Managing the Value Chain Reporting Under the ESRS (Post-Omnibus)

The Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) reshape how companies approach sustainability reporting. One requirement is to include material information not only about a company's own operations but also about its value chain — spanning upstream suppliers, downstream customers, business relationships, and the lifecycle of products and services.

Three years on from the original ESRS, the value-chain rules have changed materially. Directive (EU) 2026/470 (Omnibus I, in force 18 March 2026) amends Article 19a(3) of the Accounting Directive to introduce a statutory value-chain cap — a hard limit on what large reporters can demand from small suppliers. The Commission's revised ESRS delegated act, expected in the second half of 2026, will operationalise this cap from FY 2027.

For sustainability professionals, this presents a new challenge: identifying when and how to integrate value chain data into reports, within the new statutory limits. Importantly, value chain information is not required in every disclosure. It must be tied to the company's materiality analysis and focused on material impacts, risks and opportunities (IROs) that go beyond own operations.

What Changed: The Value-Chain Cap (2026)

The single most important change to value-chain reporting is the new statutory cap introduced by Directive (EU) 2026/470. It rewires how large reporters and small suppliers interact across the value chain.

The Cap, in Plain Language

Article 19a(3) of the Accounting Directive, as amended by Omnibus I, introduces four interlocking provisions:

• Protected undertakings: any undertaking with 1,000 employees or fewer that sits in a large reporter's value chain. Self-declaration of size is sufficient.
• Right to decline: a Protected Undertaking has a statutory right to decline information requests that exceed the VSME (Voluntary SME Standard).
• VSME ceiling: the VSME standard becomes the de facto ceiling on what large reporters can demand from small suppliers in their value chain. Anything beyond VSME is optional for the supplier.
• Deemed compliance: the reporting undertaking is "deemed to have complied" with value-chain reporting obligations if it respects the cap — even if some data turns out to be unavailable because a supplier exercised the right to decline.

The 3-Year Transition

During the first three years that an undertaking is required to report on its value chain under ESRS, it may explain its efforts to collect data and explain any remaining gaps — rather than disclose direct data or estimates. After the transition period, it must use direct data or estimates.

Example: Requesting Data From a 600-Employee Supplier

Suppose a large Wave 1 reporter (1,500 employees, EUR 600M turnover) wants Scope 3 emissions data from a key supplier with 600 employees.

• Pre-Omnibus, the reporter could ask the supplier for granular Scope 3 data and reasonably expect cooperation, citing CSRD obligations.
• Post-Omnibus, the 600-employee supplier is a Protected Undertaking. It can self-declare its size and decline anything that exceeds the VSME standard. The reporter cannot compel a more granular response.
• If the reporter respects the cap — even if the supplier provides only VSME-level data, or declines altogether — the reporter is deemed to have complied with its value-chain reporting obligations on that data point. The reporter should document the request, the supplier's response and the methodology used to fill the gap (estimates, secondary data, sector averages).

In short: the question is no longer "how do I collect everything I want?" but "have I respected the cap and documented my efforts?"

Understanding the Value Chain in the ESRS Framework

The ESRS define the value chain (VC) as the full spectrum of activities, resources and relationships that underpin an organisation's business model and its external operating environment. This includes everything from the creation of products or services to their delivery, use and eventual end-of-life.

The ESRS break down value chain activities into three main categories:

1. Own operations — activities within the reporting undertaking, such as its use of human resources.
2. Supply, marketing and distribution channels — sourcing materials and services, selling products and delivering services.
3. External operating environments — financing, geopolitical, geographical and regulatory contexts.

Actors in the Value Chain

While the ESRS use "value chain" in the singular, they acknowledge that many undertakings operate across multiple value chains. Value chain reporting covers both upstream actors (suppliers that provide materials and services) and downstream actors (distributors, customers, or waste management entities handling end-of-life products).

Business Relationships in the Value Chain

In this context, business relationships are broadly defined. They encompass relationships with business partners, entities within the value chain, and any other state or non-state entities directly connected to the undertaking's operations, products or services. This includes:

• Indirect relationships beyond first-tier suppliers
• Shareholding positions in joint ventures or investments

Mapping out the activities in the value chain — focused on material impacts, risks and opportunities — is a crucial first step for identifying actors and business relationships. Under the cap, mapping also helps you identify which of your suppliers are Protected Undertakings, so you can plan your data requests around the VSME ceiling.

What Needs to be Covered in Value Chain Reporting?

The ESRS do not require exhaustive reporting on every actor in the value chain. Undertakings should focus on material value chain information, specifically when IROs are linked to:

1. Hot spots — relationships with actors likely associated with significant actual or potential impacts on people or the environment, which may create risks or opportunities.
2. Key dependencies — actors critical to the undertaking's business model, where the dependency on products or services generates notable risks or opportunities.

Why is the Value Chain Important?

The CSRD and ESRS highlight the value chain because many key impacts, risks and opportunities occur outside an undertaking's own operations. Reporting only on internal activities offers an incomplete picture of how a company's products, services and activities affect people and the environment.

