VSME vs ESRS: Which Standard Applies After Omnibus?

Since the EU's Omnibus simplification, sustainability reporting in Europe follows two very different tracks. A few thousand large companies report under the European Sustainability Reporting Standards (ESRS) — with a double materiality assessment at the core. Everyone else can report voluntarily under the VSME and its legal successor, the Voluntary Standard (VS), which also limits what large companies may demand from their suppliers.

This article explains VSME vs ESRS in practical terms: which standard applies to whom, how the two compare, what the new value chain cap means — and whether you still need a double materiality assessment if you are no longer in scope.

In short: Under Omnibus I (Directive (EU) 2026/470), the CSRD applies to companies with more than 1,000 employees and more than €450 million net turnover. They report under the revised ESRS (mandatory from FY2027) and must perform a double materiality assessment. Companies with up to 1,000 employees can report voluntarily under the Voluntary Standard (VS) — the successor to the VSME — which requires no materiality assessment, works on an "if applicable" basis and, from FY2027, acts as a value chain cap: CSRD reporters may not require more from them than the VS contains.

What Omnibus I changed

The Omnibus I Directive was adopted by the Council on 24 February 2026, published in the Official Journal on 26 February 2026 and entered into force on 18 March 2026. Member States have until 19 March 2027 to transpose it. Its effect on the CSRD is dramatic:

	Before Omnibus	After Omnibus I
EU companies in scope	Large companies (2 of 3: >250 employees, >€50m turnover, >€25m balance sheet) and listed SMEs	>1,000 employees and >€450m net turnover
Listed SMEs	In scope from FY2026 (with opt-out)	Out of scope
Non-EU groups	>€150m EU turnover	>€450m EU turnover and EU subsidiary/branch >€200m, from FY2028
Former wave two	First report for FY2025	First report for FY2027 (stop-the-clock Directive (EU) 2025/794)
Assurance	Limited, later reasonable	Limited only
Sector-specific ESRS	Planned	Dropped
Companies in scope	Approx. 50,000 (Commission estimate)	Approx. 6,750 (−85%, Commission SWD(2026) 500)

For wave-one companies that fall below the new thresholds, Member States may exempt them for financial years 2025 and 2026 — check how your country transposes this option. If you have followed the Omnibus process from the start, our earlier article on double materiality analysis after Omnibus describes the proposal stage; the figures above reflect the final directive.

What is the ESRS — and what changed in 2026?

The ESRS are the mandatory reporting standards under the CSRD. The revised ESRS, adopted by the Commission on 3 July 2026 as Delegated Regulation (EU) 2026/1563, apply to financial years beginning on or after 1 January 2027. They cut mandatory datapoints by more than 60% — see our breakdown of EFRAG's 2026 list of ESRS datapoints — and make the materiality process more proportionate, for example through a top-down approach. All DMA-related changes are covered in our article on the double materiality assessment under the revised ESRS.

What has not changed: ESRS reporting is driven by double materiality. You only report on the topics that are material from an impact perspective, a financial perspective or both.

What is the VSME — and what is the new Voluntary Standard?

The VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) was developed by EFRAG and delivered in December 2024. The Commission published it as Recommendation (EU) 2025/1710 on 30 July 2025 and encouraged SMEs, banks and large companies to use it as the common format for sustainability data requests.

Omnibus I then turned this into law. Under the amended Accounting Directive (Art. 29ca), the Commission adopted the Voluntary Standard (VS) as Delegated Regulation (EU) 2026/1560 on 3 July 2026; it was published in the Official Journal on 21 September 2026. The VS:

• is based on the VSME, with minimal changes to align it with the revised ESRS and fewer datapoints than the VSME,
• keeps the VSME structure of a Basic Module (B1–B11) and a Comprehensive Module (C1–C9),
• is intended for companies with up to 1,000 employees, with some disclosures voluntary for micro-undertakings (10 employees or fewer),
• supersedes the VSME Recommendation, which no longer produces legal effects once the VS applies.

In everyday language, "VSME" is still the term most people use — and in substance, VSME and VS are the same standard in two legal versions.

The VSME / VS modules at a glance

Basic Module	Comprehensive Module
B1 Basis for preparation	C1 Strategy and business model
B2 Practices, policies and future initiatives	C2 Practices, policies and targets
B3 Energy and greenhouse gas emissions	C3 GHG reduction targets and climate transition
B4 Pollution of air, water and soil	C4 Climate risks
B5 Biodiversity	C5 Additional workforce characteristics
B6 Water	C6 Human rights policies and processes
B7 Resource use, circular economy and waste	C7 Severe negative human rights incidents
B8 Workforce – general characteristics	C8 Revenues from certain sectors
B9 Workforce – health and safety	C9 Gender diversity ratio in the governance body
B10 Workforce – remuneration, collective bargaining and training
B11 Convictions and fines for corruption and bribery

Companies can report the Basic Module alone (Option A) or Basic plus Comprehensive (Option B). The Basic Module is always the starting point.

VSME vs ESRS: side-by-side comparison

	Revised ESRS	VSME / Voluntary Standard (VS)
Legal status	Mandatory for CSRD companies	Voluntary
Legal basis	Delegated Regulation (EU) 2026/1563	Delegated Regulation (EU) 2026/1560 (previously Recommendation (EU) 2025/1710)
Target group	>1,000 employees and >€450m turnover	Up to 1,000 employees, incl. micro-undertakings
Materiality	Double materiality assessment required	No materiality assessment — "if applicable" principle
Structure	ESRS 1, ESRS 2 + 10 topical standards (E1–E5, S1–S4, G1)	Basic Module (B1–B11) + optional Comprehensive Module (C1–C9)
Scope of disclosures	Depends on DMA outcome; datapoints cut >60% vs. 2023	Fixed list; omitted disclosures assumed not applicable
Value chain	Value chain covered in the DMA; requests to partners capped	Defines the cap for requests from CSRD companies
Assurance	Limited assurance	None required
Application	Mandatory from FY2027 (FY2026 optional)	In force since Sep 2026; cap applies from FY2027

Which standard applies to your company?

