A Commission delegated regulation amending the European Sustainability Reporting Standards (ESRS), published by the Council on 9 July 2026, cuts mandatory datapoints by 61% while retaining core European Green Deal objectives. The regulation, effective for financial years beginning on or after 1 January 2027 with voluntary early application for 2026, aims to reduce reporting costs by an average of 34% over five years, generating cumulative savings of EUR 4.7 billion from 2027 to 2031 including value chain effects.
The regulation introduces several simplifications. Undertakings "shall not" report non-material information except in clearly defined circumstances, clarifying the materiality principle. New flexibility allows undertakings to use either a financial control or operational control approach for the GHG emissions reporting boundary. Additional phase-ins provide one extra year for reporting anticipated financial effects (qualitative and quantitative) and for substances of very high concern. Financial institutions managing investments under fiduciary duty may exclude client investment information from sustainability statements. Only "substantiated verified" human rights incidents and discrimination incidents must be reported, and disclosure of microplastics is limited to primary microplastics. Climate transition plans with targets incompatible with the 1.5°C target must state this explicitly.
The Commission consulted EFRAG, ESMA, EBA, EIOPA, EEA, FRA, ECB, CEAOB, and the Platform on Sustainable Finance. The regulation builds on the Omnibus I Directive (EU) 2026/470, which entered into force on 18 March 2026 and must be transposed by Member States by 19 March 2027.
For businesses subject to the Accounting Directive's Articles 19a and 29a, the regulation reduces compliance burden significantly, particularly for SMEs and smaller listed companies that previously faced extensive datapoint requirements. Investors and financial institutions benefit from clearer, more material information, though some may face reduced granularity on certain environmental and social metrics. EU regulatory bodies such as ESMA and EFRAG will need to update guidance and enforcement frameworks to align with the simplified standards. Civil society and NGOs focused on sustainability transparency may see a trade-off between cost savings and the loss of detailed data on issues like microplastics and human rights incidents.