How the Omnibus I Directive Changes CSRD — And Why VSME Matters More Than Ever
On 24 February 2026, the EU Council adopted the Omnibus I Directive, cutting CSRD scope from 49,000 to 1,000 companies. Here is what it means for SMEs.
By VSME Reporter
On 24 February 2026, the EU Council adopted the Omnibus I Directive, the most significant simplification of EU sustainability reporting since the CSRD was introduced. The directive reduced the number of companies subject to CSRD from approximately 49,000 to about 1,000 by raising the thresholds to 1,000 employees and EUR 450 million in turnover. For SMEs, this means VSME — not CSRD — is now the relevant sustainability reporting framework for the vast majority of European businesses.
What Changed: Key Numbers
| Metric | Before Omnibus I | After Omnibus I |
|---|---|---|
| Companies subject to CSRD | ~49,000 | ~1,000 |
| Employee threshold | 250+ | 1,000+ |
| Turnover threshold | EUR 50M+ | EUR 450M+ |
| ESRS data points | 1,073 | ~320 |
| First application of simplified ESRS | N/A | Financial year 2027 |
| Transposition deadline | N/A | 12 months from entry into force |
The Five Major Changes
1. Dramatically Raised CSRD Thresholds
The most impactful change is the new threshold: companies now need both 1,000+ employees and EUR 450M+ annual turnover to fall under CSRD. Previously, the thresholds were 250 employees or EUR 50M turnover (meeting two of three size criteria). This single change removed approximately 48,000 companies from mandatory reporting.
2. Simplified ESRS (320 Data Points Instead of 1,073)
For the remaining ~1,000 companies, the ESRS has been significantly simplified. The European Commission reduced mandatory data points from 1,073 to approximately 320, focusing on the most material and decision-useful metrics.
3. The Value Chain Cap
This is the most important change for SMEs. CSRD-reporting companies can no longer request sustainability data from their SME supply chain partners that exceeds the scope of VSME. Specifically:
- Requests must be limited to VSME Basic Module level for general supply chain partners
- Comprehensive Module data can only be requested with a specific justification
- SMEs have the right to decline requests that exceed VSME scope
- A 3-year transition period applies before the cap is fully enforced
This means VSME defines both the minimum expected level of SME sustainability data and the maximum that can be demanded.
4. Delayed Reporting Waves
Companies that were in CSRD Wave 2 (2026 reporting) and Wave 3 (2027 reporting) have received a 2-year delay. The simplified ESRS applies from financial year 2027 at the earliest.
5. Reduced Assurance Requirements
The Omnibus I also eased external assurance requirements, reducing the scope of mandatory limited assurance for the initial years.
Impact on SMEs by Scenario
Scenario A: SME in the Supply Chain of a Large Company
Before Omnibus I: Your large customer might have asked you to report at near-CSRD level, with hundreds of data points and detailed Scope 3 emissions.
After Omnibus I: Your customer can only ask for VSME-level data. If you complete a VSME Basic Module report, you have met the legal maximum that can be requested.
Action: Complete a VSME Basic Module report. This satisfies all supply chain data requests within the regulatory framework.
Scenario B: SME That Was Preparing for CSRD Wave 3
Before Omnibus I: You were spending significant resources preparing for CSRD compliance.
After Omnibus I: If you have fewer than 1,000 employees and less than EUR 450M turnover, you are no longer subject to CSRD.
Action: Stop CSRD preparation. Transition to VSME reporting. Your ESRS data is fully compatible — you are switching to a simpler format, not starting over.
Scenario C: Listed SME on an EU Regulated Market
Before Omnibus I: Listed SMEs were subject to CSRD regardless of size.
After Omnibus I: Listed SMEs remain subject to sustainability reporting, but under the simplified LSME (Listed SME) standard rather than full ESRS.
Action: Check whether LSME or VSME is appropriate for your situation. Consult your listing requirements.
Scenario D: Non-EU SME Supplying to EU Companies
Before Omnibus I: Unclear requirements, with some EU customers demanding extensive ESG data.
After Omnibus I: The value chain cap applies globally. EU companies cannot request data beyond VSME scope from any supplier, including non-EU suppliers.
Action: Complete a VSME report to proactively address all potential EU supply chain requests.
What This Means for VSME Adoption
The Omnibus I Directive has elevated VSME from a "nice to have" to a critical piece of the EU sustainability reporting architecture:
- VSME becomes the default SME standard. With CSRD now limited to ~1,000 companies, millions of SMEs need a reporting framework. VSME fills that role.
- The value chain cap creates predictability. SMEs now know exactly what data they might be asked for — it is capped at VSME level.
- VSME is the lingua franca of supply chain ESG. Both the requesting company and the responding SME now share a common reference point.
- Tool investment is justified. Companies hesitating on VSME reporting software now have regulatory clarity that VSME is the long-term framework.
Should Your Company Switch from CSRD to VSME?
If you now fall below the Omnibus I thresholds: Yes. You are no longer legally required to report under CSRD. Switching to VSME will save significant time and cost while still meeting stakeholder expectations.
Key considerations when switching:
- All ESRS data collected maps directly to VSME disclosures
- Inform your auditor, if engaged, that CSRD assurance is no longer needed
- Communicate the change to stakeholders (customers, investors, banks)
- Consider retaining Comprehensive Module reporting if stakeholders expect it
- Update your reporting timeline and budget accordingly
Action Checklist for SMEs (Post-Omnibus I)
- Check your status: Do you meet the new CSRD thresholds (1,000+ employees AND EUR 450M+ turnover)?
- If exempt from CSRD: Stop CSRD preparation; adopt VSME
- If still subject to CSRD: Note the simplified ESRS timeline (FY 2027)
- Complete a VSME Basic Module report to proactively address supply chain requests
- Try VSME Reporter's interactive demo to see how it works.
- Inform supply chain partners of your VSME reporting status
- Educate your team on the value chain cap and what data can be requested
- Set up annual VSME reporting as an ongoing process
Frequently Asked Questions
When does Omnibus I take effect?
The directive enters into force 20 days after publication in the Official Journal. Member states have 12 months to transpose it into national law. The simplified ESRS applies from financial year 2027.
Can a large company still ask me for ESG data beyond VSME scope?
Legally, no. The value chain cap limits supply chain data requests to VSME level. A 3-year transition period gives companies time to adjust.
Is the Omnibus I change final?
Yes. The EU Council adopted the directive on 24 February 2026 after agreement with the European Parliament.
What about Omnibus II?
Omnibus II is under discussion and may bring further changes to due diligence (CS3D) and taxonomy requirements, but the CSRD scope changes in Omnibus I are confirmed.
Published by VSME Reporter. Updated March 2026. This article will be updated as Omnibus I transposition progresses across EU member states.