VSME
The VSME is the only sustainability reporting standard in the EU framework that a company can choose not to use — and yet, after the Omnibus I reforms, the one most likely to land on an SME’s desk through a customer’s procurement questionnaire. Developed by EFRAG for non-listed small and medium-sized enterprises outside the scope of the CSRD, it converts an open-ended flood of supplier ESG requests into a single, proportionate template.
Voluntary by name, structural by function: VSME is now the statutory ceiling on what a large company can demand from a smaller one.
VSME is EFRAG's voluntary sustainability reporting standard for non-listed SMEs, first published in Commission Recommendation (EU) 2025/1710 and set in EU law by Delegated Regulation (EU) 2026/1560 in 2026. It has a Basic and a Comprehensive Module and uses an “if applicable” principle instead of double materiality.
What VSME is and why it matters now
The Voluntary Sustainability Reporting Standard for non-listed SMEs — VSME — is a proportionate ESG reporting framework that EFRAG developed under a mandate from the European Commission’s 2023 SME Relief Package (Action 14). EFRAG delivered the final standard to the Commission on 17 December 2024 after public consultation and field-testing with SMEs. On 30 July 2025 the Commission adopted Recommendation (EU) 2025/1710, publishing the VSME Standard as Annex I and its accompanying guidance as Annex II, and inviting banks, investors, and large undertakings to base their SME data requests on it.
VSME exists to solve a specific problem created by the CSRD. Large undertakings in scope of the CSRD must report on their value chain, which means they send sustainability questionnaires downstream to suppliers — most of whom are SMEs with no reporting infrastructure and no obligation to respond. Before VSME, every buyer asked differently. VSME gives a supplier one standardised answer to give to all of them: complete a single VSME report, share it with every customer that asks. It is the proportionate counterpart to the mandatory ESRS that govern large companies.
The Omnibus I reforms removed roughly 90% of companies from mandatory CSRD scope by raising the threshold to more than 1,000 employees and more than €450 million net turnover. That did not remove those companies from the ESG data landscape — it moved them from being direct reporters to being value-chain respondents. For the large population of mid-sized companies now outside CSRD, VSME has become the de facto standard their banks and customers point them to. Voluntary in legal form; expected in practice.
That standard is now EU law. Commission Delegated Regulation (EU) 2026/1560, adopted on 3 July 2026 and published in the Official Journal on 21 September 2026, sets out a voluntary standard based on the Recommendation’s, with the same Basic and Comprehensive Modules. It entered into force on 24 September 2026, and from that date the Recommendation no longer has legal effect. The standard is intended for undertakings with up to 1,000 employees that are not required to report under the CSRD; it stays voluntary, and undertakings that use it need not obtain assurance. It also sets the value chain cap, which applies from financial years beginning on or after 1 January 2027.
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Where VSME sits in the reporting stack
VSME is a disclosure standard, not a calculation methodology. Like the ESRS it mirrors, it specifies what an SME discloses and in what structure — it does not specify how to calculate an emission. The calculation discipline still belongs to the GHG Protocol and national emission-factor sets. The most useful way to place VSME is as the SME-scaled disclosure layer sitting on top of the same methodology stack a large company uses, with the heavy governance requirements stripped out.
VSME is the standardised data a value-chain SME hands up to a CSRD reporter, and simultaneously the legal ceiling on how much that reporter is allowed to ask for. The data structure is designed to be compatible with the ESRS so an SME that grows into CSRD scope can step up without rebuilding from scratch.
Who VSME is for — scope and eligibility
VSME is designed for non-listed micro, small, and medium-sized undertakings that fall outside the mandatory scope of the CSRD. It is voluntary for every one of them — there is no employee count or turnover figure above which an SME is legally required to publish a VSME report. The relevant thresholds are descriptive (who the standard is built for) rather than prescriptive (who must comply).
