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The entry into force of the Omnibus I Directive (March 2026) fundamentally changes the landscape of sustainability reporting. While fewer companies are now required to report in full under the CSRD, the VSME standard has become the essential tool for those now "out of scope".

The EU Commission's Omnibus Package

The EU Commission has achieved four main goals with this update:

• Promoting voluntary reporting: Companies that no longer fall under the CSRD can use the VSME standard to provide a clear, standardized basis for documenting their sustainability contribution.
• Credibility and future-proofing: Developed by EFRAG, the VSME is the only officially recognized “lite version” of the ESRS. Working with VSME today ensures a seamless transition to full ESRS if the company grows back into scope.
• Stopping the "trickle-down effect": The Omnibus I Directive explicitly prevents companies from being burdened by excessive, non-standardized reporting requirements from their business partners.
• Protection of smaller companies: The VSME standard now acts as a statutory "Value-Chain Cap." It is no longer just a recommendation; it is a legal limit defining the maximum sustainability information that can be requested from SMEs and small mid-caps.

The has been officially adopted as a delegated act, enshrining this "simplified but standardized" approach in EU law as of early 2026.

What is the VSME standard?

The VSME standard was developed by the European Financial Reporting Advisory Group (EFRAG) to provide non-reporting companies with a basis for voluntary sustainability reporting. As a simplified version of the comprehensive European Sustainability Reporting Standards (ESRS), it enables structured but less complex reporting.

Main objectives of the VSME standard

The standard pursues several key objectives that are specifically tailored to the needs and challenges of SMEs:

• A Standardized Language: Providing sustainability information that meets the requirements of large companies and supports investors and banks in assessing credit worthiness.
• Efficiency: Improving the management of environmental and social issues to promote resilience without overwhelming small teams.‍
• The "Value Chain Cap": As of the March 2026 Omnibus I Directive, the VSME acts as the legal ceiling for what large companies can demand from their SME suppliers.

The VSME standard is entirely voluntary and has been developed to make reporting proportional and actionable.

Key features of the VSME standard

• Reduced scope: Compared to the ESRS, the requirements of the VSME standard are easier to implement.
• ‍Two Finalized Modules: Basic (for micro-entities) and Comprehensive (for SMEs facing complex bank or customer requests).
• Compatibility with ESRS:  The data structure is 100% compatible with the ESRS, allowing for a "step-up" approach as a company grows.

How VSME and ESRS are related

The VSME standard is not a completely separate construct, but a simplified derivation of the ESRS. This connection is important to understand:

• Common core principles: VSME is based on the same sustainability principles as the ESRS.
• Reduced level of detail: While the ESRS requires very extensive disclosures, the VSME standard focuses on the essentials.
• Compatible data structure: The data collected according to VSME can generally be transferred to a complete ESRS report.

Who is the VSME standard intended for?

The standard is aimed at all companies that are not subject to the mandatory CSRD reporting obligation. Following the 2026 Omnibus updates, this now includes:

• Small Mid-Caps: Companies with fewer than 1,000 employees and less than €450M in turnover.‍
• SMEs and Micro-enterprises: Any business currently facing "trickle-down" data requests from business partners or lenders.

Although these companies are not legally obliged to disclose their sustainability performance, they are increasingly confronted with demands from investors, banks, customers, business partners and other stakeholders to create transparency about their social and environmental impact.

These companies can voluntarily apply the VSME standard to transparently communicate their sustainability performance.

Structure of the VSME Standard

The standard consists of two modules that can be used flexibly to create reports according to specific requirements:

1. Basic VSME Module

The basic module is the entry point to sustainability reporting and represents the minimum requirements. It comprises eleven disclosures (B1-B11) on the following ESG topics:

• General information (B1-B2):
  
  • Selection of report type (e.g. individual or consolidated)
  • Information on existing practices, policies, and initiatives for a sustainable economy
• Environmental metrics (B3-B7):
  
  • Energy consumption and greenhouse gas emissions (Scope 1 and Scope 2)
  • Emissions to air, water, and soil
  • Information on biodiversity and water management
  • Resource use and waste management
• Social metrics (B8-B10):
  
  • Key figures on workforce structure, health, and safety
  • Equality and training measures
• Governance metrics (B11):
  
  • Corruption and bribery

The basic module provides a clear structure for collecting and presenting basic sustainability information. It is now recognized by most EU banks as the minimum data set for "Green" SME lending.

2. Comprehensive VSME Module

The comprehensive module supplements the basic module with additional reporting requirements that are relevant for stakeholders such as banks and investors. It includes:

• Strategy and business model: Description of the link between business activities and sustainability, including strategic goals.
• Extended environmental metrics: Reporting on Scope 3 emissions, climate risks, reduction targets and action plans.
• Social and governance aspects: Disclosures on human rights policies, serious incidents, gender diversity and revenues from sensitive industries (e.g. fossil fuels).

Important: Companies can only use the comprehensive module if they have already fully applied the basic module.

Advantages of the VSME Standard (March 2026 Update)

• Practicality for small teams: The standard takes limited resources into account and enables efficient reporting with less effort. By using a single, finalized standard recognized by all CSRD-regulated customers (>1,000 employees), you stop answering different, conflicting questionnaires.
• Easier access to finance: EU banks have now standardized their lending criteria around the VSME. Providing a Basic Module report is often the fastest way to secure "Green" financing and better interest rates.
• Improved supply chain transparency: Companies involved in supply chains of companies subject to CSRD can use the VSME Standard to efficiently fulfill reporting requirements. Under the Omnibus I Directive, the VSME is now the legal "ceiling" for data requests.
• Strengthen competitiveness: Companies that use the VSME standard signal proactive commitment and can positively differentiate themselves from the competition.

Practical Implementation of the VSME Standard

Sustainability managers can implement the VSME standard by taking the following steps:

1. Perform a gap analysis: Identify gaps in your existing sustainability data.
2. Materiality analysis: Focus on the most relevant sustainability aspects for your company. You do not need to perform a double materiality analysis, as required by the CSRD, for VSME reporting — but EFRAG recommends doing so for the comprehensive module.
3. Optimize data collection: Set up compact processes to meet VSME requirements. An ESG software can help you to efficiently collect the missing data.
4. Build a reporting structure: Create a reporting scheme that complies with VSME requirements and reflects your corporate identity.

Conclusion: Using VSME as a Strategic Opportunity

The VSME standard offers companies below the CSRD obligation a strategic tool for professional sustainability communication. The Omnibus Package in particular makesit the definitive standard for companies with fewer than 1,000 employees and €450M in turnover. By choosing between the Basic and Comprehensive module, companies can adapt their reporting to internal resources and external expectations.

As a sustainability manager, you can use the VSME standard to create a solid foundation for your sustainability communication, report efficiently and prepare for the transition to more comprehensive standards. The standard closes the gap between lack of reporting and full CSRD compliance — a strategic opportunity for forward-looking companies in the sustainable competitive environment.

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