CSRD: Requesting Data from SME Suppliers

Reporting obligation and timeline

The Stop the Clock Directive

In France, these companies are due to publish their first sustainability report in 2028 for the financial year starting on January 1, 2027. This timeline reflects the two-year deferral introduced by the Stop the Clock Directive (Directive (EU) 2025/794), which was implemented into French law by Law n° 2025-391 of April 30, 2025.

EFRAG VSME - A voluntary standard for SMEs

The Voluntary Sustainability Reporting Standard for SMEs (VSME), developed by EFRAG, is designed to provide a proportionate and simplified framework for small and medium-sized enterprises that are not listed. Its purpose is to help SMEs disclose sustainability information in a way that is manageable and cost-effective, while also meeting the expectations of larger companies and financial institutions.

The VSME applies to non-listed small and medium-sized enterprises, defined as follows: medium-sized enterprises have fewer than 250 employees and either turnover or a balance sheet total of no more than €50 million and small-sized enterprises that have fewer than 50 employees and either turnover or balance sheet total of no more than €10 million.

The standard adopts a modular approach, consisting of a basic module with minimum disclosures and a comprehensive module for more detailed information. This structure ensures flexibility and proportionality, allowing SMEs to choose the level of reporting that suits their needs and capabilities.

Importantly, the VSME is entirely voluntary and does not impose any legal obligation or sanction.

Omnibus I proposal

The Omnibus I proposal (COM(2025)80) introduces significant changes to the CSRD framework. It raises the thresholds for mandatory reporting. Only companies with more than 1,000 employees and either a turnover of at least €50 million or a balance sheet total of at least €25 million will be subject to this obligation. Companies with fewer than 1,000 employees will not be required to publish sustainability reports but may voluntarily apply the VSME developed by EFRAG.

Omnibus I also removes the empowerment of the European Commission to adopt sector-specific reporting standards and introduces a voluntary standard for companies below these thresholds.

Omnibus I is expected to be adopted in early 2026. Once adopted, it will enter into force 20 days after its publication in the Official Journal of the European Union. Member States will be required to implement its provisions within 12 months following its entry into force.

Suppliers and value chain transparency

Increased pressure will be placed on suppliers. Under Articles 19a and 29a of the CSRD, companies are required to report on their entire value chain, covering both upstream and downstream activities, in line with the principle of double materiality. This obligation means that large companies will need to obtain sustainability-related data from their suppliers, including SMEs.

Providing sustainability data and complying with Environmental, Social and Governance (ESG) commitments in supplier policies will become a key contractual obligation putting pressure on businesses to update their supplier policies. Failure to meet these requirements could, in the most severe cases, result in the termination of business relationships.

It is widely acknowledged that SME suppliers will face the greatest challenges in meeting these expectations due to limited resources and reporting capabilities.

Current situation

General principles

According to Articles 19a and 29a of the CSRD companies must collect information across their entire value chain to prepare their sustainability reporting, but only to the extent necessary to understand their impacts, risks, and opportunities related to sustainability. This obligation is governed by two fundamental principles:

• Double Materiality: Companies only must disclose information necessary to understand both the impacts of their activities on the environment and society, and the effects of sustainability issues on the financial position of the company. This principle is expressly provided for in the CSRD and reflected in European Sustainability Reporting Standards (ESRS) 1 (General Requirements), adopted by Delegated Regulation (EU) 2023/2772.
• Proportionality: Obligations must be adapted to the capacities of companies and avoid excessive administrative burden, particularly for SMEs in the value chain. This principle is established in the CSRD and reflected in the ESRS, which provide modular requirements and simplified approaches for smaller entities.

European Commission Recommendation of July 30, 2025

Pending the adoption of a Delegated Act and following the entry into force of Omnibus I proposal (see par b. ii below), the European Commission issued a recommendation on July 30, 2025, based on the VSME. The European Commission recommends that large companies to limit, as far as possible, their information requests to the content provided by the VSME when dealing with SME suppliers.

Future framework under Omnibus I proposal

Omnibus I proposal

The Omnibus I proposal aims to protect smaller companies (i.e. those with fewer than 1,000 employees) from excessive information requests and to limit the trickle down of reporting obligations across value chains. Accordingly, the Omnibus I proposal extends and strengthens the “value chain cap” established by the CSRD (the current value chain cap states that ESRS may not contain reporting requirements that would require undertakings to obtain from SMEs in their value chain information that exceeds what listed SMEs must disclose under the proportionate standard).

The Omnibus I proposal introduces three main changes as compared to the current cap:

1. The value chain cap will apply directly to the reporting company.
2. It will protect all companies with fewer than 1,000 employees, rather than not just SMEs.
3. The limit of this cap will be defined by the voluntary standard currently provided for by the VSME, as reflected in the European Commission’s recommendation, and, in the future, by a Delegated act based on this standard.

According to the Omnibus I proposal, Member States will be required to ensure that large companies do not request information from entities in their value chain with no more than 1,000 employees beyond the information specified in voluntary standards. The exception would be for additional sustainability information that is commonly shared in the relevant sector. Companies that report their value chain information in accordance with this voluntary requirement will be deemed to comply with sustainability reporting.

Delegated act

The European Commission will adopt this voluntary standard referred to above through a delegated act no later than six months after Omnibus I enters into force. This new voluntary standard will be inspired from the existing VSME issued by EFRAG. However, it may include modifications depending on legislative negotiations and stakeholder feedback. Once issued companies with fewer than 1,000 employees, whether they voluntarily adopt this new standard or are contractually involved in a value chain, will be protected by the new value chain cap.

We will continue to monitor the implementation and effective dates of the Omnibus I proposal and the first publication of the European Commission’s proposed new voluntary standards.

Phase 2 companies should be aware of the trend towards limiting the ESG data that they will have and be in a position to request from their SME suppliers and to start adapting their suppliers’ policies accordingly.