EU VS, VSME, CSRD–ESRS and the Omnibus: Clearing The Confusion

This article clarifies the differences between CSRD, ESRS, VSME, the new VS, and the Omnibus regulatory changes. It explains their timeline, relationship, reporting requirements, and which framework companies should use depending on whether they are subject to mandatory CSRD reporting or need a voluntary sustainability report.

Recently, a client asked me: “I heard in a webinar that the VS will replace the VSME. Is that correct?”

The short answer is yes, but “replace” needs some explanation. The VS is the successor to the VSME framework, not a completely new reporting concept. It builds on the VSME and gives it a broader legal and practical role, particularly for companies outside the mandatory CSRD scope that still face sustainability-data requests from customers, banks, investors, or business partners.

The confusion mainly comes from the fact that these terms refer to different things:

CSRD is an EU reporting directive.
ESRS are the reporting standards used to comply with the CSRD.
VSME was the earlier voluntary reporting standard for non-listed SMEs.
VS is the new voluntary sustainability reporting standard adopted by the European Commission.
Omnibus is the legislative package that changed the scope and requirements of the CSRD and related sustainability legislation.

1. What are these frameworks?

CSRD: the legal obligation

The Corporate Sustainability Reporting Directive, or CSRD, is EU legislation. It determines which companies must prepare and publish sustainability information.

It does not itself contain all the detailed questions, metrics, and disclosure requirements. Instead, companies within its scope report according to the ESRS.

Following the Omnibus changes, mandatory CSRD reporting is focused on EU companies and groups with both:

More than 1,000 employees on average; and
More than €450 million in net annual turnover.

The revised rules also significantly reduce the number of companies that were previously expected to report under CSRD. The exact application may still depend on national implementation and the company’s legal structure.

ESRS: the detailed reporting standards

The European Sustainability Reporting Standards, or ESRS, provide the technical requirements for companies reporting under the CSRD.

They cover topics such as:

Climate change.
Pollution.
Water and marine resources.
Biodiversity.
Resource use and circular economy.
Own workforce.
Workers in the value chain.
Affected communities.
Consumers and end-users.
Business conduct.

CSRD reporters need to apply the principle of Double Materiality. This means assessing both:

How sustainability matters affect the company financially; and
How the company affects people and the environment.

Compared with the voluntary SME standards, ESRS reporting is more extensive, formalised and demanding. It also involves assurance requirements.

VSME: the earlier voluntary standard

EFRAG developed the VSME for non-listed micro, small and medium-sized undertakings. EFRAG delivered the VSME technical advice to the European Commission in December 2024. Its purpose was to give smaller companies a proportionate way to report sustainability information without applying the full ESRS.

The VSME was especially useful for companies that:

Were outside the CSRD scope.
Wanted to respond to customer or supply-chain requests.
Needed sustainability information for banks or investors.
Wanted to prepare for future regulation.
Needed a structured ESG report but lacked the resources for full ESRS reporting.

The VSME was not simply a small CSRD. It was a separate, voluntary, and proportionate framework.

VS: the successor to VSME

On 3 July 2026, the European Commission adopted a voluntary sustainability reporting standard for smaller companies outside the mandatory CSRD scope, alongside the revised ESRS. The Commission describes it as a single, proportionate reference framework for smaller companies.

This new standard is commonly referred to as the VS, or Voluntary Standard.

It is based on the VSME, so the underlying approach remains familiar:

Voluntary reporting.
Proportionate disclosures.
A simplified structure.
A focus on useful sustainability information.
Support for value-chain, financing, and stakeholder requests.

However, the VS is broader than the original VSME in terms of its intended users. It is particularly relevant to companies that are no longer subject to mandatory CSRD reporting after the Omnibus changes but still want or need to report sustainability information.

Omnibus: the rule-changing package

The Omnibus is not a reporting standard. It is a package of legislative changes intended to simplify EU sustainability regulation.

Among other changes, the Omnibus:

Narrows the scope of mandatory CSRD reporting.

Raises the employee and turnover thresholds.
Removes many companies from the mandatory reporting population.
Simplifies elements of the sustainability reporting framework.

Introduces a legal basis for limiting information requests to smaller companies in the value chain.
Supports the development of a voluntary standard for companies outside CSRD.

The revised CSRD rules entered into force on 18 March 2026, with Member States given time to transpose the changes into national law.

2. The timeline

The following timeline explains how the frameworks developed.

Date	Development	Why it matters
December 2024	EFRAG delivered the VSME technical advice to the European Commission.	The first detailed EU-level voluntary reporting framework for non-listed SMEs became available.
July 2025	The European Commission recommended the VSME for companies outside the CSRD scope.	The VSME became the main EU reference point for voluntary SME reporting.
2025–2026	The Omnibus legislative process changed the CSRD framework.	Many companies that might previously have expected to report under CSRD moved outside the mandatory scope.
March 2026	The final Omnibus legislation entered into force.	The revised CSRD thresholds and simplification measures began taking effect.
3 July 2026	The Commission adopted revised ESRS and the VS.	The VS became the updated voluntary framework for companies outside mandatory CSRD reporting.
From the relevant future reporting periods	Companies should use the applicable revised ESRS or VS, depending on their status.	Businesses need to determine whether they are mandatory CSRD reporters or voluntary VS users.