| Undertaking type | Typical profile | How VSME is usually applied |
|---|---|---|
| Micro-undertaking | Below small-undertaking thresholds under the Accounting Directive (very small balance sheet, turnover, headcount) | Basic Module is the target level; many disclosures resolve to “not applicable” |
| Small and medium undertaking (non-listed) | Below the CSRD threshold; outside mandatory ESRS reporting | Basic Module as the minimum; Comprehensive added when banks or customers request it |
| Company below the post-Omnibus CSRD threshold | Up to 1,000 employees, no longer mandatorily in CSRD scope after Omnibus I | VSME is the standard the Commission directs to this population; Comprehensive common where finance or large-customer demands exist |
| Subsidiary of a CSRD-reporting parent | Data already consolidated into the parent’s sustainability statement | May be exempt from a separate VSME report where the parent’s consolidated reporting covers it |
The legal status and the commercial reality diverge. No law compels an SME to publish a VSME report. But a CSRD-reporting customer that needs Scope 3 Category 1 data, or a bank pricing a sustainability-linked loan, increasingly conditions the relationship on receiving structured ESG data. VSME is the format they will ask for. Treating it as “optional, so skip it” risks losing the contract to a supplier who can produce the report.
The two-module structure — Basic and Comprehensive
VSME is modular. An undertaking chooses how far up the detail curve to go based on who is asking for its data and how mature its own systems are. There are two modules and three valid ways to combine them.
Option A — Basic only
The Basic Module (B1–B11) on its own. The entry point and the target level for micro-undertakings. Covers core environmental, social, and governance metrics that can usually be assembled from existing records — invoices, HR data, policies. The minimum any SME applies.
Option B — Basic + Comprehensive
The Basic Module plus the Comprehensive Module (C1–C9). For SMEs facing detailed requests from banks, investors, or large corporate clients. Adds strategy, GHG reduction targets, climate risk, value-chain emissions, human rights, and governance diversity.
Option C — Basic + selected Comprehensive items
The Basic Module plus a deliberate subset of Comprehensive disclosures (or entity- and sector-specific additions). Lets an SME answer a specific datapoint a customer needs — for example C3 climate targets — without committing to the full Comprehensive Module.
Basic is a prerequisite for Comprehensive. An undertaking cannot report Comprehensive disclosures without first completing all applicable Basic disclosures. A chosen module is applied in its entirety. Once you opt into a module, you report every disclosure in it that is applicable to your circumstances — you cannot cherry-pick within a module to avoid an inconvenient but applicable disclosure. The “if applicable” filter removes disclosures that genuinely do not fit your situation; it is not a discretion to omit ones that do.
The “if applicable” principle — no double materiality
This is the single most important structural difference between VSME and the ESRS, and the one most often misunderstood by practitioners coming from the CSRD side. VSME does not require a double materiality assessment. The materiality analysis that appeared in the original VSME exposure draft was removed following the public consultation, after both preparers and users said it was disproportionate for SMEs.
In its place, VSME uses an “if applicable” principle. Each disclosure carries a condition describing the circumstances in which it must be reported. If those circumstances apply to the undertaking, the disclosure is mandatory within the chosen module. If they do not, the disclosure is simply omitted — and the omission is assumed to mean the topic is not applicable. No explanation, no documented non-materiality analysis, no forward-looking justification is required for an omission.
On a CSRD/ESRS engagement, omitting a topic requires a documented materiality conclusion — for climate, a forward-looking analysis explaining why it could not become material. Carrying that habit into VSME wastes effort: VSME omissions need no rationale. The opposite error is more dangerous — assuming an “if applicable” disclosure is discretionary when its triggering condition is in fact met. If your circumstances satisfy the condition, the disclosure is mandatory within the module. Read each applicability condition against your actual operations, not against a sense of what feels material.
The practical consequence is that two SMEs of identical size can produce VSME reports of very different lengths, because applicability is driven by what the business actually does — whether it operates near a biodiversity-sensitive site, whether it is legally required to report pollutant emissions, whether it has a governance body — rather than by a materiality judgement.
