VSME: What the EU’s Voluntary Standard for SMEs Means

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. As of September 2026, it is also written into EU law, and sets a legal limit on what larger customers can ask you for.

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. Following the Omnibus I reforms signed off in February 2026, it applies to EU companies with more than 1,000 employees and net turnover above €450 million, and to non-EU companies with more than €450 million EU turnover and an EU subsidiary or branch generating more than €200 million. Listed SMEs are no longer in scope. These organisations must report using the European Sustainability Reporting Standards (ESRS), a detailed set of mandatory disclosures covering climate, environmental, social and governance topics.

The Omnibus I reform has narrowed the CSRD's scope by around 90%, taking every company with 1,000 or fewer employees out altogether. As a result, most companies 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 companies outside the CSRD a simpler, consistent way to provide that information.

What is VSME?

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 was first recommended by the European Commission on 30 July 2025.

In July 2026, the Commission turned it into law. Delegated Regulation (EU) 2026/1560, published on 21 September 2026, sets out a voluntary standard based closely on VSME. The changes are mainly to align it with the revised ESRS, which reduces the number of datapoints. It keeps the Basic and Comprehensive modules, and it replaces the 2025 Recommendation, which no longer has legal effect. It is designed for any company outside the CSRD with 1,000 or fewer employees, not just SMEs.

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.

Using the standard is still voluntary, but it is now set out in EU law, and it defines the legal limit on what CSRD reporters can ask of you. 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 companies outside CSRD scope‍

The standard is designed for companies outside the CSRD that averaged 1,000 or fewer employees in the previous financial year, well beyond the usual SME definition. That includes many mid-sized businesses. Companies outside the EU are covered too, as the revised ESRS confirm the value chain cap protects non-EU suppliers.

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’

The Omnibus I reform made the voluntary standard a 'value chain cap'. From financial years starting on or after 1 January 2027, companies reporting under the CSRD can't require more from suppliers with 1,000 or fewer employees than the datapoints listed in Annex II of the regulation. Only the standard's essential datapoints count towards the cap, and the list is shorter still for companies with 10 or fewer employees.

Suppliers now have a statutory right to refuse requests that go beyond the cap. If a customer does ask for more, it must tell you which information is extra and that you can decline to provide it. CSRD reporters are also expected to ask for less than the cap if they don't need all of it.

The cap has limits. It only covers information gathered for CSRD reporting, so it doesn't affect requests linked to other laws or existing contracts, and it doesn't stop you sharing information that is commonly shared in your sector.

In practice, that means large EU corporates and financial institutions should base their requests on the voluntary standard, rather than sending open-ended questionnaires.

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 companies using the standard are not obliged to seek assurance for the information they report. 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.

For companies with 10 or fewer employees, some of the more demanding environmental disclosures are voluntary, and fall outside the value chain cap.

The Comprehensive module

The Comprehensive module adds disclosures on strategy, reduction targets, climate risks and human rights, along with optional Scope 3 reporting.

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 Annex I of the regulation, 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:

• Scope 3 emissions, if you choose to report them, covering your significant categories
• Reduction targets, if you have set them, in absolute values with base year, target year and main actions
• For high climate impact sectors, whether and when you'll adopt a transition plan if you don't have one
• Climate risks, if you have identified any, including how you assessed them and any adaptation actions

In short:
Basic = core emissions + energy + any targets/actions
Comprehensive = optional Scope 3, targets if you have them, a transition plan position for high climate impact sectors, and climate risks

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. From 2027, these organisations can't require more than the standard's capped datapoints for their CSRD reporting. Over time, supplier portals and questionnaires may explicitly reference VSME or mirror its structure.

b) Working with banks, lenders or investors

The regulation also encourages banks, insurers and investors to limit their sustainability requests to companies with 1,000 or fewer employees to what the voluntary standard covers, even when the request isn't for CSRD reporting. For example, this could apply to sustainability-linked loans or covenants. 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 oblige anyone to report. Its legal effect is to limit what larger companies can request.

• 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 mandatory template.

The regulation sets out what you must disclose, but not a fixed format. EFRAG provides optional templates on its website.

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 companies outside the CSRD 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.