Navigating the Revised ESRS & Voluntary Standards: Timelines, Flexibility, and What It Means for Your Business
TRANSFORMATIONESGSUSTAINABILITYREPORTINGESRSVOLUNTARY REPORTING
On 3 July 2026, the European Commission has officially adopted the revised European Sustainability Reporting Standards (ESRS) and a new voluntary reporting standard for smaller companies. Designed to reduce administrative burdens while maintaining high-quality ESG disclosures, these updates bring significant changes to the regulatory landscape.
Flexibility for FY 2026
For financial years starting between 1 January 2026 and 31 December 2026, the European Commission is offering a transitional period with multiple reporting options. This is a critical strategic decision for your compliance team.
Companies falling within the scope of the Corporate Sustainability Reporting Directive (CSRD) can choose to apply:
The newly revised ESRS: Taking full advantage of the streamlined requirements and reduced mandatory datapoints.
The previous ESRS: Continuing with the original framework (as amended by Delegated Regulation EU 2025/1416).
A hybrid approach: Applying the previous ESRS but incorporating specific new transitional reliefs.
If you opt for the hybrid approach, you can take advantage of several crucial reliefs, including:
A top-down approach for the double materiality assessment.
Allowances for undue cost and effort, and value chain limitations in double materiality.
Simplified reporting for new acquisitions, disposals, and joint operations.
The presentation of EU Taxonomy disclosures in a separate appendix.
Important Note: Whichever path you choose, you must clearly state in your sustainability statement which version of the standards you are applying for the 2026 financial year.
The New Voluntary Standards & Value Chain Rules
The European Commission also adopted a voluntary reporting standard aimed at providing a single, proportionate reference framework for smaller companies outside the mandatory scope of the CSRD.
One of the most significant protections introduced is the "value chain cap." Large companies subject to the CSRD cannot require the smaller companies in their value chains to provide more sustainability information than what is covered by this new voluntary standard. This effectively shields SMEs from overwhelming data requests.
Key Timelines for the Value Chain and Voluntary Reporting:
Mandatory Value Chain Reporting: The delegated act applies from FY 2027 for the value chain reporting of companies that are subject to mandatory sustainability reporting.
Early Adopters: The voluntary standard applies immediately upon its entry into force for companies that, on their balance sheet dates, do not exceed an average of 1,000 employees during the preceding financial year and wish to report on sustainability voluntarily.
What are the next steps?
While the European Commission has adopted these measures, they are not yet law. Both the delegated act revising the ESRS and the act establishing the voluntary reporting standard are currently being transmitted to the European Parliament and the Council of the EU.
They will undergo a strict scrutiny period of 2 months, which can be prolonged by a further 2 months. The measures will officially apply once this scrutiny period concludes successfully.
👉 [LINK] Click here to access the Delegated Acts.
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