Comment on the revised European Sustainability Reporting Standards and the sustainability reporting standard for voluntary use

Comment on the revised European Sustainability Reporting Standards and the sustainability reporting standard for voluntary use

This comment was submitted to the European Commission’s public feedback on the draft Delegated Regulation containing the revised European Sustainability Reporting Standards (Initiative 16775) and the draft Delegated Regulation establishing the sustainability reporting standard for voluntary use by undertakings protected by the value chain cap (Initiative 17232).

1. Summary

The Climate Leadership Coalition (CLC) is pleased to comment on the two draft Delegated Regulations that together establish the revised European Sustainability Reporting Standards (“revised ESRS”) and the sustainability reporting standard for voluntary use (the “voluntary standard”). We support the Commission’s objective to reduce administrative burden, simplify the reporting framework, and protect undertakings with 1,000 employees or fewer from disproportionate and uncoordinated information requests.

The two acts are interlinked. The revised ESRS sets out the mechanism of the value chain cap; the voluntary standard defines its content. The cap therefore determines the climate and sustainability information that banks, investors and CSRD-reporting corporates can obtain from the small and mid-sized undertakings that make up most of their portfolios and supply chains. Importantly the cap also signals to companies using the voluntary standard, the relevant scope of sustainability work. Our comments focus on the calibration of the cap and propose two targeted amendments and supporting implementation guidance.

2. Include “necessary if applicable” disclosures within the cap when the condition applies

Article 3 of the draft places only disclosures marked “necessary” inside the cap. Disclosures marked “necessary if applicable” sit outside it. This calibration is too narrow.

Several climate-relevant disclosures in the voluntary standard are conditional by nature, not optional in substance. Examples include GHG emission reduction targets (C3), the transition plan for high climate impact sectors (C3), the identification and assessment of climate-related hazards and transition events (C4), the breakdown of energy consumption between renewable and non-renewable sources (B3), and the disaggregation of revenues from fossil-fuel and other excluded activities (C8). Where the condition is met, these are precisely the data points that ESRS reporters, banks and investors need to meet their own obligations under SFDR, the EBA Pillar 3 ESG disclosures, the Benchmark Regulation and prudential climate risk management.

Excluding these items from the cap creates an asymmetry: the information exists at the responding undertaking and is needed by the regulatory user, but the responding undertaking has a statutory right to decline. The result is greater reliance on proxies and sector averages — a weakness in current climate risk practice already flagged by the European Central Bank.

We recommend amending the cap so that “necessary if applicable” disclosures fall within scope when the specified condition is met. This is not a blanket expansion. Information only flows when the undertaking’s circumstances make the disclosure relevant; where the condition does not apply, no information is required and proportionality is preserved.

3. Limit the ten-employee relief in climate-critical sectors

The draft marks several environmental disclosures — total energy consumption, Scope 1 and location-based Scope 2 emissions, water withdrawal, circular economy practices, and waste — as voluntary for undertakings with ten employees or fewer.

For small service businesses, professional firms and similar entities, the relief is well calibrated. Compliance cost would be disproportionate, and the environmental footprint is limited. The relief is not proportionate, however, for asset-heavy entities with few employees. The Nordic real estate sector illustrates the issue: Finnish and Swedish property companies are commonly organized as separate legal entities per building or portfolio, with very few employees but significant energy use, emissions, physical climate risks and transition risks. The same pattern recurs in energy production, transport, logistics and parts of manufacturing.

Under the current draft, a real estate company with ten employees or fewer can satisfy the cap by reporting only identity information, employee statistics and basic social data. None of this addresses the climate characteristics of the assets the company controls. A bank financing such a company, or a CSRD-reporting tenant occupying the building, would have no contractual right to obtain energy use, emissions, climate targets, transition planning or physical risk information from the asset-holding entity.

The gap is material. The EU building stock accounts for approximately 40% of final energy consumption and 36% of energy-related GHG emissions and is a priority under the European Climate Law and the EPBD. The EBA environmental scenario analysis guidelines, taking effect in January 2027, require banks to assess transition and physical risks at counterparty and collateral level.

We recommend limiting the ten-employee relief so that it does not apply automatically in climate-critical sectors. Core environmental disclosures — energy consumption, Scope 1 and Scope 2 emissions, climate targets, transition planning and climate-related risks — should remain “necessary” or “necessary if applicable” regardless of headcount. The scope can be defined by reference to the high climate impact sectors already used in the voluntary standard.

4. Operational guidance to prevent default maximum requests

Recital 12 of the Omnibus I Directive and the accompanying Q&A make clear that reporting undertakings should request only the information they actually need, and less than the cap permits where the full dataset is not necessary. To make this principle operational, we encourage the Commission and EFRAG to publish practical guidance covering typical use cases, sector-typical defaults below the level of the cap, and digital templates that allow responding undertakings to produce the dataset once and reuse it across counterparties. Without such guidance, CSRD reporters will tend to request the maximum permitted dataset by default to avoid having to justify a narrower request, reproducing the trickle-down effect the cap was designed to address.

5. Recommendations

We recommend that the Commission:

• Include disclosures marked “necessary if applicable” within the value chain cap, with the cap applying only when the specified condition is met.
• Limit the relief for undertakings with ten employees or fewer so that it does not apply in climate-critical sectors, including real estate activities (NACE Section L) and the high climate impact sectors already referenced in the voluntary standard (NACE Sections A to H and Section M).
• Publish, together with EFRAG, practical guidance and digital templates that operationalise the principle of requesting only the information needed, including sector-typical defaults below the cap.
• Review the calibration of the cap and the lists of “necessary” and “necessary if applicable” disclosures after the first reporting cycle under financial year 2027, also taking into account how companies using voluntary standard have operationalized sustainability work.

We stand ready to support the Commission, EFRAG and the co-legislators in the further calibration of the revised ESRS, the voluntary standard and the value chain cap.