Revision of the ESRS Sustainability Standards Is Moving Forward

The European Commission’s Omnibus I package, which has since been adopted, also provided for a revision of the European Sustainability Reporting Standards (ESRS Set 1), which set out the specific standards of the Corporate Sustainability Reporting Directive (CSRD). The European Commission has further revised the technical advice on the revision of the ESRS developed by the European Financial Reporting Advisory Group (EFRAG) at the end of last year. It subsequently published this advice, together with the voluntary sustainability reporting standard VS (formerly VSME), for consultation in May. The one-month consultation period ran through early June.

ESRS Set 1: Legal Uncertainty and Disproportionate Burden Remain

At the end of last year, the BDI had expressed serious concerns about the technical recommendation presented by EFRAG, as it fell far short of expectations. The drafts offered no concrete prospects for improvement and could be considered alarming in many respects. Therefore, the BDI generally welcomes the European Commission’s plan to further simplify the European Sustainability Reporting Standards (ESRS) as a step toward reducing the burden on companies. Among other things, the draft standards feature, in some cases, clearer objectives and initial simplifications.

However, the drafts now published by the European Commission do not, on the whole, result in any noticeable reduction in the burden on companies subject to reporting requirements. Neither the proposed conceptual simplification of the standards nor the specific removal of data points goes far enough, meaning that the bureaucratic burden is reduced only to a limited extent. In addition, there are significant legal uncertainties, such as unclear definitions, reporting requirements, and assessment criteria.

Three points are important: It must be possible to prepare a legally compliant report. The focus should be on key performance indicators relevant to management. Furthermore, the scope and effort required for reporting must be significantly reduced for the affected companies in order to safeguard the EU’s competitiveness as a business location.

Design of the Voluntary Sustainability Standard (VS) Is Generally Practical and Feasible

The BDI considers the draft standard for voluntary sustainability reporting (VS) to be a practical and comparatively easy-to-apply standard. In particular, the aim of better alignment with existing ESRS requirements and value chain requirements, as well as the underlying goal of the “value chain cap,” are positive aspects worth highlighting.

At the same time, challenges remain, particularly for smaller companies and in the practical implementation of individual reporting requirements. For example, there are uncertainties regarding the comparability of data or existing regulatory gaps.

Overall, the BDI calls for not expanding the standard, for continuing to ensure its practical applicability, and for consistently avoiding unnecessary burdens on SMEs. An appropriate level of practical applicability, combined with reasonable relief measures for SMEs, is essential for the widespread adoption of the VS. It is also of great importance that the standard be recognized by large companies, investors, financial institutions, and banks that use the data provided by reporting companies. It must be regarded as an appropriate and sufficient fulfillment of disclosure obligations throughout the value chain. This is a prerequisite for broad acceptance and for limiting the “trickle-down effect.”

Next Steps

The European Commission plans to adopt the final amendments in mid-2026 as a delegated act. They will then be submitted to the European Parliament and the Council for review before entering into force. In addition to the one-month public consultation, the European Commission also plans to consult with the EU member states and the eight EU institutions. The amended ESRS Set 1 is then expected to be applicable for fiscal years beginning on or after January 1, 2027, possibly with an option to apply it to fiscal years beginning on or after January 1, 2026.