The practical transition point is important. A company should not assume that every future report must automatically use the old VSME document. It should check the applicable version, effective date and national implementation position.

3. The differences

Criterion	CSRD	ESRS	VSME	VS	Omnibus
What is it?	EU directive	Reporting standards	Earlier voluntary standard	Updated voluntary standard	Legislative package
Main purpose	Defines who must report	Defines what mandatory reporters disclose	Simplifies reporting for non-listed SMEs	Provides the updated voluntary framework	Changes and simplifies EU sustainability rules
Mandatory?	Yes, for companies in scope	Yes, through CSRD	No	No, in principle	It changes legal obligations
Main users	Large companies and groups meeting the revised thresholds	Companies subject to CSRD	Non-listed micro, small and medium-sized companies	Companies outside mandatory CSRD, including many companies affected by the new thresholds	EU companies affected by sustainability legislation
Complexity	High legal obligation	High	Low to moderate	Low to moderate	Not a reporting framework
Double materiality	Required for companies in scope	Central reporting principle	Proportionate approach	Proportionate approach	Changes the surrounding legal framework
Assurance	Assurance applies under CSRD requirements	Relevant to CSRD reporting	Generally no mandatory assurance	Generally voluntary and proportionate	Depends on the final legal requirement
Best described as	The law	The technical rulebook	The previous voluntary SME framework	The successor voluntary framework	The regulatory simplification package

4. Does the VS replace the VSME?

Yes, but not in the sense that companies must abandon all work already completed under the VSME.

The VS is based on the VSME, so existing VSME work should remain useful. Companies can generally expect continuity in areas such as:

Basic climate and emissions information.
Energy consumption.
Workforce information.
Governance and business conduct.
Policies, actions and targets.
Sustainability information requested by business partners.

However, companies should review the VS before publishing a new report because:

The name and legal status have changed.
The intended population is broader.
The final disclosure requirements may differ from the earlier VSME.
The VS may become the reference framework for value-chain information requests.
Stakeholders may begin asking specifically for a VS-based report.

A sensible transition approach is:

Complete or preserve the current VSME data collection.
Obtain the final VS and compare its requirements with the VSME.
Map existing VSME disclosures to the VS.
Identify any new data points or definitions.
Update the reporting template and internal responsibilities.
Explain in the report that the company has transitioned from VSME to VS, if relevant.

5. Which framework should a company use?

Use CSRD and ESRS when reporting is mandatory

A company should use the CSRD and applicable ESRS when it falls within the mandatory reporting scope after the Omnibus changes.

This is not a matter of choosing between ESRS and VS. If the company is legally in scope, a voluntary report under the VS does not replace the mandatory ESRS report.

Use VS when the company is outside CSRD but needs credible reporting

The VS is likely to be the appropriate option for companies that are outside mandatory CSRD scope but still want a recognised EU framework.

This includes companies that:

Have fewer than 1,000 employees or do not meet the revised threshold combination.
Have been removed from mandatory CSRD scope because of the Omnibus.
Supply larger companies.
Need sustainability information for customers.
Want to respond to bank or investor requests.
Want a proportionate public sustainability report.
Want to maintain ESG data systems without the full ESRS burden.

Use the VS for value-chain requests

A supplier outside CSRD may still receive sustainability questionnaires from a large customer.

The VS can provide a structured answer to those requests. Instead of responding to multiple customised questionnaires, the supplier can prepare a standardised report and share the relevant information.

This is particularly important because the revised framework introduces a value-chain limitation intended to prevent larger reporting companies from demanding unlimited sustainability information from smaller companies. The VS therefore becomes not only a reporting option but also a practical reference point for what information can reasonably be requested.

A simple decision tree

If you are wondering which one to use for your company report, start asking the following question

Question 1: Is the company within the revised mandatory CSRD scope?

Yes: report under CSRD using the applicable ESRS.
No: continue to Question 2.

Question 2: Does the company need to provide sustainability information to customers, banks, investors or other stakeholders?

Yes: consider preparing a VS report.
No: continue to Question 3.

Question 3: Does the company still want a structured sustainability report?

Yes: use the VS as a proportionate reporting framework.
No: the company may choose not to publish a formal sustainability report, while still maintaining basic ESG data and controls.

Reference

1. The CSRD Omnibus: what changed

2. VS Standard: Simplified Sustainability Reporting for SMEs and Mid-Sized Companies

3. Efrag

4. BDO

5. Deloitte

6. Omnibus I - simplification of the directives on corporate sustainability reporting (CSRD) and due diligence (CSDDD)

7. VSME vs CSRD and ESRS: Differences, Links and Use Cases for SMEs

8. EU Sustainability Reporting: Less is more?

9. Efrag - VSMEs

10. European Commision

11. KPMG