ESRS reporting overhaul: fewer companies, fewer data points, no sector-specific standards
The European Commission’s Omnibus simplification proposal, if enacted, will change the shape of sustainability reporting across that continent, reducing the number of private companies required to comply with the European Sustainability Reporting Standards (ESRS) while streamlining the disclosures themselves. Assurance arrangements will be changed – perhaps simplified. Fewer companies will now be subject to mandatory reporting, and those that remain will face a leaner, more focused ESRS—but there’s no free pass.
Reporting thresholds will change. Previously, private companies with more than 250 employees had to report. Now, only those with more than 1,000 employees and either €50 million in turnover or €25 million in total assets are proposed to remain in scope. The EC proposal estimate is that this will exempt around 80% of previously covered companies, including listed SMEs, which will no longer be required to report. Smaller companies can still opt in voluntarily under the new VSME framework.
All of these changes impact “Second Wave” and subsequent reporters — large listed entities are already reporting, although not yet in a digital manner. As expected, the implementation dates will be pushed out once again.
There appear to be relatively significant proposed changes to assurance framework being proposed, with the Omnibus papers suggesting that there will be changes to assurance arrangements to “reduce the risk that assurance service providers inadvertently encourage undertakings to report information that is not necessary or dedicate excessive resources to the materiality assessment process”. Furthermore, the EC no longer intends to shift assurance from “limited assurance” to “reasonable assurance” — something that will generate a range of debate amongst users, as well as issuers.
All reporting companies will be impacted by another key set of proposals in the Omnibus – the significant simplification of the ESRSs themselves. The to-be-“rapidly”-revised standards will:
- remove those disclosures deemed least important for general purpose sustainability reporting,
- prioritise quantitative disclosures over over narrative text
- further distinguish between mandatory and voluntary disclosure, “without undermining interoperability with global reporting standards”
- Remove the plan for sector-specific ESRS, so there would be no separate additional standards for specific industries.
The EC intends that the revised ESRSs will seek to prioritise alignment with global frameworks, including ISSB and GRI, reducing the reporting burden for multinational firms operating under multiple sustainability standards.
The message seems clear enough: sustainability reporting is to get leaner, not optional. The changes reflect a political push to reduce compliance burdens while keeping meaningful, structured sustainability data in the hands of investors and regulators. For companies that remain in scope, the revised ESRS still demands transparency, accountability, and comparability— or at least that’s what the EC intends. It is important to remember that there is a complex path of negotiations with the European Parliament and with member states still to come.
At XBRL International we remain very focussed on (a) overly optimistic perspectives on AI’s ability to consume and analyse unstructured information, and (b) the importance to economic competitiveness and market relevance of digital reporting. We will be focussing on this second point in particular over the next few weeks, leading up to the 31 March deadline for responses to ESMA’s consultation on the digitisation of sustainability and further digitisation of financial reporting,
Want to dive into the details? The Commission’s full proposals lay out exactly who is affected, what’s changing, and when new requirements will take effect (subject to consultation, negotiation and finalisation!).
