Welcome to this month’s sustainability policy newsletter.
While we continue to await the Ninth Circuit's review of California's climate disclosure laws, Europe took one more step towards a finalized CSRD, with the European Commission releasing its draft simplified ESRS. And in Australia, the government proposed simplifications to its reporting standards to better align with the rest of the world. Read on for more of the latest on global sustainability disclosure policy.
Europe: Simplified ESRS brings greater compatibility with ISSB
What happened: On May 6, the European Commission published its draft Simplified ESRS for a 4-week consultation. The standards are mostly unchanged from the December 2025 version, with a few key amendments that increase alignment with ISSB. Reminder: while the CSRD addresses who needs to report and when, the ESRS cover what to report.
Why it matters: The current consultation is the last procedural step before companies have clarity on what the ESRS require. Once adopted, companies reporting in 2028 must use these standards in their sustainability reports. Wave 1 companies reporting in 2027 may optionally use these standards instead of the old ESRS.
What you should do now: Wait until the final ESRS are released next month (though if interested, read pages 1-5 of the Draft Delegated Regulation to see how the Commission is thinking about simplification). We don’t expect big changes between the current and final draft, expected in mid/late-June. An early review will help inform future decisions on updated double materiality assessments, data collection and governance processes, and reporting strategy.
The details:
- 61% of data points have been removed compared to the original ESRS, but most quantitative data points remain. This is unchanged from EFRAG’s draft submitted in December 2025.
- While the Commission’s draft rules out complete convergence between ESRS and ISSB, it does propose changes to better align the different standards and allow companies to reuse certain sections:
- Companies may use the financial or operational control approaches described in the Greenhouse Gas Protocol, increasing interoperability with standards like ISSB.
- Companies can disclose plans that aren't compatible with the Paris Agreement's 1.5-degree goal in alignment with ISSB.
- Companies must make sure their ESRS-aligned sustainability reports meet the ‘fair presentation’ threshold. In practice, this means that after conducting a double materiality assessment, collecting all the required data, and authoring the sustainability report, companies should step back and assess whether this report has fairly represented all of its sustainability-related impacts, risks, and opportunities. ISSB disclosures also require fair presentation, so equating these thresholds makes it easier for companies to reuse ESRS disclosures in their ISSB-aligned filings.
Timeline: Where we are in the simplification process
Europe: Member states begin adoption of CSRD Omnibus—watch for additional requirements
What’s happening: With all the attention on the ESRS, it’s easy to forget that there is a parallel process ongoing to adopt the CSRD. With the Omnibus package approved, the CSRD must be re-transposed into each EU Member State's national law by March 2027. Each country's parliament or government must pass new or amended legislation to give the revised Directive legal effect.
Why it matters: Member states are technically permitted to “gold-plate” the Directive—imposing stricter requirements in their national law than in the EU baseline. Given the back-and-forth of the Omnibus process, we expect minimal gold-plating. But it is still possible, and we recommend that companies monitor developments in countries where they are headquartered or have in-scope subsidiaries.
What to do now: Engage local or external counsel to help you determine whether you are in scope under your headquarters’ Member State's transposition. We recommend starting with the Ropes & Gray CSRD transposition tracker, which draws on leading law firms across Member States to provide high-level summaries of transposition status and any gold-plating.
See our full guide to CSRD and the ESRS here.
Australia: Government proposes simplification measures
What happened: On May 12, Australia’s Treasury presented the government’s annual budget, containing proposals for raising sustainability reporting thresholds for small companies, providing AASB S2 implementation guidance, and relaxing some assurance requirements. Most companies currently working on AASB S2 reporting are not drastically affected, though Group 1 and 2 companies should watch for any guidance on scope 3 reporting.
Why it matters: In the past five months, there have been significant updates in sustainability reporting requirements in the EU (Omnibus) and UK (UK SRS). Prior to the latest budget proposal, Australia had some of the strictest sustainability reporting requirements in the world. The government's proposals align with requirements across the rest of the world, underscoring the trend of governments and regulators upholding mandatory sustainability reporting, but paring back some of the most difficult requirements.
The details: The Australian government aims to:
- Clarify how companies should apply the principle of “undue cost or effort” when preparing their AASB S2 disclosure. Group 1 companies—Australia’s largest entities—will have to disclose scope 3 emissions this year. Without this clarification, companies can be unsure how much they can rely on estimates vs. having to collect actual data from suppliers or customers. As there is limited precedent on how companies should approach mandatory scope 3 disclosure (only CSRD Wave 1 companies have faced these requirements before), this guidance should help companies and assurance providers practically understand what their obligations are.
- Reassess assurance requirements for AASB S2. Australia is currently the only major economy with a clear timeline for reasonable assurance of scope 3 emissions—this may change in the future.
- Raise the revenue thresholds from A$50M to A$100M, and balance sheet thresholds from A$25M to A$50M for all reporting requirements (financial and sustainability). This effectively raises the thresholds for Group 3 reporters (who must first publish ISSB-aligned disclosures in 2028). Thresholds for Group 1 and Group 2 companies are unchanged.
What to do now: If you are a Group 1 company in scope for AASB S2, monitor the Australian Securities and Investments Commission’s website for any updates on confirmed changes to reporting requirements. In the meantime, review CSRD sustainability reports to understand how similar companies have approached mandatory scope 3 disclosure.
