Over the past few years, the EU sustainability framework has expanded significantly, bringing increasing attention to the complexity of the requirements, the administrative burden on businesses and their impact on the competitiveness of European companies. The practical implementation of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) highlighted the need to simplify reporting requirements and limit the burden indirectly placed on smaller undertakings in the value chain.
Against this background, in February 2025 the European Commission presented the Omnibus I package, aimed at simplifying EU sustainability rules and reducing administrative burden while preserving the key objectives of the framework. As regards the CSRD, the subsequent changes significantly narrowed the scope of mandatory sustainability reporting and led to a revision of the ESRS themselves.
As part of this process, two important changes were finalised in 2026 – revised ESRS for undertakings that remain within the mandatory scope of the CSRD, and a new voluntary sustainability reporting standard for undertakings outside that scope. On 21 September 2026, the corresponding two Delegated Regulations were published in the Official Journal of the European Union:
Commission Delegated Regulation (EU) 2026/1563 of 3 July 2026 amending Delegated Regulation (EU) 2023/2772 as regards the simplification of certain sustainability reporting standards;
Commission Delegated Regulation (EU) 2026/1560 of 3 July 2026 supplementing Directive 2013/34/EU of the European Parliament and of the Council by establishing voluntary sustainability reporting standards for undertakings protected by the value chain cap.
Following the Omnibus I changes, mandatory sustainability reporting at individual level applies to undertakings that exceed both EUR 450 million in net turnover and an average of 1,000 employees during the financial year. For parent undertakings of groups, these thresholds apply on a consolidated basis.
The revised standards aim to reduce the complexity and administrative burden of reporting while preserving the key principles of the CSRD, including double materiality.
The volume of information to be reported is reduced. The number of datapoints has been reduced, quantitative datapoints are prioritised over narrative disclosures, and mandatory and voluntary datapoints are more clearly distinguished.
The double materiality assessment is simplified. The assessment continues to cover both impact materiality and financial materiality. A top-down approach allows the analysis to focus on areas where material impacts, risks and opportunities are likely to arise, rather than requiring a detailed assessment of every potential case.
Proportionality and reliefs are expanded. Undertakings can make broader use of reasonable and supportable information available without undue cost or effort, including when assessing materiality, determining the value chain and preparing certain metrics and estimates. The use of reliefs provided for in the ESRS does not in itself conflict with the principle of fair presentation.
Some requirements relating to anticipated financial effects (AFE) are eased. Quantitative information may be omitted under certain conditions, for example where the level of measurement uncertainty is so high that the resulting information would not be useful, or where the undertaking does not have the necessary skills, capabilities or resources.
The rules for certain investment activities are clarified. Of particular relevance to the financial sector is the clarification concerning investments managed on behalf of clients under a mandate agreed with them. Where an undertaking manages such investments under a fiduciary duty and does not bear the risks and rewards of ownership, it is not expected to assess the impacts, risks and opportunities associated with those investments.
Interoperability with global sustainability reporting standards is strengthened, including with the ISSB standards, with the aim of reducing inconsistencies and duplicative reporting.
The revised ESRS will apply to financial years beginning on or after 1 January 2027. For financial years beginning in 2026, undertakings may choose to apply either the revised standards or the existing standards. Where they continue to apply the existing standards, they may also make use of certain reliefs introduced by the revised ESRS.
The second Regulation introduces a simplified and proportionate framework for the voluntary provision of sustainability information by undertakings that are not subject to mandatory sustainability reporting under the CSRD. The standard is intended for undertakings with an average of up to 1,000 employees during the preceding financial year and builds on the VSME developed by EFRAG. Its purpose is to facilitate the provision of standardised sustainability information to business partners, financial institutions and other users.
The standard consists of two modules. The Basic Module contains the core set of information and metrics and represents the minimum requirement when applying the standard. The Comprehensive Module supplements it with additional information likely to be requested by banks, investors and corporate clients. For undertakings with up to 10 employees, certain datapoints are voluntary. Application of the standard does not require independent assurance of the information provided.
A value chain cap is introduced. It sets the maximum amount of sustainability information that undertakings subject to mandatory CSRD reporting may request, for the purposes of their own sustainability reporting, from undertakings in their value chain with an average of up to 1,000 employees during the preceding financial year. The specific datapoints covered by the cap are set out in Annex II to the Regulation. The aim is to limit the trickle-down effect, whereby the burden of mandatory reporting requirements is passed on to smaller undertakings outside the scope of the CSRD.
The value chain cap has a specific scope. It applies to information requested for the purposes of sustainability reporting under Directive 2013/34/EU. This distinction is particularly important for the financial sector, as banks, insurers and other financial institutions may also need sustainability information for other regulatory purposes. At the same time, the voluntary standard provides a common and comparable information basis that can also be used by financial institutions.
The voluntary standard may be used following the entry into force of the Regulation, while the value chain cap applies to financial years beginning on or after 1 January 2027.
Insurance Europe broadly supports the direction of the changes towards simplification and greater proportionality of reporting requirements, while identifying scope for further improvements in certain areas, including anticipated financial effects (AFE), access to sufficient sustainability data and the practical application of the value chain cap.
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