VSME explained: what the EU’s Voluntary Standard for SMEs means for growing businesses

Requests for carbon and wider ESG data are becoming a normal part of doing business. Larger customers, banks and investors are under pressure to understand their own climate impact, and they are passing those expectations along their value chains.

The Voluntary Standard for SMEs (VSME) is the EU’s attempt to make that process more manageable. It gives non-listed small and medium-sized companies a common way to share sustainability information, rather than responding to a different questionnaire for every stakeholder. If your organisation will not be reporting under ESRS (the European Sustainability Reporting Standards – more on that below), VSME is the framework the Commission wants you to use.

This article looks at what VSME is, why it’s being introduced, how it links to climate and carbon data, and where a platform like Seedling can help. Whether you're an experienced sustainability lead or simply navigating carbon for the first time as part of a tender or compliance process, this guide will help you get to grips with VSME.  

What is ESRS and CSRD? – Setting the scene

The Corporate Sustainability Reporting Directive (CSRD) is the EU’s main sustainability reporting law. It applies to EU companies that meet the “large undertaking” criteria (currently at least 2 of the following: more than 250 employees, €50m turnover, or €25m total assets), as well as listed SMEs on EU regulated markets. These organisations must report using the European Sustainability Reporting Standards (ESRS), a detailed set of mandatory disclosures covering climate, environmental, social and governance topics.

A proposed simplification package (the Omnibus reform) would further narrow this scope by moving some mid-sized companies out of CSRD altogether - including those with fewer than 1,000 employees. As a result, most non-listed companies, and many that may fall out of CSRD under the updated thresholds, will not be required to use ESRS. But they are still routinely asked for ESG and carbon information by their larger customers, investors and banks who are in scope.

VSME has been introduced specifically to give these non-CSRD, non-listed companies a simpler, consistent way to provide that information.

What is VSME - in plain English?

The Voluntary Standard for SMEs (VSME) is a sustainability reporting standard developed by EFRAG (the European Financial Reporting Advisory Group) for non-listed micro, small and medium-sized companies. It sits within the EU’s ‘SME Relief Package’ and was formally recommended by the European Commission on 30 July 2025.

The core idea is straightforward: provide smaller companies with a single, structured template for sustainability information, so that banks, investors and large customers can work from a consistent baseline rather than inventing their own formats.

A few key points anchor what VSME is – and isn’t:

a) It’s voluntary.

VSME is a recommendation, not a law. It sits outside the Corporate Sustainability Reporting Directive (CSRD). Companies that are in CSRD scope will still report using ESRS; companies outside CSRD can choose to use VSME when it helps them respond to information requests more efficiently.

b) It’s aimed at non-listed companies outside CSRD scope‍

The standard is designed for non-listed companies that fall into the EU ‘small and medium-sized’ definition - those that will fall outside of the CSRD thresholds (<1,000 average employees under the current proposed changes). The Commission explicitly notes that companies outside the EU can use it if they want to provide information in a familiar EU format to larger customers, banks or investors.

c) It’s built for information requests.‍

VSME is written with a specific purpose: to help smaller companies respond when banks, investors or larger corporate customers ask for sustainability information as part of lending, procurement or due diligence.

d) It has two levels.‍

The Basic module is a lighter set of disclosures that most smaller businesses can reasonably provide. The Comprehensive module builds on this with more detailed requirements, for cases where stakeholders expect deeper reporting.

Structurally, VSME is aligned with the themes in the EU’s main standards (ESRS): environment, social and governance. The difference is that the detail is pared back so a small team can realistically use it.

Why has the EU introduced VSME?

a) Reducing ESG questionnaire overload

Under CSRD, large companies now have to report on their value chain impacts, including emissions and wider ESG topics. That inevitably means asking suppliers, portfolio companies and partners for information.

Without a shared template, this quickly becomes messy. Each large customer or bank designs its own spreadsheet or portal, uses slightly different definitions, and asks for overlapping, but not identical, data. Smaller teams then spend time reformatting essentially the same information in different ways.

The Commission’s stated goal is to reduce this administrative burden. By pointing larger companies and financial institutions to a single voluntary standard for smaller businesses, it wants to bring more consistency to what is being asked for.

b) The ‘value-chain cap’

Alongside recommending VSME, the Commission has proposed a ‘value-chain cap’ as part of a broader simplification of CSRD. In essence, companies in scope of CSRD should not ask their value chain for more sustainability information than what is set out in the voluntary standard.

