Reduce the volume of reportable data points:
The Substantive Proposal forgoes the adoption of new sector-specific standards and provides that all sustainability reporting standards (including the first set of ESRS) shall not include disclosures that would require reporting entities to breach the “value chain cap” described below. Commission has also indicated its intent to substantially slash the number of reportable data points in the ESRS Delegated Act (see section 4 of this bulletin).
Introduce a “value chain cap”:
The CSRD currently requires reporting of “information about the undertaking’s own operations and about its value chain”. However, the Substantive Proposal prescribes that an entity reporting under Articles 19a and 29a must not ask certain value chain actors (i.e. those that “do not exceed the average number of 1000 employees during the financial year”) for information that exceeds the new voluntary sustainability reporting standards (the “Voluntary Standards”, which the Commission intends to introduce swiftly by way of Delegated Act– see section 6 below for timings).
This “value chain cap” is intended to minimize the “trickle-down effect” (i.e. transfer of reporting burdens to value chain actors) and alleviate some of the burdens associated with obtaining information about value chains. How well this “value chain cap” will operate alongside the similar cap proposed for chain of activity due diligence under the CSDDD bears further examination.
It also remains to be seen if the Parliament and Council will, for instance, extend the “value chain cap” to Article 40a reporting to avoid inconsistencies with the approach to artificial consolidated sustainability reporting pursuant to Article 48i.
Draw the line at limited assurance:
The Commission will no longer be empowered to move from a requirement for ‘limited assurance’ to a standard of ‘reasonable assurance’. It will still adopt limited assurance standards (but the original adoption deadline of October 1, 2026 will no longer apply). Before adopting the limited assurance standards by Delegated Act, the Commission intends to issue targeted assurance guidelines by 2026 to clarify the procedures that assurance providers are to perform.
4. What changes to the first set of ESRS can we expect?
At present, the ESRS Delegated Act (which entered into force in December 2023) includes 161 data points that are mandatory irrespective of the materiality assessment, a further 622 data points that are subject to the materiality assessment, additional data points which are to be reported in certain circumstances, and 269 voluntary data points marked as ‘may disclose’ (source: EFRAG).
In the accompanying materials to the Substantive Proposal, the Commission stated an intent to revise the ESRS Delegated Act to, amongst other things, “substantially reduce the number of ESRS data points”. The revised general ESRS should become available by the end of 2027 for use in 2028 (see the flowchart in section 6 below).
Changes anticipated to apply from 2028 include: (i) removing data points that are deemed least important; (ii) improving consistency with other pieces of EU legislation; (iii) incorporating the “value chain cap”, which will reduce/simplify the requests that reporting entities can make of certain value chain actors; (iv) simplifying the structure and presentation of the standards; and (v) clarifying provisions that are deemed to be unclear and make “any other modifications that may be considered necessary considering the experience of the first application of the ESRS”.
Notably, the Commission has indicated that it will provide clearer instructions on how to apply the materiality principle. In the meantime, the ambiguity surrounding the double materiality assessment places entities at risk of pouring excessive resources into the process to discern what impacts, risks and opportunities to report. If entities end up disclosing unnecessary information, the comparability and usability of reports will, unfortunately, be hindered.
The Commission’s revisions to the ESRS Delegated Act will enter into force if the Commission and Parliament have expressed no objection (in a process that is separate from the ordinary legislative process for amending the CSRD).
Until then, entities which are required to report prior to 2028 must use the existing ESRS and should consider how to build in flexibility to adapt to future changes.
5. What are the key proposed changes to Taxonomy reporting requirements?
Presently, an undertaking which is obliged to publish non-financial information pursuant to Articles 19a or 29a is required to report, under Article 8 of the Taxonomy Regulation, on how and to what extent its activities are associated with economic activities that qualify as “environmentally sustainable”. To qualify as “environmentally sustainable”, the activity must meet specific requirements, including technical screening criteria which many find challenging to meet.
To alleviate the reporting burden, the Substantive Proposal provides that undertakings and parent undertakings that are in scope of Articles 19a and 29a whose net turnover figures do not exceed EUR 450m should no longer be subject to mandatory taxonomy reporting requirements under Article 8 of the Taxonomy Regulation.
If those undertakings choose to voluntarily report, the Substantive Proposal provides that they will be able to report on activities that fulfil only some of the “environmentally sustainable” requirements – this is intended to encourage Taxonomy reporting that is increasingly useful for scaling transition finance.
For the largest undertakings that remain subject to mandatory taxonomy reporting requirements (i.e. those whose net turnover exceed EUR 450m), the Commission has not proposed to offer the option of reporting on partial Taxonomy-alignment.
However, several amendments to the Disclosures Delegated Act, the Climate Delegated Act and the Environmental Delegated Act are expected to apply from January 1, 2026, subject to public consultation. The changes proposed in the consultation (which closes on March 26, 2025) include: the introduction of de minimis thresholds; simplification of reporting templates; and postponement of application of KPIs deemed to have limited relevance and decision-usefulness.
6. What are the next steps in the legislative process for amending the CSRD, and when can we expect the law to change?
The Commission’s proposed changes to the CSRD are not set in stone, in that they are likely to be amended by the Parliament and Council under the “ordinary legislative procedure”. As explained in the flowchart below, this will entail the Parliament and Council working to agree on a legislative text that they will ultimately adopt jointly.
Based on the Parliament’s statistics, the ordinary legislative procedure has taken on average c.19 months to complete, but the Parliament and Council have been called by the Commission to “treat this omnibus package with priority, in particular the proposal postponing certain disclosure requirements under the CSRD and the transposition deadline under CSDDD”.2
Presently, the proposed changes are expected to be rolled out in the two stages described below. However, in the proposals’ present form, this split would exacerbate complications and uncertainties for businesses (as explained further in sections 7 and 8 of this bulletin).