Sustainability Reporting Starting in 2027: What the New ESRS and the Voluntary Standard Mean for Companies

The European Sustainability Reporting Standards (ESRS) are binding European reporting standards that specify what sustainability information companies must disclose in their management reports. On July 3, 2026, the European Commission officially adopted both the revised version of the ESRS and a new voluntary standard for sustainability reporting. This establishes the final framework for mandatory and voluntary ESG reporting in Europe. This topic is particularly relevant for small and medium-sized enterprises (SMEs)—because even companies that are not required to report themselves may be affected through the value chain.

At a Glance

On July 3, 2026, the European Commission adopted the revised ESRS, which will be mandatory for companies falling within the scope of the Corporate Sustainability Reporting Directive (CSRD) starting with the 2027 fiscal year. At the same time, a voluntary standard (VS) was introduced to serve as a safeguard for companies not subject to reporting requirements against excessive data requests from the value chain. The number of mandatory data points has been reduced by approximately 70 percent compared to the first version. The EU Council of Ministers and the European Parliament must still formally approve the legislative acts, but no further substantive changes are possible.

What’s Changing in the Mandatory ESRS

The revised standards differ from the previous version in several key respects. The changes can be categorized into four areas.

Greater practicality and proportionality: Reporting requirements have been streamlined to focus on the essentials. For example, information on microplastics will be limited to primary microplastics in the future, and additional transition periods apply to substances of very high concern. Overall, the number of mandatory data points has been reduced by about 70 percent.

Greater flexibility in implementation: Companies are given more leeway in summarizing and breaking down information. The guidelines for materiality analysis have been clarified, and there are additional options for omitting certain disclosures—for example, if their publication could significantly harm the company’s competitive position. Flexibility is also being introduced for greenhouse gas reporting: Companies will be able to use either the financial or the operational control approach in the future.

Greater international harmonization: The revised ESRS align more closely with the international standards of the International Sustainability Standards Board (ISSB). At the same time, direct links are established to the European Supply Chain Directive (CSDDD) to avoid duplicate reporting.

Greater legal certainty: More precise guidelines are intended to prevent companies from reporting more than necessary. This includes, among other things, clearer rules for presenting information, restrictions on the disclosure of human rights incidents to documented and verified cases, and better guidelines for handling estimates of the expected financial impacts of sustainability issues.

The New Voluntary Standard: A Shield for Small and Medium-Sized Enterprises

In addition to the mandatory ESRS, the European Commission has adopted a voluntary standard that was originally developed as a guide for small and medium-sized enterprises (VSME) and is now known as the “Sustainability Reporting Standard for Voluntary Use” (VS).

The background: With the increase in the thresholds for CSRD reporting requirements, numerous companies are no longer subject to mandatory reporting. At the same time, as suppliers or service providers, they are part of the value chain of large companies subject to reporting requirements—and are increasingly confronted by these companies with extensive ESG data requests. The VS is intended to act as a so-called “value chain cap” in this context: It defines an upper limit on the information that companies subject to reporting requirements may request from their business partners who are not subject to such requirements.

Specifically, this means that companies not subject to the CSRD themselves have a legal right to reject requests that go beyond the scope of the VS. If a company subject to reporting requirements nevertheless requests additional data, it must transparently inform the affected business partner about what additional information is being requested and that the partner has the right to refuse.

In practice, it remains to be seen whether this right to refuse is actually enforceable in existing customer-supplier relationships. Particularly in cases of economic dependency, the de facto pressure to provide additional data is likely to persist.

What the Voluntary Standard Covers

The VS represents a subset of the mandatory ESRS and focuses on the key quantitative ESG data points. It is divided into a base module and an additional module. Each data point is assigned to one of five categories, ranging from mandatory to conditionally mandatory to entirely voluntary. The categorization also distinguishes based on company size—businesses with ten or fewer employees are subject to less stringent requirements.

Compared to the original VSME draft, individual data points have been adjusted or removed to ensure consistency with the revised ESRS. For example, greenhouse gas intensities and the gender-specific breakdown of training hours have been omitted, and the information on biodiversity has been simplified.

What Companies Should Do Now

For companies subject to reporting requirements, the new ESRS must be applied starting with the 2027 fiscal year. The significantly reduced number of data points makes it easier to get started, but still requires structured preparation—particularly when it comes to materiality analysis and data collection along the value chain.

For non-reporting small and medium-sized enterprises (SMEs), it is advisable to familiarize themselves with the voluntary standard early on. Companies that know the maximum amount of data that may be requested by business partners can better assess such requests, systematically build their own data infrastructure, and invoke their legal right to refuse in the event of excessive demands.

Frequently Asked Questions About Sustainability Reporting Starting in 2027

What are the ESRS?

The European Sustainability Reporting Standards are binding EU reporting standards that specify what sustainability information companies must disclose as part of their management reports. They cover environmental, social, and governance topics and apply to companies subject to the Corporate Sustainability Reporting Directive (CSRD).

Which companies must report in accordance with the new ESRS?

Companies that exceed the CSRD thresholds are required to report. Following the adjustments made as part of the omnibus procedure, these thresholds are higher than originally planned, meaning that primarily large companies and corporate groups are affected. For smaller companies, the standard is voluntary.

What is the Value Chain Cap?

The value chain cap limits the ESG data requirements that reporting companies may impose on their non-reporting business partners. The cap is based on the scope of the voluntary standard (VS). Non-reporting companies have the right to reject requests that go beyond this scope.

Is the Voluntary Standard mandatory?

No. The VS is an option, not a requirement. It serves as a guide and a safeguard for non-reporting companies against data requests from the value chain. Its application is voluntary but may make strategic sense.

When do the new rules take effect?

The revised ESRS are to be applied starting with the 2027 fiscal year. The EU Council of Ministers and the European Parliament must still formally approve the legal acts, but no further substantive changes are possible.

This article was reviewed by the tax advisors and certified public accountants at Trimborn . Partner.

About Trimborn . Partner

Trimborn . Partner is an award-winning tax consulting and auditing firm with offices in Düsseldorf and Oberhausen. As experienced auditors and tax advisors for small and medium-sized businesses, we assist companies in preparing for sustainability reporting—from materiality analysis and data collection to integration into the management report. If you’d like to know whether your company falls under the CSRD or how you, as a supplier, can prepare for ESG data requests, please feel free to contact our experts in Düsseldorf and Oberhausen.