VSME, VS or Simplified ESRS: Selecting the right voluntary reporting standard in FY2026
However, while the regulatory mandate may have shifted, the demand for transparency has not.
Investors, banks, and global supply chains continue to demand structured, comparable ESG data. As a result, many “out-of-scope” companies are now turning to voluntary sustainability reporting.
The FY2026 reporting dilemma: Which standard to choose?
With the European Commission expected to adopt the simplified ESRS, the VSME, and the new Voluntary Standard (VS) in mid-June 2026, businesses must decide which standard best suits their needs for theFY2026 reporting cycle.
For mid-caps and companies with more than 500 employees, this choice is not merely technical. It is a strategic decision that determines how an organization:
- Meets stakeholder expectations: Aligning with the rigorous data demands of banks and investors.
- Maintains competitive advantage: Avoiding the “requirements gap” that occurs when lightweight standards fail to meet complex value chain requests.
- Ensures future-readiness: Building scalable reporting capabilities that can adapt as regulations evolve.
Understanding the differences between the VSME, the VS, and the simplified ESRS is critical for long-term business resilience.
VSME vs. Simplified ESRS: Different Tools for Different Purposes
VSME and simplified ESRS were designed for different purposes, for different types of companies, and to deliver different outcomes.
VSME: The Baseline for SMEs
The VSME was developed by EFRAG for non-listed SMEs (fewer than 250 employees and €50m in net turnover). Its purpose is to provide a simple, standardized way for small businesses to deliver a minimum set of sustainability information to banks, investors, and larger customers. This is known as the “value chain cap”.
While efficient, the VSME is not designed for the depth or structural complexity required by larger mid-caps.
Simplified ESRS: Comparable and achievable
The simplified ESRS retains the core logic of the full ESRS, including double materiality and a structured assessment of impacts, risks, and opportunities (IROs), but in a far more achievable format.
Reduced Burden: Mandatory datapoints have been reduced by 61%, with an overall reduction of 71% compared to the original 2023 standards
Achievable Depth: Total datapoints drop from 1,073 to approximately 310.
Comparability: Built on comparability and decision-useful information, and aligned with global standards like ISSB.
It is not a minimum data-request framework like VSME. This distinction is critical for companies with more than 500 employees that are now considering voluntary reporting.
Why the Simplified ESRS is the standard for Mid-Caps
For companies with more than 500 employees, “out of scope” does not mean “out of sight”
Future-Proofing vs. Reworking
Choosing VSME when your stakeholders expect ESRS-level data creates a “requirements gap”. Choosing a lighter standard risks may require a costly “rebuild” of your ESG data maturity when market demands inevitably increase. The simplified ESRS is designed to grow with your organization.
Double Materiality as a business tool
One of the key advantages of simplified ESRS is that it retains double materiality.
In the simplified ESRS, the materiality assessment has been made more practical. It moves away from a bottom-up checklist of topics and instead uses a more focused, top-down approach to identify what truly matters for the business.
This is not just a reporting requirement. It is a management tool.
A well-executed double materiality assessment helps companies:
- Identify the sustainability issues that have a real impact on financial performance
- Prioritise the risks and opportunities that require management attention
- Focus reporting on what is decision-relevant for stakeholders
In practice, this creates clarity across the organisation. It aligns sustainability, finance, and strategy around a common understanding of what matters, and why.
The VSME does not include a materiality assessment. This makes it harder to connect sustainability reporting to business priorities, and limits its usefulness as a tool for managing performance and risk over time.
When VSME may still be the right choice
VSME is well-suited for companies that:
- Fall within the SME category (fewer than 250 employees and €50m in net turnover)
- Are early in their sustainability journey
- Face limited external pressure for structured ESG data
For these organizations, proportionality and accessibility are key.
But for companies with more complex stakeholder environments, expectations are typically higher and reporting needs to serve more use cases.
In that context, VSME can become limiting over time.
What About the new Voluntary Standard (VS)?
While the simplified ESRS is the strategic choice for mid-caps, the European Commission is also introducing a new Voluntary Standard (VS) for companies with up to 1,000 employees.
- Based on VSME: The VS will be based on the VSME with only minimal modifications
- No New Datapoints: To maintain stability, the VS will not add any new datapoints or create additional modules beyond those already in the VSME.
- Value Chain Cap: The VS will limit the amount of information these companies need to provide to the VSME comprehensive module,
With no new datapoints, the challenge remains: The VSME was designed for companies with fewer than 250 employees and €50m net turnover, not for those with 750 employees and €200m.
Whether the VS can bridge this gap convincingly remains to be seen.
The bottom line for voluntary reporting in FY2026
The Omnibus has changed who is required to report but not how sustainability information is used.
That is why voluntary reporting is becoming a practical necessity, not just a strategic choice.
The European Commission is expected to adopt the final simplified ESRS text in mid-June 2026, along with the VSME and the VS. At that time, in-scope companies are also expected to have the option to use the simplified ESRS for their FY2026 reporting.
For out-of-scope companies with more than 500 employees, the choice is clear. To remain bankable, investable, and competitive in the global supply chain, you need a framework that the market trusts.
The simplified ESRS provides that foundation, delivering high-value insights with a significantly lower administrative burden.
This is not a decision between “simple” and “complex.”
It is a decision between:
- a framework designed for proportionate, voluntary disclosure (VSME)
- a framework built on alignment, comparability, and decision-useful information (ESRS)
For companies with more than 500 employees, simplified ESRS offers a balanced approach:
- structured, investor-relevant reporting
- reduced complexity and effort
- alignment with market expectations
- readiness for future regulatory developments
It is not just a reporting choice. It is a strategic one that we can help you define as it relates to your business objectives for 2026 and beyond. So, if you are looking to get ahead of your peers and align to the highest quality standard of European reporting, then let us help you chart your course to impact.
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