Revised European Sustainability Reporting Standards: EU Commission adopts Delegated Act

3 July 2026

On 3 July 2026, the EU Commission formally adopted the Delegated Act revising the European Sustainability Reporting Standards (ESRS) as part of the Omnibus I simplification package (Act).[1] A separate Delegated Act[2] establishing a voluntary sustainability reporting standard for undertakings outside the CSRD scope was adopted simultaneously. Both acts will now be transmitted to the EU Parliament and the Council of the EU for a two-month scrutiny period, which can be extended by a further two months, before entering into force.

Overview

The revised ESRS replace Annexes I and II to Delegated Regulation (EU) 2023/2772 in full. According to the EU Commission, the new standards cut mandatory datapoints by more than 60% and total datapoints by more than 70% relative to the first-generation standards; per-company reporting costs are expected to fall by over 30%. Those numbers warrant a cautious approach: a lower datapoint count does not reflect the process demands of the double materiality assessment (DMA), which remains the principal determinant of what an undertaking must report and, further, has been strengthened in several respects.

The revised standards follow EFRAG’s technical advice, informed by stakeholder input from spring 2025 and a public consultation in summer 2025, with targeted EU Commission adjustments following a Have Your Say call for feedback in spring 2026. The acts are expected to apply from financial year 2027, with earlier application from financial year 2026 possible where adoption and national implementation timelines permit.

The Act introduces additional transitional provisions for financial years beginning between 1 January 2026 and 31 December 2026. Undertakings subject to mandatory sustainability reporting in that period may choose to apply either:

1. the existing 2023 ESRS, as amended by the 2025 Quick Fix;
2. the new revised ESRS 2.0; or
3. a hybrid consisting of the 2023 ESRS as amended by the 2025 Quick Fix, with certain reliefs introduced by the ESRS 2.0.

Legal and advocacy commentary

The commentary below addresses the legal and advocacy points that generated the most significant debate during the stakeholder consultation process, where the final text responds to positions stakeholders put forward, and where it does not.

1. DMA: more central, not less demanding.

The approved standards convert the materiality definition into a positive prohibition: undertakings shall not disclose ESRS-prescribed disclosure requirements or datapoints unless that information is material and must refrain from disclosing non-material entity-specific information. The DMA is the operative gatekeeper for the sustainability statement. The Act codifies both a top-down (permitting topic-level materiality conclusions based on strategy, business model, geographies, and value chain features without assessing each individual impact, risk or opportunity (IRO)) and a bottom-up approach at IRO level, confirming that the two may be combined within the same DMA process across different topics.

Application Requirements (ARs) are confirmed as mandatory with the same authority as operative requirements, resolving a longstanding ambiguity. Undertakings should not assume that a smaller number of required disclosures translates into a lighter assessment process.

Two further clarifications directly address concerns raised by companies. First, the Act requires undertakings to consider at each reporting date whether significant changes have occurred that could affect prior DMA conclusions, and to carry out reviews and updates only if such changes are identified, confirming that the DMA does not need to be fully repeated each year in the absence of material change. Second, undertakings may conduct the DMA for the upstream and downstream value chain without direct input from value chain actors, using instead average regional data, sector data or generally available information.

2. Phase-in relief is qualified by mandatory disclosure floor

The Act preserves phased omission options for certain topical standards and financial effects disclosures. However, it pairs those options with a transparency floor embedded in ESRS 2 BP-2: where an undertaking omits information under a phase-in option, it must still disclose whether the related topics were assessed as material and if they were, must provide at minimum the topic identification, a description of how the business model and strategy take account of material impacts, time-bound targets, policies, actions, and relevant metrics. Phase-in relief does not permit complete silence on topics an undertaking has itself assessed as material.

3. Value chain cap has legislative basis but limited protective reach

The Act anchors the cap in Articles 19a(3) and 29a(3) of Directive 2013/34/EU, providing the Directive-level authority absent from the May 2026 draft, and extends its application to non-EU value chain undertakings. The cap limits what a CSRD reporter may request from protected value chain entities, defined by reference to the necessary datapoints in the voluntary standard, differentiated by employee threshold and excluding voluntary and “necessary if applicable” items. It does not create a statutory right for smaller entities to refuse such requests, nor does it address the practical burden arising from simultaneous data requests by multiple CSRD reporters.