Basic Module — disclosures B1 to B11
The Basic Module contains eleven disclosures spanning general information, environment, social, and governance. It is designed to be completable by any SME without a dedicated sustainability function, drawing on data the business already holds. The table below lists all eleven with their subject matter and the applicability conditions that determine whether each is reported.
| ID | Disclosure | What it covers | Applicability |
|---|---|---|---|
| B1 | Basis for preparation | Legal form, NACE sector code(s), balance sheet total, turnover, employee count (FTE or headcount), country of operations, geolocation of sites, ESG certificates; individual vs consolidated basis; any omitted sensitive disclosures. | Always |
| B2 | Practices, policies and future initiatives | Whether the undertaking has sustainability practices, policies, or initiatives in place, and whether they are supported by targets. | Always |
| B3 | Energy and greenhouse gas emissions | Total energy consumption (and renewable split where available), plus gross Scope 1 and Scope 2 GHG emissions. See the deep dive below. | Always (Scope 1+2); Scope 3 sits in the Comprehensive Module |
| B4 | Pollution of air, water and soil | Pollutant emissions to air, water, and soil. | If applicable — only where the undertaking already reports pollutants by law or via an Environmental Management System |
| B5 | Biodiversity | Number and area of sites located in or near biodiversity-sensitive areas; land use. | If applicable — where the undertaking has such sites |
| B6 | Water | Water withdrawal, and consumption in water-stressed areas. | If applicable |
| B7 | Resource use, circular economy and waste | Waste generated, material flows, circular-economy practices. | If applicable |
| B8 | Workforce — general characteristics | Number of employees by contract type and gender; turnover. | Always (where the undertaking has employees) |
| B9 | Workforce — health and safety | Work-related accidents and, where available, ill-health and fatalities. | Always (where the undertaking has employees) |
| B10 | Workforce — remuneration, collective bargaining and training | Minimum-wage compliance, gender pay gap where available, collective-bargaining coverage, training hours. | If applicable |
| B11 | Convictions and fines for corruption and bribery | Number of convictions and amount of fines for anti-corruption and anti-bribery violations. | If applicable — where any exist |
Of the eleven, B3 is the disclosure that draws on emissions-accounting discipline and the one where most SMEs need calculation support. It is treated separately below.
B3 deep dive — energy and GHG emissions
B3 is where the GHG inventory plugs into VSME. It is deliberately lighter than the ESRS E1-6 disclosure it parallels, but the underlying calculation is the same exercise an SME would run for any inventory: convert activity data into CO₂e using appropriate national factors.
Total energy consumption in MWh, with a renewable versus non-renewable split where the data is available. For most SMEs this comes straight off electricity, gas, and fuel invoices. The renewable split is reported when the undertaking can substantiate it — for example through a green tariff or on-site generation.
Direct emissions from owned or controlled sources — on-site fuel combustion, company vehicles, and any process or fugitive emissions. Calculated by applying national fuel factors to activity data. The Scope 1 boundary and the calculation method are the same as under the GHG Protocol; VSME simply asks for the gross result. A Scope 1 combustion calculator handles the conversion from fuel volume to tonnes CO₂e.
Indirect emissions from purchased electricity, heat, steam, or cooling. Calculated by applying the national grid factor for the country of operation to metered consumption — a Scope 2 electricity calculation using, for UK operations, the DEFRA grid factor dataset. VSME does not impose the strict dual location-based and market-based disclosure that ESRS E1-6 requires; an SME reports its Scope 2 figure on a consistent, disclosed basis. Where a market-based instrument is held, reporting on that basis is sensible, but the dual-method obligation of the large-company standard does not bind VSME reporters.
A GHG intensity figure — emissions per unit of turnover — is a Comprehensive Module datapoint, not a Basic one. It was added during consultation specifically because banks requested it. SMEs applying only the Basic Module are not required to compute it; those moving to Comprehensive should expect it.
VSME does not publish its own factor set. It explicitly expects SMEs to use GHG calculators and emission factors appropriate to their country of operation, because factors are national. A UK SME uses DEFRA factors; a French SME uses ADEME Base Empreinte; others use national grid and fuel factors. This is a meaningful difference from the ESRS, which steer corporate reporting toward a consistent AR6 GWP basis.
B3 requires gross Scope 1 and Scope 2 plus energy consumption. It does not require Scope 3 at the Basic level, does not require the dual location/market-based Scope 2 split, does not require a GHG intensity ratio at Basic level, and does not require a double materiality assessment to justify reporting any of it. An SME with a clean Scope 1+2 inventory built on national factors has effectively satisfied B3. The complexity ESRS E1-6 adds — dual Scope 2, mandatory intensity, full 15-category Scope 3 screening, biogenic supplementary disclosure — is precisely what VSME strips out to keep the standard proportionate.
