Is Your Mid-Sized Company Ready for the New VSME?

The recent approval of the Omnibus Simplification Package text sent ripples through the European regulatory landscape. While the headlines focused on the reduction of the CSRD’s scope, what was largely missed was the repurposing of the Voluntary SME (VSME) standard.

Originally designed by the European Financial Reporting Advisory Group (EFRAG) for small businesses, the VSME is now being positioned as the reporting framework for companies with up to 1,000 employees.

CSRD & CSDDD Omnibus Changes: Final Deal Explained

From VSME to a “Voluntary European Standard”

Tens of thousands of mid-sized companies that were preparing for the full weight of the Corporate Sustainability Reporting Directive (CSRD) now find themselves in a new category. The VSME is no longer just for the “small” players; it is effectively becoming the voluntary European Sustainability Reporting Standard.

Developed by EFRAG, the VSME standard is a standalone reporting framework specifically tailored for non-listed, micro-, small, and medium-sized undertakings (<250 employees) that voluntarily choose to report sustainability data. This standard was designed to be proportional, bridging the gap between voluntary and comprehensive sustainability reporting by giving SMEs the guidance to meet data requests efficiently and scale their sustainability strategy when required.

However, a standard designed for a smaller enterprise doesn’t always translate effectively to a company of a few hundred people with complex, international value chains.

Why “Simple” Isn’t Always “Better”

While reducing administrative burden is a win for businesses, the current VSME recommendation has two significant gaps for the 250–1,000 employee bracket:

• The Absence of Materiality: The current VSME does not require a formal materiality assessment. For a mid-sized company, this creates a disconnect. Without identifying material risks, the data reported may lack relevance for the very financial institutions and business partners who need it.
• Lack of Granularity: Investors and partners rely on “decision-useful” data. High-level or binary (Yes/No) disclosures – while appropriate for a small business – fail to capture the nuance of a mid-sized company’s sustainability impact.

Looking Ahead: Making the Standard “Fit for Purpose”

The Commission is expected to adopt the delegated act establishing these voluntary standards by mid-2026, in parallel with the introduction of the simplified ESRS. However, current signals suggest there is little appetite for making significant changes to the original VSME text. If the standard largely remains in its current form, it’s unlikely to meet the reporting needs of companies at the higher end of the 1,000-employee threshold.

For these mid-sized, the “fit for purpose” choice may not be the VSME at all. Instead, companies should keep a close eye on the simplified ESRS. Expected updates in mid-2026 are likely to provide a more robust middle ground, offering:

• A reduction of mandatory data points by 60-70%. Assuming the near-final draft of the simplified ESRS was calculated based on 1,073 data points in Set 1, at least – and only – 310-320 data points should remain in scope.
• A streamlined double materiality assessment focused on “what really matters.”
• Closer alignment with IFRS S1 and S2 and the Greenhouse Gas Protocol.
• Eliminate overlaps between general disclosures and topical standards, while giving more flexibility in how companies aggregate information. 

With fewer mandatory data points and target adjustments, the ESRS Set 2 could mark a major shift in how Europe approaches sustainability reporting. Simpler reporting with fewer data points gives companies a great chance to improve their materiality process, focus on their key risks and opportunities, and develop a stronger sustainability strategy.

By mid-2026, the real test will be how many companies with 250-1,000 employees opt for a voluntary reporting standard based on a framework never intended for them, or step up to the simplified ESRS.

Are you navigating CSRD, ESRS, or broader sustainability reporting? At EcoVadis, we are committed to helping you navigate the shifts, ensuring that “simplified” reporting still translates into “significant” value for your business. Contact us today.