What Is VSME? The Voluntary ESG Reporting Standard for SMEs

In the same week, a Polish supplier searches “co to jest VSME”, a Spanish exporter looks for “rendición de informes VSME” and a German workshop owner types “VSME Bericht Beispiel”. Three languages, one situation. Somebody important has asked for sustainability data. Four unfamiliar letters appeared in the request.

This guide explains what VSME is, who it is for, what is inside it and how a small or medium-sized enterprise (SME) actually uses it. It is written for owners, finance leads, accountants and advisors who need the standard explained once, properly.

Both sides of the problem are close to me. For close to two decades I ran technology companies that received other people’s reporting requests. For the last two years I have been building ESGDO around this particular standard. That combination decides what I think matters here. Not the standard itself, but knowing both perspectives.

There is also a further change. In 2026, VSME stopped being only a helpful EFRAG template. It became the basis of an EU regulation, in force from 24 September 2026. With that came something no reporting standard had offered SMEs before. It sets a limit on what your largest customers may ask you for.

What VSME is

VSME is the Voluntary Sustainability Reporting Standard for non-listed micro, small and medium-sized undertakings. EFRAG, the body that also writes the European Sustainability Reporting Standards (ESRS) for large companies, delivered it to the European Commission in December 2024. It came out of the Commission’s SME Relief Package of September 2023, which asked for a simple, standardised way for smaller companies to report ESG information.

Read the standard’s own objective and the design intent is obvious. VSME exists to help smaller companies answer sustainability requests from large customers. Banks and investors follow. A completed report makes access to finance easier. Companies can also use it to manage their own environmental and social issues. And it contributes to a more sustainable economy. Note the order. Answering other people comes first.

That distinction matters, because it explains every design choice in the standard. There is no double materiality requirement. There is no requirement for an external audit. Most disclosures apply only “if applicable” to your business. The standard is short enough that a company with no sustainability department can work through it. It is also structured enough that a credit officer or a procurement team recognises the format.

The scale of the problem it addresses is real. The OECD found that most surveyed financial institutions already seek sustainability data from their SME clients. Roughly 60% obtain that data directly from the client. Every one of those institutions used to be free to invent its own questionnaire. VSME is the attempt to replace a filing cabinet of bespoke forms with one report you prepare once.

From EFRAG standard to EU law: what changed in 2025 and 2026

Most explanations of VSME online still describe the December 2024 EFRAG document. That description is now incomplete. The gap matters if you are choosing which text to work from this year.

Status checked on 23 September 2026. The Voluntary Standard was published in the Official Journal on 21 September 2026 as Commission Delegated Regulation (EU) 2026/1560. It enters into force on 24 September 2026, the third day after publication. Two short news notes cover the last steps: scrutiny ends without objection and the Voluntary Standard is published in the Official Journal.

Two milestones on that line deserve more than a label.

Practical note on names and versions

The market will keep saying “VSME” for years. It is also what people search for. The legal instrument is called the Voluntary Standard, set out in Delegated Regulation (EU) 2026/1560. For a report prepared during this transition, write down in your basis of preparation which text you applied (EFRAG’s 2024 VSME, the 2025 Recommendation or the 2026 Voluntary Standard) and which template version you used. One line of documentation now saves an awkward conversation with an auditor or a bank later.

One more detail has practical consequences. From 24 September 2026, the date the regulation enters into force, the 2025 Recommendation is to be treated as no longer producing legal effects. Financial institutions are still encouraged to keep their requests within the standard. That is encouragement, not prohibition.

Who VSME is for

The 1,000-employee figure above and the 250-employee row below are not two versions of the same test. One is who the 2026 Voluntary Standard is intended for. The other is how EU accounting law still defines micro, small and medium undertakings. They answer different questions.

The original VSME standard is aimed at undertakings whose securities are not admitted to trading on an EU regulated market, using the size categories of the Accounting Directive. An undertaking sits in a category when it does not exceed two of the three thresholds. That is why a firm can have more than 250 people and still be "medium". Headcount is only one of three tests. The modules still use these classes for proportionality. The 2026 outer limit is a separate, wider rule.

The 2026 Voluntary Standard does not rewrite the table. It adds a wider outer ring: any undertaking with up to 1,000 employees that is not caught by the mandatory regime. In practice, that covers the overwhelming majority of European suppliers. It now includes the mid-sized companies that were dropped out of CSRD scope by Omnibus I and still receive questionnaires from their customers.

What is inside: Basic and Comprehensive modules

VSME has two modules. The Basic Module is disclosures B1 and B2 plus the basic metrics B3 to B11. The Comprehensive Module adds C1 to C9, the datapoints that banks, investors and large corporate clients tend to ask for on top of the basics. Applying the Basic Module is a prerequisite for applying the Comprehensive Module. There is no shortcut straight to the C-series.

Basic Module (B1–B11)

Look closely at the proportionality built into that list, because it is the part people miss. The gender pay gap disclosure may be omitted by an undertaking with a headcount below 150. That threshold drops to 100 from 7 June 2031. Employee turnover is only required from 50 employees upwards. Water consumption arrives only if your processes genuinely consume water. A ten-person consultancy and a chemical plant do not produce the same report. The standard is written on that assumption.

Comprehensive Module (C1–C9)

C2 is where most of the writing happens. It is also where SMEs most often stall in front of a blank page. EFRAG published a Supporting Guide on Disclosure C2 full of concrete examples, from LED retrofits and route optimisation to whistleblowing channels and supplier codes. Those examples are illustrative, not a checklist you must complete.

