Proposed changes to ESG and voluntary standards

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Who Is Affected by ESG Reporting Now?

As of 2026, the obligation to conduct ESG reporting applies to companies that meet at least two of the following criteria:

• More than 250 employees
• Annual turnover exceeding 50 million EUR
• Balance sheet total above 25 million EUR

From 2027, this obligation will expand to listed small and medium-sized enterprises (SMEs), and from 2028, it will also apply to non-European groups with a net turnover of over 150 million EUR if they have at least one company or branch in the EU.

Key Changes Proposed by the European Commission

The European Commission has issued a proposal to reduce these requirements as part of the Omnibus Package, which suggests:

• Changes to reporting criteria – The obligation would only apply to companies with more than 1,000 employees that exceed one of two financial thresholds: a turnover of over 50 million EUR or a balance sheet total above 25 million EUR. This would reduce the number of companies currently subject to reporting by up to 80%.
• A two-year postponement of ESG reporting for companies in the second and third waves (i.e., those scheduled to start reporting in 2026 and 2027).
• Simplification and revision of ESRS (European Sustainability Reporting Standards) by up to 70% to reduce administrative burdens on businesses.
• Limiting EU Taxonomy reporting requirements – Companies with fewer than 1,000 employees and a turnover below 450 million EUR would report on EU Taxonomy voluntarily or only partially.
• Postponement of CSDDD (Corporate Sustainability Due Diligence Directive) transposition – The first phase of the directive’s implementation would be delayed by one year, to 2028.
• Adjustment of Carbon Border Adjustment Mechanism (CBAM) rules – Importers with an annual import volume of less than 50 tons would be exempt from CBAM, excluding approximately 182,000 companies from this reporting obligation.

These changes must undergo the EU legislative process, be approved by the European Parliament, and subsequently implemented into national legislation. This process is complex and time-consuming, with the possibility of modifications along the way. Although the European Commission is pushing for quick adoption, the process may still take several months.

Should I Stop Working on ESG Reporting?

Completely stopping preparations for ESG reporting would not be a wise decision. ESG reporting is complex and demanding, but setting it up correctly can provide a competitive advantage and help companies save costs.

How to Prepare for the Changes?

Companies with More Than 1,000 Employees

• ESG reporting will apply to you regardless, possibly with a delay, but it won’t disappear.
• Focus on the key ESG elements relevant to your business.
• Identify key stakeholders, assess impacts, risks, and opportunities using double materiality analysis, calculate your carbon footprint, collect relevant data, and prepare a sustainability strategy.
• Keep track of legislative developments.

Companies with 250–1,000 Employees

• ESG reporting is still required under the current legislation, but preparation can be slightly slowed down.
• Define your value chain, determine significant impacts, risks, and opportunities, and calculate your carbon footprint.
• Focus on material flows, key raw materials, and climate change adaptation measures. Collect and analyze data.
• Consider using Voluntary Sustainability Reporting Standards (VSME).
• Closely monitor legislative changes.

Companies with Fewer than 250 Employees

• You are not directly subject to ESG reporting, but you may be affected by supply chain requirements or public sector demands.
• Use VSME to maintain control over ESG data.
• Communicate with your suppliers to understand what data they will require from you.

What Are VSME (Voluntary Sustainability Reporting Standards)?

EFRAG (European Financial Reporting Advisory Group) has introduced Voluntary Sustainability Reporting Standards (VSME) for small and medium-sized enterprises (SMEs). These standards are optional and aim to help companies determine:

• What ESG data to collect
• How to disclose ESG data
• How to create a clear and useful ESG report for stakeholders

VSME is divided into two levels of complexity:

• Basic – A simplified version with minimal administrative burden, designed for smaller businesses.
• Comprehensive – A detailed standard for companies wanting to provide more extensive ESG reporting, aligning more with larger corporations' requirements.

Although the Omnibus Package proposes revising these standards, their current version remains valid and applicable until an official update is adopted. Companies looking to be proactive in ESG reporting can continue using VSME, especially if they want to transparently communicate their impacts or meet the expectations of business partners.

More Information

Omnibus Package: European Commission Press Corner
VSME: EFRAG Voluntary Reporting Standard for SMEs