A Broader Perspective on Risks and Impacts

Value chain reporting uncovers critical issues from a double materiality perspective:

• Impact materiality: for example, a retailer sourcing wood from outside the EU may face risks like unsafe working conditions and pollution at supplier sites, affecting both people and the environment.
• Financial materiality: regulatory changes or stricter enforcement in supplier regions could lead to significant fines or disruptions, impacting the company financially.

Identifying Opportunities

Including the value chain also helps address major opportunities, such as reducing Scope 3 emissions — often the largest part of a company's carbon footprint, as emphasised by the Carbon Disclosure Project (CDP). Under the Omnibus cap, large reporters still need Scope 3 data from their value chain, but they cannot compel small suppliers to go beyond VSME-level disclosure. Practically, this means many reporters will rely more on estimates, sector data and proxies for the long tail of small suppliers — and will focus their direct data-collection efforts on the relatively small number of suppliers above the 1,000-employee threshold.

By considering the entire value chain (within the cap), undertakings can still ensure their sustainability reports are accurate, comprehensive and aligned with regulatory and stakeholder expectations.

Enhancing Sustainability Reporting with Value Chain Information

The Reporting Group

The sustainability statement aligns with the financial reporting group (as per ESRS 1). Sustainability professionals should collaborate with the financial reporting team to ensure these nuances are addressed. Some subsidiaries excluded from financial consolidation for materiality or practical reasons may still have significant sustainability impacts that must be included in the report.

Internal Transactions

Internal or intragroup activities must also be assessed for material IROs. For instance, emissions from internal transport should be reported if they have significant environmental impacts, even if the transaction occurs within the group.

Joint Arrangements

For joint operations under IFRS, assets, liabilities and operations are treated as part of the reporting entity's own operations rather than the value chain. This means sustainability reporting should reflect these impacts as part of the group's operational footprint.

Financial Assets

Business relationships and value chains cover all types of activities and relationships. If a company provides a financial loan to another business, and this leads to environmental harm like water or land contamination, the company is connected to the impact through the loan agreement. The specific disclosure required for investments is GHG emissions under Category 15 of ESRS E1.

Example: Environmental Value Chain Reporting

The decision tree below highlights key considerations for measuring GHG emissions under ESRS E1 and pollutants under ESRS E2. The logic still applies — but the operating constraint is now the statutory cap, so requests to Protected Undertakings cannot exceed the VSME standard.

What is “Reasonable Effort” to Collect Value Chain Data?

When collecting value chain information for the sustainability statement, an undertaking should make "reasonable efforts" to gather data from its upstream and downstream value chain, considering factors like cost and feasibility (ESRS 1 §69 in the 2023 text; paragraph numbering may shift in the Commission's revised delegated act).

Post-Omnibus, "reasonable effort" operates within the value-chain cap. A reporter that respects the cap — i.e. does not demand more than the VSME standard from Protected Undertakings — has made reasonable effort by definition for those suppliers. The reporter should still document its requests, the supplier's response and the methodology used to fill any data gap.

If primary data is unavailable, the undertaking can use estimates, sector data or other proxies (such as country or industry statistics) without excessive cost or effort (ESRS 1 AR 17 in the 2023 text). Reasonable effort doesn't mean avoiding disclosure — it means determining the best approach for gathering meaningful value chain data based on the reporter's specific circumstances and resources, within the statutory cap. Document efforts and methodologies for transparency and audit purposes.

How to Estimate Information about the Value Chain?

Undertakings are permitted to use estimates for missing value chain information. They should use available resources such as proxies, sector data or indirect sources. When doing so, they must:

• Document the methodology used to estimate value chain information, including its limitations and level of accuracy.
• Ensure the assessment focuses on material IROs without undue cost or effort.

A materiality assessment can still be valid even without direct data from value chain actors, as long as reasonable steps are taken to gather data. Examples of data sources include government reports, non-profit organisations and academic institutions. If primary data isn't available, undertakings can use these secondary sources for social, environmental or human rights matters.

Undertakings should prioritise areas where they have significant risks — like safety or child labour concerns — based on general data (e.g. minimum-wage information in high-risk countries). For broader environmental impacts (like pollution from steel production), undertakings can track performance through metrics like circular economy goals rather than estimating indirect impacts.

When using estimates, undertakings should be transparent about data sources and accuracy. Over time, as the company collects more accurate data (and as the 3-year value-chain transition expires), it can refine its reporting.

Get Ready for Collecting Value Chain Data

To effectively collect value chain data within the new cap, consider implementing ESG software like Sunhat’s Collaboratice Proof Platform that streamlines data collection across upstream and downstream value chain actors.

Key benefits:

• Easy collaboration: seamless collaboration with internal teams and external partners, efficient data sharing and updates across the value chain.
• Data delivery by external users: platforms allow suppliers and distributors — including Protected Undertakings — to securely input and share data, at whatever level they choose to disclose.
• Improved accuracy and compliance: structured software enhances data accuracy and supports compliance with ESRS — and with the new cap.
• Audit trail: a transparent audit trail of requests, responses, declines and methodologies — important for documenting compliance with the cap.

By investing in the right software, undertakings can improve their data collection practices, enabling more precise and comprehensive value-chain reporting while staying within the statutory framework.