Comprehensive Module — disclosures C1 to C9
The Comprehensive Module adds nine disclosures on top of the Basic Module, targeting the deeper data that banks, investors, and large corporate clients request. Its datapoints were built to satisfy specific regulatory needs of financial-sector users — a deliberate design choice documented in EFRAG’s Basis for Conclusions. Applying it requires the Basic Module first.
| ID | Disclosure | What it covers |
|---|---|---|
| C1 | Strategy — business model and sustainability | Description of products/services, significant markets, main business relationships, and any sustainability-related strategic elements. |
| C2 | Description of practices, policies and future initiatives | Narrative detail on the practices and policies declared in B2, plus governance responsibilities for them. |
| C3 | GHG reduction targets and climate transition | Emissions-reduction targets (base year, target year, scope), and a climate transition plan where the undertaking has one. |
| C4 | Climate risks | Physical and transition climate risks to which the undertaking is exposed, and how it is affected. |
| C5 | Additional workforce characteristics / value-chain emissions context | Further workforce data; the module is also where deeper Scope 3 value-chain emissions context is provided where requested. |
| C6 | Human rights policies and processes | Whether human rights policies exist, and the processes that support them. |
| C7 | Human rights incidents | Confirmed severe negative human rights incidents in own operations and value chain. |
| C8 | Revenue from sensitive sectors / supplier practices | Revenue from controversial or excluded sectors (e.g. fossil fuels, controversial weapons), supporting financial-sector exclusion screening. |
| C9 | Gender diversity ratio in the governance body | Ratio of female to male members of the governance body, where one exists. |
Because it largely is one. During consultation, banking associations confirmed the need for four specific datapoints that were folded into the Comprehensive Module — radioactive waste, the female-to-male management ratio, exclusion from EU reference benchmarks, and GHG intensity. The module is deliberately aligned to the datapoints financial institutions must collect under SFDR, the EBA Pillar 3 ESG templates, and the EU Benchmark Regulation. An SME completing the Comprehensive Module is, in effect, pre-answering its bank’s regulatory data needs.
VSME versus ESRS E1 / CSRD
Practitioners who know the CSRD and ESRS E1 need a precise map of what changes when the same organisation — or a subsidiary, or a supplier — reports under VSME instead. The differences are not cosmetic; they reshape the work.
| Dimension | VSME | ESRS E1 / CSRD |
|---|---|---|
| Legal status | Voluntary (Delegated Regulation (EU) 2026/1560) | Mandatory EU law for in-scope undertakings |
| Materiality | No materiality assessment — “if applicable” principle | Double materiality assessment required before any topical disclosure |
| Structure | Basic (B1–B11) + optional Comprehensive (C1–C9) | 12 standards; ESRS E1 alone has 9 disclosure requirements (11 in the amended standard) |
| GHG scope | Scope 1+2 at Basic; Scope 3 context in Comprehensive | Scope 1, 2, and full 15-category Scope 3 screening mandatory |
| Scope 2 method | Single consistent disclosed basis | Both location-based and market-based mandatory |
| GHG intensity ratio | Comprehensive Module only | Mandatory (tCO₂e per €M net revenue) |
| Emission factors | National factors for country of operation; no fixed GWP basis imposed | Latest IPCC assessment (AR6) expected, disclosed explicitly |
| Transition plan | Comprehensive (C3) — where the undertaking has one | Mandatory disclosure (E1-1); absence must be stated explicitly |
| Assurance | Not required | Limited assurance mandatory |
| Typical length | Often under 10 pages for the Basic Module | Full sustainability statement embedded in the management report |
VSME’s data structure is intentionally compatible with the ESRS. An SME that builds a clean VSME inventory and later grows into CSRD scope can step up rather than start over — the Scope 1+2 figures, energy data, and workforce metrics carry forward. What the SME would then need to add is the heavy machinery VSME omits: the double materiality assessment, dual-method Scope 2, full Scope 3 screening, a mandatory transition plan, the intensity ratio, and limited assurance. For an SME planning growth or an acquisition that pulls it into scope, completing the Comprehensive Module early is the most efficient on-ramp. Pairing it with a credible science-based target covers the C3 transition element with third-party validation.
