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ESG Reporting

VSME Standard vs. Full CSRD: Choosing the Right Reporting Path After Omnibus

Rimsha Khan
October 26, 2026
7 min read

The CSRD was not scrapped. The CSRD was split into two paths.

After the EU’s Omnibus I reforms, sustainability reporting in Europe follows two tracks. The largest companies report under a slimmed-down CSRD. All other companies can use the EU’s Voluntary Standard, which is built on the VSME.

For businesses the question has changed from “When do we start CSRD reporting?” to “Which reporting path is right for us?” This guide covers both frameworks, their applicability, key differences, and how to decide which best fits your needs.

What is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is the EU’s mandatory sustainability reporting law. The CSRD first came into force on 5 January 2023.

In-scope companies report using the European Sustainability Reporting Standards (ESRS). The ESRS are built on double materiality. A company assesses two things:

A) How sustainability & climate change challenges affect the company’s financial performance

B) How the company’s own activities affect people and the environment

The company then reports on the topics that are material.

What Is VSME, the New Voluntary Sustainability Standard?

The VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) is the voluntary simpler alternative. The VSME became EU law in three steps:

EFRAG builds the standard in 2024. EFRAG published the VSME in December 2024 SME standard and is later endorsed by the European Commission.
The Commission recommends the VSME in 2025. The Commission published it as Recommendation (EU) 2025/1710 on 30 July 2025. The Recommendation states that smaller undertakings fall outside the CSRD but are encouraged to use the VSME, which covers the same sustainability issues as the ESRS in a proportionate way.
The new Voluntary Standard is adopted in 2026. The European Commission adopted the standard on 3 July 2026. Published as Commission Delegated Regulation (EU) 2026/1560, it came into force on 24 September 2026, giving eligible businesses a simpler way to report sustainability information voluntarily.

Three things to know about the VSME:

-It replaces the Recommendation. From the date the Regulation enters into force – Recommendation (EU) 2025/1710 no longer has effects.

-It changes little. Changes from the VSME are kept to a minimum mainly to align the VSME with the revised ESRS.

-It scales down for the smallest companies. Certain datapoints are voluntary for undertakings with 10 employees or less even though they are essential for other undertakings

In practice, VSME remains the commonly used term, while the new Voluntary Standard (VS) is its updated EU version with simplified reporting requirements and protections for smaller businesses.

The VSME modules briefly

The standard has a Basic Module (B1–B11) of core ESG metrics and a Comprehensive Module (C1–C9) with disclosures that are likely requested by banks, investors and corporate clients.

Basic Module	Comprehensive Module
B1 Basis for preparation	C1 Strategy and business model
B2 Practices, policies and future initiatives	C2 Detail on practices and policies
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 sectors
B9 Workforce: health and safety	C9 Gender diversity ratio in the governance body
B10 Workforce: pay, collective bargaining and training
B11 Convictions and fines for corruption and bribery

Companies can report the Basic Module or the Basic Module plus the Comprehensive Module. The design assumes the company completes the Basic Module first and adds the Comprehensive Module where the company’s counterparties need it.

What Omnibus changed for the CSRD

The Omnibus I Directive (EU) 2026/470 was published in the EU’s Official Journal on 26 February 2026.

Higher thresholds: EU companies are now in scope when they exceed both €450 million net turnover and 1,000 employees on average

Listed SMEs removed: The final directive excludes listed SMEs.

Assurance stays limited: The planned move to reasonable assurance was removed.

Lighter ESRS: The revised ESRS cut mandatory datapoints by over 60% and are expected to cut reporting costs by over 30% per company (European Commission). They apply to years starting on or after 1 January 2027.

Which path applies to you?

More than 1,000 employees AND more than €450 million in net turnover?

Yes → Full CSRD reporting under the revised ESRS

Reporting period: Financial years starting on or after 1 January 2027.

First reporting deadline: 2028, for the 2027 financial year.

Non-EU group with more than €450m EU turnover AND an EU subsidiary/branch above €200m?

Yes → CSRD applies under the dedicated standards for non-EU companies (ESRS-40a)

Reporting period: Financial year 2028

First reporting deadline: 2029

No → No mandatory CSRD filing under these rules

Reporting period: No mandatory reporting period

Deadline: No mandatory filing deadline

Recommended route: Use VSME or the new Voluntary Standard to respond to sustainability data requests from customers and business partners.

How this plays out by company type:

Large companies above both thresholds: The CSRD is mandatory. That means a materiality assessment, ESRS disclosures and limited assurance.

Former reporters that fell out of scope: A transition exemption covers “wave one” companies that fall out of scope for 2025 and 2026. However, each Member State must clarify how it applies.

SMEs and mid-sized companies: No CSRD filing is required. The VSME is the recognised format for sharing ESG data with clients and lenders.

Non-EU groups: The CSRD applies if Non‑EU groups generate over €450 million turnover in the EU for two consecutive years and have an EU subsidiary or branch above €200 million.

Why “voluntary” does not mean optional

Large CSRD reporters still need data from their suppliers. Omnibus put a limit on what CSRD reporters can ask for:

The cap: Value‑chain companies with no more than 1,000 employees can decline to provide information beyond what the voluntary standard specifies.

What it covers: The cap only applies to requests made for CSRD reporting not other commercial information exchanges

When it starts: It applies from years starting on or after 1 January 2027.

The result: The VSME is fast becoming the format for supplier ESG data. Being VSME‑ready is now an advantage, not just a compliance exercise.

VSME vs. CSRD: Side by side

	Full CSRD	VSME / Voluntary Standard
Legal basis	Delegated Regulation (EU) 2026/1563	Delegated Regulation (EU) 2026/1560
Who	Above 1,000 employees and €450M turnover	Out-of-scope companies can use VSME to share ESG data, with value chain cap protection.
Mandatory?	Yes	No
Double materiality	Required	Not required
Structure	Cross-cutting and topical ESRS	Basic (B1–B11) plus optional Comprehensive (C1–C9)
Assurance	Limited assurance	Not required
Applies from Wave 1: Already reporting; revised ESRS from FY2027. Newly in scope: FY2027 data reported in 2028. Non-EU groups: FY2028 data reported in 2029	FY2027 Already reporting (Wave 1): Continue CSRD reporting under the revised ESRS. Newly in scope: Report FY2027 data in 2028.	Now (value-chain cap from FY2027)

Choosing the path: Three questions to ask

Are you close to the thresholds? Growth or acquisitions could bring you into scope. Report, under the VSME now. Build ESRS‑grade data underneath.
Who is asking for your data? For customers start with the Basic Module. For banks and investors add the Comprehensive Module.
What do you report on? California’s SB 253, ISSB-based rules and investor surveys overlap heavily with EU disclosures. Pick a path that fits one data strategy.

Conclusion: One Data Foundation for All Reporting Paths

Omnibus I changed who must report, not the need for credible ESG data. Whether you report under the full CSRD or the VSME, the smart move is to build one reliable data foundation and report from it.

IRIS CARBON gives you exactly that: one AI-powered platform that supports both paths.