The European Commission opened a public comment period on May 14, 2026, for a revised draft of the ESRS (European Sustainability Reporting Standards), which reportedly contains more than 1,000 disclosure requirements. Built on EFRAG's technical advice and layered with additional simplifications for companies, this draft represents the most significant rewrite of the CSRD (Corporate Sustainability Reporting Directive) since its initial version in 2023.
Why the First ESRS Was "Too Burdensome"
The first version of ESRS was adopted in July 2023. It comprised 12 standards covering a broad range of topics — climate change, biodiversity, human rights, occupational health and safety — with total mandatory disclosure items reportedly exceeding 1,000. Even for large companies, the costs of data collection and report preparation to cover all items were substantial.
The problems did not stop there. Large companies subject to the directive began demanding data from their suppliers and subcontractors. Cases became increasingly visible where SMEs (small and medium-sized enterprises) based outside the EU were drawn into information-gathering requests from European customers. The "cascade of reporting burden" spread beyond what regulators had anticipated, and became the direct spark for the Omnibus package review.
The European Commission proposed the "Omnibus I Amending Directive" in early 2025, introducing sweeping revisions to both CSRD and CSDDD (Corporate Sustainability Due Diligence Directive). The revision of ESRS is positioned as part of this process, with EFRAG commissioned to provide technical advice.
The Turning Point Shown by EFRAG's Advice
EFRAG (European Financial Reporting Advisory Group) is a specialized body with long involvement in developing European financial reporting standards. Its technical advice reportedly pointed in the direction of significantly reducing mandatory disclosures, phasing in or making sector-specific standards voluntary, and setting ceilings on information cascades to SME suppliers.
Among the most significant shifts is the move from a "default mandatory" disclosure model to one based on materiality-driven selective disclosure. The first ESRS was structured roughly as "include all items first, then explain exclusions only where irrelevant." The revised draft may shift toward selecting and disclosing items that are material to a company's own value chain and sector.
The fact that this draft "incorporates EFRAG's technical advice while adding further simplifications" is important for understanding how to read the document. On-the-ground hearings and empirical studies appear to have informed reductions that go beyond EFRAG's advice in certain areas. This draft should be read as "EFRAG baseline plus additional measures."
Changes in Scope — What the Numbers Reveal
The Omnibus I amending directive also significantly narrowed the direct applicability of CSDDD. The main revised thresholds are as follows.
These figures show that the circle of companies bearing direct obligations has been drawn considerably tighter. For EU companies, only those with more than 5,000 employees and global turnover exceeding €1.5 billion qualify as direct targets; for non-EU companies, only those with EU turnover exceeding €1.5 billion. For companies involved in cross-border European business, the starting point is confirming whether their own organization or key trading partners exceed these thresholds.
For CSRD as well, the Omnibus I amendment significantly narrowed the scope of covered companies. With a new threshold of roughly more than 1,000 employees, the number of companies originally expected to be in scope — potentially tens of thousands — is set to be substantially reduced. Since the revised ESRS draft is redesigned for this narrowed group, the substantive content of reporting obligations will also change.
What Stays the Same Even Outside Direct Scope
For companies below the thresholds, not all obligations disappear. Companies subject to CSDDD can still request information from trading partners with fewer than 5,000 employees. Even if a company falls outside the mandatory ESRS scope, as long as it continues trading with major European customers, practical data provision requests will continue.
The VSME (Voluntary SME) standard is beginning to function here. Under CSRD, data collection from suppliers with fewer than 1,000 employees is expected to be limited to the scope of this VSME standard. A de facto ceiling on the types and volume of information that can be requested creates a baseline for negotiations on both the procurement and supply sides.
Large EU Companies in Direct Scope
Companies with more than 1,000 employees fall under CSRD obligations. Expanded discretion for materiality-based selective disclosure is expected to increase flexibility in report design. The timing of sector-specific standard application will also affect practical decision-making.
Large Non-EU Companies in Direct Scope
Companies with EU turnover exceeding €1.5 billion are directly subject to CSDDD. Companies with significant EU sales remain in scope even if headquartered outside the EU — this has not changed.
SMEs Facing Indirect Pressure
Companies below the threshold but trading with major European customers will still receive information requests. The VSME standard is beginning to function as a benchmark for the scope of compliance, providing a basis for capping demands.
Practical Response for Non-EU SMEs and Mid-Sized Companies
While there is no direct obligation, understanding the requirements of key customers and using the VSME standard as grounds to negotiate the scope of requests that exceed it is emerging as a realistic practical approach.
How to Read the Public Comment Period and What to Watch
The public comment period is one of the few opportunities to anticipate the direction of the final ESRS. Since the draft may change, gaining a clear picture of the key issues now — while comments are still being solicited — is the most efficient way to prepare for implementation.
There are three issues to watch. First, the specific criteria for materiality judgments. Even if the principle of "narrowing scope based on materiality" becomes established, without guidance on the process and how to document the rationale, implementation will vary widely. The extent to which definitions are embedded in the draft and its annexes directly affects the precision of report design.
Second, the final positioning of sector-specific standards. ESRS sector standards — designed for industries such as finance, agriculture, and energy — were already delayed in their finalization under the first version. Whether these are made voluntary in the revised draft, whether mandatory timelines are pushed back, or whether they are treated entirely separately will significantly affect judgments depending on the sector.
Third, the wording of rules limiting information cascades to SMEs. How the VSME standard "ceiling" is reflected in actual contract terms and procurement requirements affects both the information-gathering behavior of large companies and the compliance costs of smaller ones. Tracking the relevant wording in the draft and what modifications are sought through public comments will reveal the direction ahead.
Once the public comment period closes, deliberations toward adopting the final revised ESRS rules will begin. Just as the CSDDD compliance deadline was reset to July 2029, adjustments that account for companies' preparation time may be built into reporting obligation start dates as well. Reviewing the draft now reduces the risk of being caught off guard later.