In practice, that means large EU corporates and financial institutions are being steered to say: ‘We will base our requests on VSME,’ rather than sending open-ended questionnaires. For suppliers, that should gradually reduce duplication and make expectations more predictable.

c) A realistic route into structured reporting

VSME is also designed as a proportionate entry point to sustainability reporting for smaller organisations. It uses materiality as a filter, so companies focus on issues that meaningfully relate to their activities and stakeholders. The Basic module is deliberately limited in scope, so that non-listed companies without a sustainability team can still respond. And the Recommendation clarifies that, for users of VSME, self-declaration is appropriate - there is no requirement to obtain external assurance just to use the standard. For growing companies that need a credible structure but cannot justify a full CSRD-style reporting process, that balance is important.

What does VSME actually ask for?

At a high level, VSME covers three pillars:

• Environment: including climate and greenhouse gas emissions, energy use, pollution, resource use and waste.

• Social: own workforce, workers in the value chain, affected communities and customers.

• Governance: business conduct, oversight, policies and risk management.

You’re not expected to report on every topic in depth. Instead, you identify which themes are material and concentrate on those.

The Basic module

For most smaller companies, the Basic module is the relevant starting point. It brings together:

• A brief description of the company and its activities.

• A high-level view of the main sustainability risks and opportunities.

• A core set of metrics, including energy use, greenhouse gas emissions (at least Scope 1 and 2, and Scope 3 where relevant and feasible), plus selected social and governance indicators.

• A summary of any policies, targets and actions already in place.

Micro-companies can apply this flexibly - they might initially share only part of the Basic module and expand over time.

The Comprehensive module

The Comprehensive module introduces more granular metrics, deeper narrative disclosures on risks and strategy, and stronger expectations around targets and transition plans.

In practice, this is most relevant when:

• Banks, investors or corporate customers are already expecting detailed ESG reporting; or

• The company wants to use sustainability reporting as part of a more strategic agenda, such as fundraising or M&A.

Many organisations will not move into the Comprehensive module immediately. The Basic module can stand alone where that is proportionate.

Where climate and carbon data fit in

Although VSME spans the full ESG spectrum, climate is central to the environmental pillar.

Within that section, companies are asked for greenhouse gas emissions, energy consumption and any climate-related targets or transition plans. Emissions are split into Scope 1 and 2 as a baseline, with Scope 3 reported where it is material and feasible. This creates a practical requirement: it is difficult to engage meaningfully with VSME without a robust carbon footprint.

For most growing businesses, that means:

• A full-scope, GHG-Protocol-aligned greenhouse gas inventory across Scopes 1, 2 and 3.

• A preference for activity-based data (kWh, litres, kilometres, kilograms) rather than purely spend-based calculations.

• Clear documentation of boundaries, assumptions and data quality.

• A realistic reduction plan and near-term targets to show how emissions will change over time.

Many Seedling clients are already building this dataset for other reasons – for example to meet PPN 006 (06/21) tender requirements, comply with SECR, work towards B Corp, or answer detailed client questionnaires. Once that work is done, VSME becomes another way of presenting the same underlying climate data, rather than a separate exercise.

How carbon reporting differs between VSME Basic and Comprehensive

Based on the official VSME Annex, the Basic module asks for foundational climate metrics:

• Scope 1 emissions (required)

• Scope 2 emissions (required)

• Scope 3 emissions only where relevant and feasible

• Energy consumption

• Any climate-related targets or actions already in place

It does not require detailed methodologies, supplier-level data, granular breakdowns, or a full transition plan.
It is designed to be achievable for a small team using high-level, activity-based or spend-based data.

The Comprehensive module expands the requirements significantly. It adds:

• More detailed Scope 3 reporting, including category-level information where material

• Higher expectations for data quality (moving towards activity-based and supplier-specific data)

• More granular emissions breakdowns, often year-on-year

• Disclosure of reduction targets, including whether they are science-aligned

• A fuller transition or decarbonisation plan, with timelines and actions

• Narrative explanation of climate risks, strategy, and performance

• More robust methodological information (boundaries, assumptions, improvements, estimation methods)

In short:
Basic = core emissions + energy + any targets/actions
Comprehensive = deeper emissions detail, Scope 3 expansion, stronger targets, transition plan, methodological information

Who should pay attention to VSME?

Because VSME is voluntary, it’s helpful to be clear about when it is worth investing time in.

a) Supplying large EU-based customers

If your customers include large European corporates, particularly those in scope of CSRD, VSME is likely to become relevant. These organisations are encouraged to base supplier information requests on the voluntary standard and to minimise additional bespoke questions. Over time, supplier portals and questionnaires may explicitly reference VSME or mirror its structure.

b) Working with banks, lenders or investors

Financial institutions are also highlighted in the Recommendation. When they ask smaller clients for sustainability information, for example as part of sustainability-linked loans or covenants, they are invited to use VSME as a reference point. If you already complete ESG sections in loan applications or investor updates, having data organised in a VSME-aligned way may reduce repetition.

c) Already reporting under other frameworks

Many growing companies are already collecting climate and ESG data for other frameworks:

• Carbon Reduction Plans for PPN 006 (06/21).

