The European Commission’s Omnibus proposal claims to ease sustainability reporting for SMEs by limiting what large companies can ask from them—restricting requests to Tier 1 suppliers and standardizing data collection under the Voluntary Sustainability Reporting Standard for SMEs (VSME). At first glance, this sounds like a win for SMEs. But does it truly reduce the ESG compliance burden, or does it simply shift how ESG data is requested? History suggests compliance demands don’t disappear—they evolve.
To understand what will happen, we only need to look at what has already happened in food safety and quality assurance (QA). In an average SME with 100+ employees, it is now common to have three full-time employees (FTEs) dedicated exclusively to managing customer questionnaires on food safety, QA, and certifications. These employees are not innovating, improving products, or optimizing processes—they are filling out forms, responding to customer portals, and submitting compliance documentation. This has only become more detailed and subject to regular check-ins over time. A decade ago, a supplier might have been asked:
Now, the question has evolved into:
Not all of these details are legally required, but they have become de facto industry standards due to customer expectations, certification schemes, and risk management. A similar trend is already happening with ESG compliance. Even before CSRD took full effect, ESG questionnaires were expanding in complexity, with companies requiring proof of carbon reduction strategies, supplier labor conditions, and environmental impact assessments. While the Omnibus mandates that large companies can only request VSME data points, we all know this won’t hold up in practice. Buyers will still demand additional ESG data through their supplier “mandatory” rating systems like EcoVadis, CDP, Sedex, through EUDR regulations, or as part of their own sustainability commitments and risk management policies. So while the formal data requests may be limited, the real ESG compliance burden won’t change—companies will just find other ways to ask for the same information.
The Omnibus proposal restricts ESG data collection to Tier 1 suppliers, suggesting that this will simplify compliance for SMEs. But in industries like food, that’s not where the critical data lives. A food processor needs sourcing data from farms to prove pesticide-free status. A coffee trader needs traceability data from plantations for deforestation-free claims. A manufacturer needs supplier disclosures to validate carbon footprint claims. Even if Omnibus prevents large companies from directly asking SMEs for more data, they will still need that data to satisfy their own compliance and risk management needs. So, what happens? SMEs still have to gather the data—just further down the chain.:white_tick: The work doesn’t go away—it just moves.
The biggest issue is that buyers don’t just request ESG data for CSRD compliance—they do it to reduce financial, legal, and reputational risks. Even if CSRD limits what they can officially request, their own internal sustainability frameworks, risk assessments, and supplier programs will still require deeper ESG insights. This means SMEs will still have to deal with compliance requests on top of VSME, through supplier scoring models, buyer portals, and industry-driven audits.
While CSRD reporting is being scaled back for SMEs, other regulations like EUDR are not—and they don’t just require traceability and sustainability data, but also robust due diligence systems and risk mitigation plans. For example, EUDR requires:
This means that even if CSRD-related ESG requests decrease, EUDR-driven compliance burdens will continue to rise—forcing companies to collect and verify detailed sustainability data from multiple tiers of their supply chain. And just like in food safety, buyers won’t separate EUDR compliance from their overall ESG risk management. Instead, they will bundle these requirements into broader ESG audits and supplier rating programs, adding yet another layer of compliance pressure for SMEs.
So, does the Omnibus proposal reduce ESG compliance burdens? Not really.
The Omnibus proposal may limit CSRD data requests, but ESG compliance pressures aren’t going away. Large buyers will still require sustainability data through supplier rating systems, EUDR regulations, and internal ESG commitments. Passionfruit automates compliance questionnaires, pulling answers from your existing data so you can reduce manual effort, stay compliant, and take control of what you share.
Stay ahead of evolving ESG demands—without the paperwork overload.
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