnibus I, a European Commission legislative simplification package designed to eliminate disproportionate requirements, reduce administrative burden and streamline reporting for companies.

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• The new "Revised ESRS": The 12 sector-agnostic standards from the first 2023 set proved to be excessively complex. Under mandate from the Commission, EFRAG developed a significant simplification. The resulting text, officially called Revised ESRS (or Simplified ESRS), reduces the number of required data points and metrics for large companies;

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• Postponement of sector-specific standards: To prioritize the implementation process of the Simplified ESRS, the development of sector-specific standards tailored to individual industries has been suspended/postponed as part of the simplification initiatives.

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WHICH STANDARDS APPLY TO WHOM?​

Following the amendments introduced by the "Omnibus I" Directive, the regulatory framework changes and distinguishes companies into two categories:

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➡️ Companies subject to mandatory reporting (CSRD) = "Revised" ESRS

• Who they are: New thresholds have downsized the scope of application of the CSRD.

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• Deadlines and application of "Simplified ESRS": For companies subject to the obligation, the application of the regulation is already active according to the progressive phases of the CSRD. The new Simplified ESRS, once the institutional process is complete and they officially enter into force, will replace the first set of standards, allowing all obligated companies to benefit from the simplifications and reductions in required data.

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➡️ Companies not subject to mandatory reporting = Voluntary Standards (formerly VSME)
For companies falling outside the CSRD scope of application, the European Commission has defined an ad hoc standard:

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• The link to the VSME: The Commission's Delegated Regulation absorbs the previous voluntary standard VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs). The VSME therefore forms the technical basis for the official European Voluntary Standard, developed to enable proportionate reporting of sustainability information.

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• The structure: The standard adopts a modular approach to adapt to different needs and does not require third-party assurance:

  • Basic Module: Represents the mandatory minimum requirement to apply the standard. It contains only essential and simplified metrics; more complex environmental calculations and strategic analyses are excluded from this module;

  • Comprehensive Module: Includes supplementary information (including more complex environmental metrics) necessary to respond in a standardized manner to data requests from banks, investors or large corporate clients.

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• The topic of Materiality: Unlike the mandatory standards, a double materiality analysis is not required here; instead, companies complete the standard based on what is applicable to them.

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• The Value Chain Cap ("Shield"): This is the major legal protection for smaller enterprises. Large companies bound by the CSRD cannot ask suppliers in their value chain (up to 1,000 employees) for ESG information that goes beyond the boundaries set by this voluntary standard. Suppliers have the legal right to refuse to provide extra data.

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STATE OF THE ART OF THE LEGISLATIVE PROCESS​

Update: July 2026

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⚠️ On July 3, 2026, the European Commission officially adopted the two parallel Delegated Regulations: one containing the Revised/Simplified ESRS (for mandatory companies) and one containing the Standard for voluntary use (the former VSME).

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The texts have now entered the institutional scrutiny phase: the European Parliament and the Council of the EU have 2 months to raise any objections. In the absence of vetoes, the regulations will be published in the Official Journal of the European Union, becoming fully effective law.

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