• Annual reporting under SECR.

• B Corp climate requirements and Climate Transition Plans.

• External ratings such as EcoVadis or CDP.

In these cases, much of what VSME asks for, especially on climate, is already available. VSME then acts mainly as a structuring tool, helping you present existing information in a way that aligns with EU expectations.

d) Wanting to be a straightforward supplier

Some teams will use VSME proactively. Having a concise, VSME-aligned summary of your sustainability position can make you easier to onboard as a supplier, reduce back-and-forth with procurement teams, and signal that you take ESG seriously in a practical way.

What VSME helps with - and what it doesn’t

It is helpful to treat VSME as one tool in a wider toolbox, rather than a catch-all solution.

On the positive side, VSME:

• Provides a recognised EU structure for ESG disclosures from smaller, non-listed companies.

• Encourages banks and large customers to converge around a common template, instead of each designing their own.

• Brings some order to conversations about risks, targets and actions, not just individual data points.

• Makes it easier to reuse one dataset across multiple stakeholders, reducing duplicated effort.

At the same time, VSME:

• Does not create new legal obligations by itself, it is a recommendation rather than a regulation.

• Does not guarantee that every customer or lender will use it consistently.

• Does not remove the need for high-quality underlying data, particularly on emissions.

• Does not override sector-specific requirements such as NHS Evergreen, PPN 006 (06/21) in UK public procurement or emerging product rules like Digital Product Passports.

A useful way to frame it is as a shared language. It won’t solve every ESG reporting challenge, but it can make discussions more structured and comparable.

How do you actually report carbon data under VSME?

There is no central submission and no EU portal for VSME.

You do not upload your carbon data to the Commission, EFRAG, or any EU registry.
VSME is not a compliance system — it is a framework for disclosure, used when stakeholders ask for information.

There is no official “VSME report template”.

The Recommendation provides what you must disclose, but not a fixed format, layout, or submission file.

What this means in practice:

• You can present VSME information in a PDF

• A slide deck

• A structured sustainability summary

• A supplier questionnaire response

• Or through your carbon platform (like Seedling)

The EU provides the content, not the container.

How Seedling can support VSME-aligned reporting

Seedling’s platform is designed to deliver a full-scope, GHG-Protocol-aligned footprint across Scopes 1, 2 and 3, with an emphasis on activity data rather than purely spend-based estimates. You are guided step by step through data collection, and supported by dedicated adviser who's responsible for ensuring best practice methodology and navigating data gaps.

Once measured, the same dataset can feed:

• Public sector Carbon Reduction Plans under PPN 006 (06/21).

• SECR disclosures.

• B Corp Climate Action or Transition Plans.

• Client questionnaires and supplier portals.

• VSME climate disclosures.

Turning numbers into a plan

VSME looks for more than a single footprint figure; it also asks about targets and actions.

Using Seedling you can explore different reduction pathways, set SBTi-aligned Net Zero targets, and build a plan that reflects your operations and constraints. One-to-one support helps keep this grounded in what is realistic for your team. That gives you the narrative backing you need when you talk about your climate strategy alongside emissions numbers.

Practical next steps

You don’t need to become a VSME specialist immediately - a simple, pragmatic approach is usually enough, as the system is designed for growing businesses.

a) Get your climate data into good shape.‍

If you have not yet measured a full-scope footprint, this is the logical first step, regardless of VSME. A robust inventory and a foundation reduction plan will unlock a wide range of reporting needs, from tenders and B Corp to investor questions and, later, VSME.

b) Decide how relevant VSME is today.‍

For organisations with strong EU exposure or financing, it makes sense to treat VSME as something that will become part of normal requests. For companies focused mainly on UK clients with their own frameworks, it may be more of a ‘watching brief’ for now.

c) Aim for one core dataset, supplying many outputs.‍

Regardless of how quickly you adopt VSME, the underlying strategy is the same: build a single, reliable dataset and reuse it. That is where the real time savings and consistency gains appear.

Putting VSME in perspective

VSME won’t remove all of the complexity from sustainability reporting, but it does offer a clearer structure for how smaller, non-listed companies can respond when banks, investors and large customers ask for ESG information. For growing businesses, the fundamentals remain familiar: get accurate data, build a credible plan, and communicate it in a way stakeholders can understand. VSME is another way of organising that story, particularly for EU-linked relationships, rather than a completely new chapter.

If you want support with the measurement and planning side, Seedling can help you build the kind of carbon and climate dataset that underpins VSME and the other frameworks you are already dealing with, without turning it into a second full-time job.