Key Takeaways
- ESRS 1.132–133 grant a three-year phase-in that lets reporters limit or omit value chain data while they build collection processes.
- The Omnibus I directive (effective 18 March 2026) adds a permanent cap: entities with fewer than 1,000 employees can refuse information requests beyond a forthcoming voluntary standard.
- For wave-one reporters, the transitional relief expires after FY2026; from FY2027 onward, full value chain disclosure under ESRS 1.63 applies.
- Confusing the transitional phase-in with the permanent cap is the most frequent misapplication in early CSRD implementation guidance.
What is CSRD Value Chain Cap (Phase-In)?
Two distinct mechanisms limit value chain reporting obligations, and they overlap in time without replacing each other.
The first is the ESRS 1.132–133 transitional phase-in. During the first three financial years of an entity's CSRD reporting, paragraph 133(a) permits the entity to restrict value chain information in policies, actions, and targets disclosures to data already available in-house or publicly accessible. Paragraph 133(b) goes further for metrics: the entity may omit upstream and downstream value chain data entirely, except for datapoints derived from other EU legislation listed in ESRS 2 Appendix B. Paragraph 132 requires the entity to explain what data gaps remain, what efforts it made, and how it plans to close them. From the fourth reporting year, ESRS 1.63 applies in full.
The second mechanism is the Omnibus I permanent cap. Directive (EU) 2026/470 inserted a value chain information ceiling into Article 19a of the Accounting Directive. Entities in a reporter's value chain that average fewer than 1,000 employees during the financial year may refuse to provide information exceeding the scope of a voluntary standard the European Commission will adopt by delegated act within four months of entry into force. That voluntary standard draws on EFRAG's VSME framework. The cap protects all sub-1,000-employee entities, not only those meeting the EU SME definition.
The two mechanisms serve different purposes. The phase-in gives reporters time to build data collection infrastructure. The permanent cap protects smaller value chain partners from disproportionate information demands indefinitely.
Worked example: Fernandez Distribucion S.L.
Client: Spanish wholesale distribution company, FY2026, revenue EUR 34M, IFRS reporter. Fernandez is a wave-one CSRD reporter (large undertaking, 1,400 employees) filing its third sustainability statement. It sources products from 220 suppliers across southern Europe, 195 of which have fewer than 1,000 employees.
Step 1 — Determine remaining transitional relief: FY2026 is Fernandez's third reporting year under the ESRS. The ESRS 1.133 phase-in still applies. From FY2027, the full value chain disclosure requirement under ESRS 1.63 takes effect.
Documentation note: record the first reporting year under ESRS, confirm that FY2026 falls within the three-year window, and note the FY2027 transition date in the sustainability reporting planning memorandum.
Step 2 — Apply paragraph 133(a) to policies, actions, and targets: Fernandez discloses its Scope 3 reduction targets under ESRS E1-4. For upstream value chain data supporting those targets, the sustainability team uses in-house procurement records and publicly available emission factors from Ecoinvent. No supplier-specific data is collected yet.
Documentation note: state that value chain information for policies, actions, and targets relies on in-house data per ESRS 1.133(a). Identify the specific data sources used (procurement system extract, Ecoinvent v3.10 emission factors).
Step 3 — Apply paragraph 133(b) to metrics: Fernandez omits supplier-specific Scope 3 Category 1 (purchased goods) intensity metrics from the quantitative disclosures, except for datapoints required by EU legislation listed in ESRS 2 Appendix B. The entity confirms that the EU Taxonomy CapEx ratio (a legislatively derived datapoint) includes value chain information and is therefore disclosed.
Documentation note: list each metric where value chain data has been omitted under ESRS 1.133(b). For each retained datapoint, cross-reference the originating EU legislation in ESRS 2 Appendix B.
Step 4 — Disclose the explanation required by paragraph 132: Fernandez includes a narrative explaining that supplier-specific emissions data is unavailable for 195 of 220 suppliers, that a supplier engagement programme launched in Q3 2026 targets the 25 largest suppliers (representing 62% of procurement spend) for primary data collection by Q2 2027, and that the entity plans full value chain coverage by FY2028.
Documentation note: record the paragraph 132 disclosure in the sustainability statement. Retain the supplier engagement timeline as audit evidence. Cross-reference to the double materiality assessment confirming which Scope 3 categories are material.
Step 5 — Assess the Omnibus I permanent cap: Of the 195 sub-1,000-employee suppliers, each has the legal right (once the Commission's delegated act is adopted) to refuse information requests exceeding the voluntary standard scope. Fernandez's FY2027 data collection strategy must account for this ceiling by designing supplier questionnaires that stay within the voluntary standard's boundaries.
Documentation note: record the assessment of the Omnibus I cap's applicability to the supplier base. Flag the dependency on the Commission's delegated act (expected H2 2026) and note the contingency plan if the delegated act is delayed.
Conclusion: Fernandez's FY2026 value chain disclosures are defensible because the entity applies ESRS 1.133 relief with documented justification, discloses the explanation required by paragraph 132, and has a stated plan for full compliance from FY2027 onward.
What reviewers and practitioners get wrong
- Teams treat the three-year phase-in as a blanket exemption from all value chain work. ESRS 1.132 still requires the entity to explain what data is missing, what efforts it made, and what its plans are. Omitting the explanation while relying on the relief violates the transitional provision itself. Early CSRD reviews have flagged boilerplate data-gap disclosures that name no specific suppliers, cite no engagement timelines, and provide no quantification of coverage gaps.
- Practitioners conflate the ESRS 1.132–133 transitional phase-in with the Omnibus I permanent cap. The phase-in expires (after three reporting years per entity). The permanent cap does not expire but applies only to value chain partners with fewer than 1,000 employees and only limits what the reporter can request, not what it must disclose from other sources. Mixing the two creates compliance gaps when the phase-in ends but the team assumes the cap covers all remaining data shortfalls.
Related terms
Frequently asked questions
Does the value chain phase-in apply to all ESRS topics or only environmental ones?
The ESRS 1.132–133 transitional relief applies across all topical standards, not only ESRS E1. Whether the disclosure relates to Scope 3 emissions, workers in the value chain under ESRS S2, or affected communities under ESRS S3, the same three-year relief and the same explanation requirement apply. The entity must still conduct the double materiality assessment for each topic and provide high-level narrative disclosures where a topic is material, even when quantitative value chain data is omitted under paragraph 133(b).
Can a supplier refuse to provide sustainability data under the value chain cap?
Once the European Commission adopts the delegated act establishing the voluntary standard (expected H2 2026), any value chain partner averaging fewer than 1,000 employees may refuse requests exceeding that standard's scope. The refusal right applies regardless of the contractual relationship. Reporters should design data requests that align with the voluntary standard and supplement gaps using publicly available data, sector averages, or spend-based estimates. ESRS 1.63 still requires the reporter to include value chain information in its disclosures; the cap limits what can be demanded, not what must be reported.
What happens when the three-year phase-in expires?
From the fourth reporting year, ESRS 1.63 requires the entity to include upstream and downstream value chain information in full. The entity can no longer omit value chain metrics under paragraph 133(b) or limit qualitative disclosures to in-house data under paragraph 133(a). If supplier-specific data remains unavailable, the entity must use the best available estimates and disclose the methodology, data quality limitations, and assumptions applied. The sustainability assurance provider evaluates whether the estimation approach is reasonable and whether data gaps are adequately disclosed.