The value chain cap — VSME as a statutory ceiling
The most consequential change in VSME’s status came through Omnibus I and Delegated Regulation (EU) 2026/1560. From financial years beginning on or after 1 January 2027, the value chain cap sets the legal limit on what a CSRD-reporting company can require from a value-chain undertaking with up to 1,000 employees.
The value chain cap stops a CSRD reporter from legally compelling data beyond the cap, and it applies only to information gathered for CSRD reporting: requests needed to comply with other EU or national law are not limited by it. It does not stop the reporter from asking through ordinary commercial channels, and it does not stop a supplier from choosing to answer. Most suppliers will continue to respond to customer questionnaires because the commercial relationship matters more than the legal right to refuse. The practical effect of the cap is to shift the data exchange from regulatory compulsion to commercial negotiation — and to make VSME the natural reference point for both sides of that negotiation. This is the same dynamic the due diligence regime creates on the human-rights side: a legal ceiling on demands that does not extinguish the underlying commercial pressure.
SFDR, EBA Pillar 3 and Benchmark Regulation alignment
The Comprehensive Module is not a generic deepening of the Basic Module — it is a targeted answer to the datapoints that financial institutions are themselves required to collect. EFRAG’s Basis for Conclusions provides an explicit mapping of these regimes to VSME disclosures. For an SME, the practical takeaway is that completing the Comprehensive Module pre-answers most of what a bank or asset manager will need.
| Financial-sector regime | What the institution must collect | VSME Comprehensive coverage |
|---|---|---|
| SFDR — Principal Adverse Impact indicators | GHG emissions and intensity, fossil-fuel exposure, controversial weapons involvement, gender diversity, human rights violations | C3 (targets/intensity context), C7 (human rights incidents), C8 (sensitive-sector revenue), C9 (governance gender ratio) |
| EBA Pillar 3 — ESG risk templates | Climate risk and transition data for banking-book exposures | C3 (transition), C4 (climate risks) |
| EU Benchmark Regulation | Exclusion screening for EU reference benchmarks | C8 (revenue from excluded/controversial sectors) |
An SME seeking a sustainability-linked loan or wanting to remain eligible for ESG-screened investment has a direct incentive to complete the Comprehensive Module: it hands its bank exactly the regulatory datapoints the bank would otherwise extract through a bespoke questionnaire. This is why the Comprehensive Module is most often triggered not by a customer but by a financing relationship — and why an SME anticipating a financing round should treat C3, C4, C8, and C9 as priorities rather than optional extras.
How to prepare a VSME report
A VSME report is a bounded exercise — most SMEs can complete the Basic Module from data they already hold. The workflow below sequences the work to avoid the two most common failures: over-building before the data exists, and under-building when a bank or customer needs Comprehensive datapoints. The VSME Calculator structures both the Basic and Comprehensive modules and computes the B3 energy and GHG datapoints.
VSME readiness checklist
This checklist tracks readiness across the two modules. The Basic track is the minimum any SME applies; the Comprehensive track is the additional work triggered by a bank, investor, or large-customer demand. Tick what you have in place.
Common reporting errors
Frequently asked questions
VSME is the Voluntary Sustainability Reporting Standard for non-listed SMEs, developed by EFRAG under a mandate from the European Commission’s 2023 SME Relief Package and delivered as final advice on 17 December 2024. The Commission published it as Annex I to Recommendation (EU) 2025/1710 on 30 July 2025. It gives small and medium-sized enterprises outside the scope of the CSRD a single, proportionate template for reporting environmental, social, and governance information — primarily so they can answer the sustainability data requests their banks, investors, and large customers send them. It has a Basic Module of eleven disclosures (B1–B11) and an optional Comprehensive Module of nine (C1–C9).
No. VSME is voluntary — no SME is legally required to publish a VSME report. Since 24 September 2026 the standard is set in EU law by Delegated Regulation (EU) 2026/1560, which keeps it voluntary and does not require assurance. In practice, however, VSME is increasingly expected: CSRD-reporting customers and banks ask for structured ESG data, and VSME is the format the Commission directs them to. The standard is voluntary in law but commercially important for SMEs in the value chains of larger companies.
