EU Adopts Revised ESRS and VSME Delegated Regulations

On July 3, 2026, the European Commission adopted and published two distinct Delegated Regulations under the Corporate Sustainability Reporting Directive (CSRD): one revising the European Sustainability Reporting Standards (ESRS Set 1) and one establishing the voluntary sustainability reporting standard (VSME) for non-listed SMEs. EFRAG, the Commission's technical adviser on ESRS, reported the adoption on July 3, 2026. Both texts were transmitted the same day to the European Parliament and the Council of the European Union for scrutiny under Article 290 TFEU, and they will enter into force only if no objection is raised and after publication in the Official Journal of the European Union (OJEU).

The revised ESRS apply to financial years beginning on or after January 1, 2027, with early adoption permitted for financial year 2026 once the Delegated Regulation enters into force. The VSME standard, delivered to the Commission by EFRAG in December 2024 and endorsed in July 2025, is now formally anchored in EU law as a voluntary standard for non-listed SMEs that want to standardise their ESG disclosures and respond consistently to data requests from larger CSRD reporters, banks and supply-chain partners. The adoption closes the technical track of the Omnibus I simplification of CSRD reporting, which began with EFRAG's technical advice in December 2025 and a public consultation on the draft delegated act in May 2026.

For CSRD reporting leads, the July 3, 2026 adoption is the binding trigger for FY2027 sustainability statement design and for the optional FY2026 early-adoption decision. The rest of this article sets out what changed, who is in scope, what to do this quarter, and how the two Delegated Regulations fit the wider Omnibus I track.

What changed in the revised ESRS Set 1?

The revised ESRS simplify and streamline the sector-agnostic Set 1 standards first adopted as Delegated Regulation (EU) 2023/2772. The Commission's stated objective is to simplify and streamline sustainability reporting, consistent with the narrowed scope introduced by Omnibus I Directive (EU) 2026/470. The substantive amendments cover cross-cutting standards (ESRS 1 and ESRS 2), the environmental standards (ESRS E1 to E5), the social standards (ESRS S1 to S4), and the governance standard (ESRS G1).

The revised ESRS carry forward the phase-in flexibilities introduced by the quick-fix Delegated Regulation (EU) 2025/1416 for ESRS E4 (biodiversity), S2 (workers in the value chain), S3 (affected communities) and S4 (consumers and end-users). The revised standards also reflect the Omnibus I decision to suppress the mandatory ESRS Set 2 sector-specific standards, which means sector standards no longer sit on the reporting roadmap.

Who has to apply the revised ESRS, and by when?

Mandatory application starts with financial years beginning on or after January 1, 2027, which in practice means the FY2027 sustainability statement published in 2028. Companies that wish to report earlier can opt into the revised standards for FY2026, but only after the Delegated Regulation has entered into force following OJEU publication. Scope is determined by the Omnibus I thresholds: large EU undertakings with more than 1,000 employees and more than EUR 450 million net turnover, plus third-country undertakings with an EU subsidiary or branch above the EUR 150 million net turnover threshold applying from FY2028.

Listed SMEs that were dropped from mandatory CSRD scope by Omnibus I are NOT required to apply ESRS, and the voluntary VSME standard is the Commission's recommended substitute. Member State transposition deadlines for the Omnibus I CSRD-side amendments run to March 19, 2027, so national law will catch up with the EU-level scope reset over the next nine months.

What is the VSME voluntary standard and who is it for?

VSME is a voluntary EFRAG-developed standard with a Basic module and a Comprehensive module, designed for non-listed SMEs that are not in mandatory CSRD scope but face ESG-data requests from CSRD reporters, banks, investors and large customers. By adopting VSME as a Delegated Regulation, the Commission gives the standard a recognised legal anchor in EU law, which should reduce the trickle-down of bespoke ESG questionnaires that SMEs receive from each counterparty.

VSME does not create a new reporting obligation, and national law cannot make it mandatory, but a Member State may reference it in national programmes that support SME finance or sustainability transition. For CSRD reporters, the practical effect is that VSME becomes the standardised data set you can request from in-scope SME suppliers, replacing dozens of customised questionnaires with one common format.

What is the timeline from scrutiny to entry into force?

Objection by either the European Parliament or the Council within the scrutiny period would block the Delegated Regulation and force the Commission to resubmit, but objections to ESRS adoption are historically rare. The realistic path is OJEU publication in the second half of 2026 and entry into force 20 days later, which leaves a narrow window for FY2026 early adoption.

What should reporting leads do now?

Treat the July 3, 2026 adoption as confirmed but not yet in force. Three concrete actions belong on this quarter's agenda. First, confirm whether your entity is in mandatory CSRD scope under the Omnibus I thresholds, and map your current ESRS Set 1 disclosures against the simplified data points when the consolidated text is published in the OJEU. Second, if you intend to apply the revised ESRS for FY2026, document the early-adoption decision in your audit file and brief your sustainability assurance provider, because the audit window depends on the OJEU publication date. Third, if you are a non-listed SME or a CSRD reporter's SME supply-chain partner, evaluate the VSME Basic module as a single, standardised ESG questionnaire you can hand to every customer instead of answering bespoke requests.

Reporting teams should also update their double materiality assessment process to reflect the reduced data point list, and reconfirm XBRL tagging plans with their ESEF software provider, because the ESRS XBRL taxonomy maintained by ESMA will be republished to match the revised standards.

How does this fit the Omnibus I simplification track?

The revised ESRS are the reporting leg of the Omnibus I package, which narrowed CSRD scope and reset the Wave calendar. The Omnibus I Directive (EU) 2026/470 set a statutory deadline of September 18, 2026 for the Commission to adopt the simplified Set 1; the July 3, 2026 adoption lands ahead of that deadline. The Omnibus track also removed the planned upgrade to reasonable assurance and locked limited assurance as the permanent regime, suppressed the mandatory ESRS sector standards (Set 2), and reset CS3D to a single 2029 application date. Read together, the revised ESRS Delegated Regulation and the VSME Delegated Regulation are the technical closure of the simplification agenda for corporate sustainability reporting.

A continuous, per-jurisdiction monitoring setup would have surfaced this adoption the moment EFRAG published it on July 3, 2026, alongside the parallel Commission press release. Obsidian tracks the EU CSRD and ESRS regulatory lineage end to end, from EFRAG technical advice through Commission consultation to OJEU publication and Member State transposition, so compliance leads do not discover the change in a quarterly catch-up. Explore how it works on the monitoring page or compare plans on pricing. The AI layer is a verified regulatory companion, not an "expert" or an "analyst": every output is traceable to a primary source.

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Verify in-scope status under the Omnibus I thresholds, calendar the scrutiny deadline and the OJEU publication date, brief your assurance provider on the early-adoption option for FY2026, and compare VSME Basic against the bespoke ESG questionnaires your SME counterparties send today. Obsidian's monitoring jobs keep the calendar and the source texts current, so the next move is a decision, not a search.