The Council of the European Union has published a cover note dated 9 July 2026 transmitting a Commission Delegated Regulation that simplifies the European Sustainability Reporting Standards (ESRS) for companies subject to the Corporate Sustainability Reporting Directive (CSRD). The regulation, adopted by the Commission on 3 July 2026, replaces Annex I (ESRS 1 – General Requirements) and Annex II of Delegated Regulation (EU) 2023/2772, reinforcing the principle of materiality to reduce unnecessary disclosure burdens.
Under the amended standards, undertakings must apply the double materiality principle: they must disclose information about material impacts on people and the environment (impact materiality) and material sustainability-related risks and opportunities affecting financial performance (financial materiality). Companies determine what to report in two steps: first, identify topics related to material impacts, risks, or opportunities; second, determine the specific information to report on each topic. Information is considered material if omitting, misstating, or obscuring it could reasonably influence the decisions of primary users such as investors and lenders, or other users including business partners, social partners, and civil society.
The regulation explicitly states that undertakings shall not disclose non-material information prescribed by a Disclosure Requirement or datapoint, except for supplementary information voluntarily included. Where a material topic is not covered or not covered with sufficient granularity by an ESRS, entity-specific disclosures are required. The sustainability statement must cover governance, strategy (including financial effects), management of impacts, risks, and opportunities (including policies and actions), and metrics and targets. Fair presentation requires complete, neutral, accurate, comparable, verifiable, and understandable information.
This simplification directly addresses stakeholder concerns about the complexity and cost of CSRD compliance, particularly for smaller companies and those with less mature sustainability reporting processes. By reinforcing the materiality principle, the regulation aims to reduce the volume of disclosures required, potentially lowering compliance costs for EU businesses. However, the increased reliance on materiality assessments may shift the burden onto companies to justify their reporting scope, potentially creating legal uncertainty if assessments are challenged by investors or regulators. The regulation also maintains the requirement for entity-specific disclosures, which could still impose significant costs for companies operating in sectors with unique sustainability impacts.
The delegated regulation will enter into force following the expiry of the scrutiny period by the European Parliament and the Council. Companies subject to the CSRD will need to apply the simplified standards for financial years starting on or after 1 January 2027, with earlier application permitted. The Commission is expected to monitor the implementation and may propose further adjustments based on feedback from stakeholders and national competent authorities.