Use this quick check:

1. More than 1,000 employees and more than €450 million net turnover? You are in scope of the CSRD and must report under the ESRS — wave-one companies already, former wave-two companies for FY2027. A double materiality assessment is mandatory.
2. Non-EU group with more than €450 million EU turnover and a large EU subsidiary or branch? Group-level reporting applies from FY2028.
3. Up to 1,000 employees (or below the turnover threshold)? You have no CSRD obligation. Reporting under the VS/VSME is voluntary — but likely to be requested by customers and banks.
4. Listed SME? You are now out of scope; the VS is the natural voluntary option.

Many mid-market companies sit in a grey zone: 600 or 900 employees, growing, part of the supply chains of large reporters, financed by banks with ESG questionnaires. For them, the question is less "which standard is mandatory?" than "which information will we be asked for — and how do we produce it efficiently?"

The value chain cap: what customers may still ask you

The value chain cap is the part of Omnibus with the biggest day-to-day impact on SMEs. From financial years starting on or after 1 January 2027:

• CSRD reporters may not require sustainability information from value chain partners with up to 1,000 employees that goes beyond the datapoints listed in Annex II of the VS.
• Protected companies have a statutory right to refuse requests beyond the cap, and requesters must point out which information exceeds it.
• The cap does not prevent voluntary sharing of information that is common in a sector, contractual agreements or obligations under other EU or national law, and it only covers information requested for CSRD reporting.
• The VS also encourages banks and investors to limit ESG data requests to SMEs to the VS content.

On the ESRS side, the counterpart is a relief in the materiality assessment itself: CSRD companies may assess their value chain using sector or regional data instead of direct supplier input (revised ESRS 1 §33).

Do you still need a double materiality assessment?

If you report under the ESRS: yes. Double materiality remains the mandatory starting point — the revised standards make it more proportionate, not optional. Our worked double materiality assessment example shows what a lean, audit-ready DMA looks like under the new rules.

If you report under the VS/VSME: no, it is not required. The Commission explicitly replaced the materiality assessment with a "simpler applicability principle": you report the disclosures that apply to you, and an omitted disclosure is assumed not to be applicable.

There are, however, good reasons why many companies outside the CSRD scope still run a (lean) materiality assessment:

• You may grow into scope. Companies near 1,000 employees or €450 million turnover — or planning acquisitions — benefit from building the process before it becomes mandatory.
• The VS asks you to think beyond the list. Companies are encouraged to add sector- or company-specific information, such as Scope 3 emissions where relevant. Deciding what to add is a materiality question.
• Customers and banks ask strategic questions. C1 (strategy and business model) and C4 (climate risks) are hard to answer credibly without a structured view of your impacts, risks and opportunities. Our explainer on IROs under the CSRD shows how to identify them.
• GRI requires it. If you report under GRI, an impact materiality assessment is mandatory — see our comparison of GRI vs ESRS materiality assessments.
• International investors use ISSB logic. For financial materiality as used by the ISSB, see ISSB vs ESRS materiality.
• Strategy and risk management. A materiality assessment is the fastest way to find out which sustainability topics actually move your business — independent of any reporting obligation.

The key is proportionality. A voluntary assessment does not need 300 IROs and a three-month stakeholder programme. A focused review of the obvious topics, a short list of IROs and documented thresholds are usually enough — which is exactly the logic the revised ESRS now follow as well.

Recommendations by company type

Company	Standard	What to do now
CSRD wave one (>1,000 employees, >€450m)	Revised ESRS	Choose your FY2026 option, review your existing DMA against the revised ESRS rules, update datapoints
Former wave two in scope (first report FY2027)	Revised ESRS	Run your first DMA in 2026/27 — designed for the new top-down and proportionality rules
Mid-market company (250–1,000 employees) supplying large customers	VS (voluntary)	Prepare the Basic Module, consider Comprehensive; use a lean materiality assessment to decide what to add
Small company (fewer than 250 employees)	VS Basic Module	Report the Basic Module when requested; refer to the value chain cap for excessive requests
ESG consultancy	Both	Offer ESRS DMAs for in-scope clients and lean, scalable assessments for SME clients

How Materiality Master fits in

Materiality Master is built for the part of the process both tracks share: understanding which sustainability topics matter. Companies in scope of the CSRD use it to run a complete, audit-ready double materiality assessment — stakeholders, IROs, scoring, thresholds, matrix and audit trail — and to map the result to ESRS datapoints with the ESRS Data Points Mapping Tool. Companies outside the scope use the same workflow for a lean, voluntary assessment that they can scale up if they grow into the CSRD.

ESG consultancies serving both large and small clients can find out more on our page for consultants, and the pricing page shows the available plans.

Key takeaways

• After Omnibus I, the CSRD applies only to companies with >1,000 employees and >€450 million turnover — around 85% fewer companies than originally planned.
• In-scope companies report under the revised ESRS (mandatory from FY2027) and must perform a double materiality assessment.
• The VSME has become the Voluntary Standard (VS) (Regulation (EU) 2026/1560): voluntary, Basic Module B1–B11 plus Comprehensive Module C1–C9, no materiality assessment.
• From FY2027, the VS acts as a value chain cap protecting companies with up to 1,000 employees from excessive data requests.
• A materiality assessment is not required for VS reporters but often worth doing in lean form — for growth into scope, customer and bank requests, GRI reporting and strategy.