Europe is redefining the rules on sustainability reporting: new NEIS and a voluntary standard
Sustainability reporting has just entered a new phase in the European Union. Following months of debate on the competitiveness of European businesses and the administrative burden associated with ESG regulation, on 21 September, two Delegated Regulations were published in the Official Journal of the European Union, marking a key milestone in the implementation of the legislative package known as ‘Omnibus I’.
On the one hand, the European Commission has adopted a Delegated Regulation aimed at simplifying the European Sustainability Reporting Standards (ESRS), which remain the reference framework for the preparation of sustainability reports by companies subject to the Corporate Sustainability Reporting Directive (CSRD). Among other changes, the new ESRS remove more than 60 per cent of the mandatory data that the report must contain and more than 70 per cent of the total information requirements; they reduce narrative obligations and remove the requirement to adopt and apply specific sectoral standards.
This follows the review in February 2026 of the CSRD’s application thresholds, a change that has reduced the number of companies subject to reporting obligations by around 90 per cent, from approximately 50,000 entities to around 5,000.
Simplification is one of the priorities of both the 2024–2029 Strategic Agenda and the Budapest Declaration on the New Pact for European Competitiveness, which expressly calls for a ‘simplification revolution’ that, in this case, is aimed at streamlining sustainability reporting obligations without compromising the climate and social objectives of the Green Deal.
Furthermore, the Commission has adopted a second Delegated Regulation containing the Voluntary Sustainability Reporting Standard for SMEs (VSME), a voluntary standard tailored to the capabilities and characteristics of those SMEs that fall outside the scope of the CSRD but wish to continue reporting sustainability information to the market. Furthermore, the VSME plays a key role in value chain management: companies subject to the CSRD will no longer be able to require entities in their value chain with an average of no more than 1,000 employees to provide information beyond that set out in this standard. The VSME thus becomes not only a common language for exchanging sustainability information, but also a mechanism to protect SMEs from disproportionate requests for information.
Meanwhile, the architecture of the sustainability reporting system remains virtually unchanged. The principle of double materiality remains the cornerstone of the European model. Companies subject to the CSRD will continue to be obliged to identify and report in their reports those impacts, risks and opportunities that are material from both a financial and a sustainability perspective. External reviews of limited scope remain mandatory (although the door has been closed on a transition to a ‘reasonable assurance’ review), and the general structure of the standards – both cross-cutting and thematic – is maintained, albeit in a simplified form.
The Commission appears to have adopted a conclusion shared by various economic and legal stakeholders: an excess of information does not, in itself, imply high-quality information. During the initial phase of the CSRD’s implementation, there was a risk of over-reporting – that is, a tendency to report more information than necessary out of regulatory prudence. At times, sustainability reports began to resemble more of an endurance test for the reader than a useful tool for decision-making.
Perhaps a good illustration of this is that, despite the exponential growth in the data disclosed and the sophistication of reporting frameworks, in Spain, IBEX 35 companies achieved an average score of just 44.39 out of 100 for the quality of the information disclosed in the study *Sustainability Information in IBEX 35 Companies*. Analysis of the 2024 financial year, produced by the Corporate Social Responsibility Observatory in collaboration with the UNED in April 2026.
The new NEIS standards are specifically designed to address this issue, on the basis that companies must focus on what is material to understanding their performance and sustainability risks. In this regard, the 2025 study ‘The Voice of the Objective: ESG Communication, Authenticity and Value Creation’ by the IE-Elecnor Knowledge Hub on Ethical Business, promoted by the IE Foundation and the Elecnor Foundation, based on an analysis of 110 European companies and four experiments involving 1,286 respondents, concludes precisely that authenticity is a strategic asset and that ‘companies that communicate clearly, focus on important issues and align their messages with verifiable information achieve better results than those that rely on broad or exaggerated narratives’.
We are witnessing a paradigm shift in the disclosure of sustainability information within the European Union, with the current phase focusing on striking a balance between transparency, competitiveness and proportionality. Sustainability is no longer measured by the volume of information but is now centred on companies’ ability to identify the issues that really matter, generate reliable information and credibly explain how they manage their impacts, risks and opportunities. The challenge will no longer be to report more, but to report better.