4. Capability-based relief for financial effects introduced; several stakeholder concerns remain unaddressed

The Act adds a capability-based relief under ESRS 2 SBM-3: quantitative disclosure of anticipated financial effects is not required where the undertaking lacks the skills, capabilities, or resources to produce it, subject to qualitative explanation and identification of affected financial statement line items. It also clarifies that reporting anticipated financial effects is likely to involve estimates and that those estimates may be updated in future periods without constituting a reporting error, thus extending the “undue cost effort” relief to anticipated financial effects.

Fair presentation is defined in terms of completeness, neutrality and accuracy applied to the sustainability statement as a whole (not to each individual datapoint), and the Act states that use of permitted reliefs is not detrimental to fair presentation. On confidentiality, the Act introduces a reference to intellectual capital, intellectual property, know-how and technological information qualifying as trade secrets under Article 2(1) of Directive (EU) 2016/943 as a standalone ground for omission, alongside the pre-existing commercially prejudicial information relief.

A number of concerns raised during the EFRAG stakeholder process remain unresolved in the final text: no standardised quantitative materiality thresholds or sector-specific DMA templates have been introduced; no mapping between old and new datapoints has been published; the NMIG quasi-mandatory treatment by assurance providers has not been addressed; and no formal comply-or-explain mechanism with a disclosed remediation timeline has been introduced.

The adjusted gender pay gap has been removed as a mandatory metric, with the obligation now limited to the unadjusted gap. However, there remains terminological ambiguity between “adequate wage” and “living wage”. The GHG reporting boundary default (financial control) has not changed, meaning the conflict with GHG Protocol and ISSB operational control approaches remains unresolved.

5. Value chain reporting for investment managers

AR 37 (paras. 62-63) exempts undertakings that manage investments under a fiduciary duty on behalf of clients, without retaining the risks or rewards of ownership, from the obligation to provide value chain data on those investments. The relief covers arrangements such as discretionary portfolio mandates, UCITS and AIF managers, and fiduciary pension fund managers. Two cumulative conditions apply: (i) the undertaking must act under a legally recognised fiduciary duty and (ii) must not retain economic exposure to the underlying assets. Proprietary positions, co-investment stakes, seed capital on balance sheet, and general account insurance assets fall outside the relief. AR 37 operates alongside AR 17, which provides a parallel carve-out at the DMA stage, giving undertakings satisfying both provisions an end-to-end exemption for fiduciary portfolios.

Qualifying undertakings should document the fiduciary nature of each mandate and their absence of risk or reward retention, both for the DMA process and any assurance engagement. Where an undertaking manages a mix of fiduciary and proprietary assets, the relief covers only the fiduciary portion. The exemption creates a corresponding data gap: impacts, risks and opportunities connected with fiduciary portfolios fall outside the mandatory reporting boundary of the managing undertaking, which may affect the comparability and completeness of sustainability data at market level.

6. Payment practices and anti-corruption: protections confirmed retained.

Payment practice metrics (G1-6) and anti-corruption and anti-bribery disclosures (G1-4 and associated metrics) are maintained in full as mandatory requirements, consistent with the SFDR-linked indicator on lack of anti-corruption and anti-bribery policies. These retained requirements are a direct response to positions companies put forward in the EFRAG consultation process.

Next steps

Undertakings within scope of mandatory CSRD reporting should prioritise three areas: (i) reviewing and updating their DMA methodology and documentation to reflect the new codified pathways and the mandatory status of ARs; (ii) assessing the scope and defensibility of any phase-in elections against the BP-2 transparency floor; and (iii) mapping their value chain data strategy against the cap as operationalised by the voluntary standard.

In Luxembourg, companies should also monitor the expected national implementation by the end of 2026. While the CSRD framework will be implemented through Luxembourg law, the revised ESRS adopted by the EU Commission are expected to become mandatory for reporting periods starting in 2027 (with optional early application for FY2026), and will apply directly without further national implementation.

Arendt’s ESG & Sustainability team is available to assist clients in assessing the impact of the revised standards on their reporting frameworks and governance processes.

Author : Sara Garcia, Rocco Mezzatesta and Dino Serafini.

1. Commission Delegated Regulation C(2026) 5010 final, amending Delegated Regulation (EU) 2023/2772

2. Commission Delegated Regulation (EU) …/…of XXX supplementing Directive 2013/34/EU of the European Parliament and of the Council by establishing sustainability reporting standards for voluntary use by undertakings protected by the value chain cap