The revised European Sustainability Reporting Standards are now official.
The European Commission has published the final revised ESRS in the Official Journal of the European Union, alongside the new voluntary sustainability-reporting standard for smaller companies. The regulation is due to enter into force on 10 November 2026 and apply to financial years beginning from 1 January 2027.
The headline is simplification.
The revised standards reduce mandatory datapoints by 61%, remove voluntary disclosures and cut total datapoints by more than 70%, according to the published account of the reform process. The wider Omnibus package also narrows the scope of mandatory CSRD reporting, excluding companies below thresholds of 1,000 employees and €450 million in revenue.
For many businesses, this may sound like a retreat from sustainability reporting.
It is not.
The change is better understood as a shift from volume to usefulness. The future of sustainability reporting is likely to involve fewer broad disclosure requests, but greater pressure to produce clear, decision-useful and evidence-backed information on the issues that genuinely affect a company’s risks, strategy, financial performance and value chain.
For companies remaining in scope, that means better reporting discipline.
For SMEs outside direct scope, it means a more proportionate but still commercially important evidence system.
What has changed
The original ESRS framework was ambitious and comprehensive. It asked companies to report across environmental, social and governance topics using a double-materiality lens.
The revised framework retains the basic architecture but simplifies the reporting burden. The intention is to make disclosures more focused, reduce unnecessary data collection and improve usability.
The wider policy package also addresses a major practical problem for smaller suppliers: cascading sustainability-information requests from larger companies.
Companies below the CSRD scope are expected to face a limit on the sustainability information that larger business customers can request from them. That ceiling will be linked to the new voluntary standard for SMEs, commonly referred to as VSME.
This is important.
Many SMEs have not been directly required to produce CSRD-style reports. Yet they have still received lengthy questionnaires from major customers, banks, investors, procurement portals and supply-chain platforms.
The voluntary standard is intended to provide a common, proportionate baseline.
It does not make sustainability irrelevant. It gives smaller companies a clearer answer to the question: what information should we prepare first?
Less reporting does not mean less accountability
The mistake would be to assume that fewer datapoints mean businesses can reduce their focus on sustainability information.
In reality, customers, lenders, insurers, investors, regulators and public-sector buyers are still asking questions that have commercial consequences.
They want to know:
How exposed is the business to energy, carbon, water, climate and supply-chain risks?
What emissions data is available and how reliable is it?
Are there credible policies on workforce, ethics, procurement and environmental claims?
Which sustainability issues affect revenue, costs, access to finance or contracts?
Who owns the data and validates the claims?
What actions are underway and how is progress measured?
The revised ESRS does not remove these questions. It makes materiality more important.
Companies will need to explain why an issue matters, how it affects the business and what evidence supports the disclosure.
That requires an evidence architecture.
The rise of evidence architecture
An evidence architecture is a practical system that links every material sustainability metric or claim to:
Its original source data.
The organisational and operational boundary.
The calculation methodology.
Key assumptions and estimates.
The responsible owner.
Internal review and control steps.
Any assurance or verification status.
The decision, report or claim the information supports.
This is more valuable than a large spreadsheet filled with unconnected metrics.
For example, a company may report an annual carbon number. But can it show:
Which energy bills, fuel records, travel data and supplier information were used?
Whether the number covers all sites and operations?
Which emission factors were applied?
What estimates were used for missing data?
Who approved the methodology?
Whether the figure is suitable for a customer questionnaire, lender request or public claim?
The same logic applies to workforce data, water use, waste, supplier policies and nature-related risks.
Simpler standards will reward companies that can answer these questions clearly.
What VSME means for smaller businesses
The voluntary standard for SMEs should be treated as a business tool, not merely a reporting template.
For a smaller company, the most useful outcome is not a long sustainability report. It is a reusable evidence pack that can support several needs at once:
Customer and tender questionnaires.
Supplier assessments.
Bank and investor discussions.
Insurance and risk reviews.
Public sustainability communications.
Internal management decisions.
Future reporting requirements.
A proportionate SME evidence pack can include:
Area | Practical starting point |
|---|---|
Business profile | Sites, employees, sectors, main products or services |
Energy and carbon | Electricity, gas, fuel, travel and key emissions estimates |
Climate and operational risk | Main exposure to heat, flooding, water stress, energy costs or disruption |
People | Basic workforce, health and safety, training and policy information |
Supply chain | Top suppliers, key materials, country or sector risks and supplier expectations |
Governance | Named responsibility for sustainability information and approval |
Actions | A short list of targets, projects, owners and dates |
Evidence | Bills, policies, calculations, supplier documents and review records |
The important principle is reuse. The same credible information should support multiple requests instead of being recreated from scratch every time a customer sends a questionnaire.
Materiality is now the filter
The revised ESRS reinforces a central lesson: not every sustainability topic is equally relevant to every business.
A food company may need to focus on agricultural sourcing, water, packaging, food waste, labour and nature. A manufacturer may need to prioritise energy, materials, product carbon, worker safety, CBAM exposure and supplier data. A professional-services firm may focus on travel, office energy, workforce, digital infrastructure and client requirements.
Materiality is how a company decides.
A practical materiality process asks:
Which sustainability issues could affect our costs, revenues, contracts, financing, assets or operations?
Which issues are we likely to affect through our business model, products, workforce or value chain?
Which issues matter most to customers, employees, suppliers, lenders, regulators and communities?
What evidence do we already have?
Which three to five issues require action in the next 12 months?
This approach works for a large CSRD reporter and for a smaller supplier. The scale changes. The discipline does not.
A practical action plan
Businesses should use the current transition period to improve their reporting foundation.
1. Map existing information
Identify what is already available across finance, operations, procurement, HR, facilities and legal teams.
Most companies have more relevant information than they realise. The problem is that it is fragmented.
2. Identify material topics
Use a focused materiality assessment to select the issues that genuinely affect business performance, stakeholder decisions and real-world impacts.
Do not begin by collecting every possible ESG metric.
3. Assign ownership
Every material metric should have an accountable owner. Sustainability teams should coordinate the process, but finance, operations, procurement, HR and legal teams need to own the underlying data.
4. Build an evidence register
For each material claim or metric, record the source, methodology, boundary, assumptions, owner and review status.
This will reduce friction in future reporting, assurance and customer requests.
5. Use VSME as a proportionate baseline
Smaller companies should use the voluntary SME standard to structure a credible evidence pack. It can provide a practical ceiling for customer information requests and a starting point for future growth.
The commercial opportunity
Good sustainability reporting is not only a compliance activity.
When information is reliable, it can support better decisions on:
Energy procurement.
Capital expenditure.
Product design.
Supply-chain resilience.
Customer retention.
Tender performance.
Insurance.
Access to finance.
Climate and operational risk.
The revised ESRS should therefore not be read as a signal to do less. It should be read as an opportunity to focus on the information that creates the most value.
The companies that benefit will not be those with the largest reports. They will be those with the clearest evidence, the strongest materiality process and the ability to turn sustainability information into management intelligence.