The Basic Module (B1–B11) is the entry level and the minimum any SME applies — general information, energy and GHG emissions, conditional environmental disclosures, workforce data, and anti-corruption. It can usually be completed from existing records and is the target level for micro-undertakings. The Comprehensive Module (C1–C9) adds strategy, GHG reduction targets and climate transition, climate risks, deeper workforce and human-rights data, sensitive-sector revenue, and governance gender diversity — datapoints that banks, investors, and large customers need. Applying the Basic Module is a prerequisite for the Comprehensive Module, and once a module is chosen it is applied in full for every disclosure that is applicable.
No. The materiality analysis that appeared in the original VSME exposure draft was removed after the public consultation, on the grounds that it was disproportionate for SMEs. VSME uses an “if applicable” principle instead: each disclosure carries a condition, and the undertaking reports the disclosure where the condition is met and omits it where it is not. An omission is assumed to mean the topic is not applicable, and no rationale is required for the omission. This is a fundamental difference from the ESRS, which require a documented double materiality assessment before any topical disclosure.
Disclosure B3 in the Basic Module requires total energy consumption and gross Scope 1 and Scope 2 GHG emissions. Scope 1 covers direct emissions from owned or controlled sources; Scope 2 covers purchased electricity, heat, steam, and cooling. VSME does not impose the dual location-based and market-based Scope 2 disclosure that ESRS E1-6 requires, does not require a GHG intensity ratio at the Basic level, and does not require Scope 3 at the Basic level — deeper value-chain emissions context sits in the Comprehensive Module. VSME expects SMEs to use emission factors appropriate to their country of operation, such as DEFRA factors in the UK, rather than supplying its own factor set.
The value chain cap, set by the Omnibus I reforms and Delegated Regulation (EU) 2026/1560, limits what a CSRD-reporting company can require from value-chain undertakings with up to 1,000 employees. From financial years beginning on or after 1 January 2027, it cannot require more than the essential datapoints listed in Annex II of the Regulation, a subset of the voluntary standard, with a shorter list for undertakings with 10 employees or fewer. The protected undertaking can refuse requests that exceed the cap, and the CSRD reporter is still deemed compliant even if it cannot obtain the additional data. The cap removes the legal compulsion to provide data above it; it does not stop customers asking through commercial channels, so most SMEs continue to respond because the commercial relationship matters more than the right to refuse.
The Comprehensive Module was deliberately built to satisfy the datapoints financial institutions must collect. It aligns with the SFDR Principal Adverse Impact indicators, the EBA Pillar 3 ESG risk templates, and the EU Benchmark Regulation exclusion-screening requirements. Four datapoints — radioactive waste, the female-to-male management ratio, exclusion from EU reference benchmarks, and GHG intensity — were added during consultation specifically at the request of banking associations. An SME that completes the Comprehensive Module is effectively pre-answering its bank’s regulatory data needs, which is why a financing relationship is often the trigger for moving from Basic to Comprehensive.
No. Unlike the CSRD, which mandates limited assurance of the sustainability statement, VSME does not require any external assurance. An SME may choose to seek limited assurance or external validation — for example to strengthen a Comprehensive Module report used for sustainability-linked financing — but it is optional. The absence of a mandatory assurance requirement is one of the main proportionality features that keeps VSME achievable for SMEs without a sustainability function.
Yes. VSME’s data structure is intentionally compatible with the ESRS, so an SME that builds a clean VSME inventory and later grows into CSRD scope can step up rather than start over. The Scope 1+2 figures, energy data, and workforce metrics carry forward. What the company would then need to add is the machinery VSME omits: a double materiality assessment, dual-method Scope 2, full 15-category Scope 3 screening, a mandatory transition plan, the GHG intensity ratio, and limited assurance. For an SME anticipating growth or an acquisition that pulls it into scope, completing the Comprehensive Module early is the most efficient on-ramp to full ESRS reporting.
Build the B3 energy-and-emissions core of your VSME report with audit-grade traceability. GreenCalculus calculators output Scope 1 and Scope 2 figures with the national factor provenance a customer or bank can verify — the proportionate inventory VSME asks for, without the ESRS overhead.