A Commission delegated regulation published by the Council on 9 July 2026 establishes voluntary sustainability reporting standards for undertakings with up to 1,000 employees, while also introducing a 'value chain cap' that limits how much sustainability information larger reporting undertakings can demand from them. The regulation, supplementing Directive 2013/34/EU, aims to reduce the administrative burden on smaller entities in corporate value chains.
The voluntary standard is based on the VSME standard from Commission Recommendation (EU) 2025/1710 and includes a Basic Module and a Comprehensive Module. Reporting undertakings—those exceeding EUR 450 million net turnover and 1,000 employees—are prohibited from requiring protected undertakings to provide information beyond what the voluntary standard specifies. Protected undertakings have a statutory right to refuse to provide information exceeding those limits. The value chain cap applies only to information gathering for sustainability reporting under the Accounting Directive; it does not affect contractual obligations or obligations under other Union or national law.
Certain environmental disclosures are voluntary for undertakings with 10 employees or fewer, and thus fall above the cap for them. The cap covers only essential datapoints; Annex II lists which disclosures are covered, distinguishing between undertakings with more than 10 employees and those with 10 or fewer. The regulation applies from financial year 2027 for value chain reporting by mandatory reporters, and from entry into force for voluntary users. Recommendation (EU) 2025/1710 ceases to have legal effects from the date of entry into force. Undertakings applying the standard are not obliged to seek assurance for reported information.
Policy orientations and trade-offs The regulation balances the need for sustainability transparency in supply chains with the desire to avoid disproportionate compliance costs for smaller firms. By capping information requests, it protects SMEs from excessive data demands while still allowing large companies to obtain essential sustainability data. However, this may limit the depth of sustainability information available to investors and stakeholders, potentially reducing the comparability and completeness of corporate sustainability reporting.
Impact on stakeholders - Small and medium-sized undertakings (up to 1,000 employees): Benefit from reduced administrative burden and legal protection against excessive information requests. They can use a simplified voluntary standard without assurance obligations, lowering compliance costs. - Large reporting undertakings (exceeding EUR 450 million turnover and 1,000 employees): Face restrictions on the sustainability information they can collect from value-chain partners, which may hinder their ability to meet own reporting obligations under the Corporate Sustainability Reporting Directive (CSRD). They may need to adjust data collection processes. - Investors and financial institutions: May receive less detailed sustainability data from smaller entities in value chains, potentially affecting risk assessments and investment decisions. The cap could reduce the granularity of ESG data available. - EU regulatory bodies: Must monitor compliance with the cap and ensure consistent application across member states. The regulation simplifies enforcement by providing a clear reference standard.
Institutional follow-up The regulation will enter into force on the twentieth day following its publication in the Official Journal of the European Union. The European Parliament and the Council have the right to object within a specified period. Once in force, the Commission may issue further guidance on implementation. The regulation is expected to apply from financial year 2027 for mandatory reporters.