Basic only, or Basic plus Comprehensive?

You declare the answer in B1, as Option A (Basic Module only) or Option B (Basic and Comprehensive). Once a module is chosen you apply it in full. You omit a disclosure only when it is not applicable. You do not omit it because you would rather skip it.

The decision rule that holds up in practice is unglamorous. Let the counterparty decide. If a specific bank, investor or key account has asked for targets, climate risk or human rights processes, you need the Comprehensive Module. If nobody has asked, Basic is a complete and legitimate report, not a reduced one. Adding the C-series speculatively means committing to maintain narrative disclosures nobody reads.

For a side-by-side decision matrix against real situations (first report, repeated questionnaires from large customers, credit application, group structure), see the module selection table in our step-by-step guide to preparing an SME ESG report.

VSME vs ESRS and CSRD

Searches like “VSME ESRS” and “simplified ESRS” usually come from a team that has been handed the wrong document. VSME covers the same sustainability topics as the ESRS, so the family resemblance is real. It is not a shrunken ESRS. Treating it as one is the fastest route to a stalled project.

One difference is worth stating plainly because it saves months of work. ESRS asks you to run a formal double materiality assessment to decide what to report. VSME replaces that with a relevance test you can apply yourself: does this disclosure fit our actual circumstances? If a disclosure is omitted, it is assumed not to be applicable. That single substitution is the largest simplification in the standard.

For the longer story of how corporate social responsibility hardened into today’s ESG frameworks, see our expert analysis on the evolution from CSR to ESG and the SDGs.

The value-chain cap: the right to say no

Here is the part that most “what is VSME” explainers have not caught up with. It is also the reason the 2026 delegated act matters more than a version number suggests.

The Omnibus I reforms addressed a complaint the Commission heard repeatedly. Requests reaching suppliers were sometimes disproportionate. They arrived through differing, uncoordinated and overlapping questionnaires. The response was to turn the Voluntary Standard into a ceiling. Undertakings that report under the mandatory regime are prohibited from requiring, from undertakings in their value chain with no more than 1,000 employees, information that goes beyond the standard. Those smaller undertakings, which the act calls protected undertakings, have a statutory right to refuse anything above the limit. A large company that asks for more must tell the supplier which extra information it is requesting and that the supplier may decline.

The cap is defined precisely rather than left to argument. Annex II of the delegated act lists the disclosures it covers, with one list for undertakings above 10 employees and a shorter one for those with 10 or fewer. The essential disclosures are on that list. They include the B1 basis of preparation, total energy consumption, estimated gross GHG emissions, water withdrawal, waste and recycling figures, workforce composition, health and safety, pay and training. They also include convictions and fines.

The cap has limits of its own. Do not claim more than it actually does.

• The cap only limits data a large customer collects for its own sustainability report. It does not stop other commercial questions.
• Banks, insurers and financial market participants are encouraged to keep requests within the standard for other purposes. Encouraged is not the same as prohibited.
• Voluntary sharing of information commonly exchanged in your sector remains perfectly possible.
• Existing contractual or legal obligations to provide information are unaffected.
• The cap applies for financial years beginning on or after 1 January 2027. The regulation itself is in force from 24 September 2026. The cap starts later.

So the honest summary is this. From 2027, a CSRD-reporting customer cannot demand more than the standard for its own reporting. You can point at a legal text when you decline. You will still receive your bank’s credit questionnaire, a tender scorecard and a customer’s voluntary supplier survey. A complete VSME report remains the best single answer to them.

How SMEs implement VSME in practice

Ask about VSME implementation in Warsaw, Milan or Stuttgart and you will hear the same three words in different languages: implementation, support, guidance. The work itself is more ordinary than the vocabulary suggests.

1. Decide the boundary and the period. Individual or consolidated. Use a period consistent with your financial statements. Record both in B1.
2. Run the applicability screen. Walk B4 to B7 and mark what genuinely applies to your sites and processes. Document the reasoning. “Not applicable” should be a decision, not a blank.
3. Choose Option A or Option B, based on what a real counterparty has asked for.
4. Collect activity data. Energy invoices, fuel records, water and waste contracts, payroll and headcount, the accident register, certificates and signed policies.
5. Calculate B3. Estimated gross Scope 1 and location-based Scope 2, with your emission factors and their versions kept in the working file. The standard expects estimates to be reasonable and transparent, not perfect.
6. Draft, review, freeze and share. Have finance and operations challenge anything that looks unusually high or low before you send it out.

First-time preparers often miss two things. Comparative information is required from the second year of reporting, so your first report sets a baseline you will be measured against. It is worth getting the definitions right early. And if you also prepare financial statements, the sustainability report must be coherent with them for the same period and presented so that the links are easy to follow, for example with cross references.

For the full project sequence, including owners by department and a data checklist, use our step-by-step guide to preparing an SME ESG report. For disclosure-by-disclosure detail on the VSME fields themselves, see the practical VSME guide.

You do not need a consultant to complete a Basic Module, though an accountant or advisor who already knows your books can accelerate the data gathering considerably. What helps most is structure. You need guided fields, validation of the arithmetic, a stored audit trail and an export your counterparty can actually read. That is what ESGDO’s reporting features are built around. You can check what a full report costs on our pricing page.

What usually goes wrong. It is rarely the standard

I have built reporting software around VSME. Before that I spent years running companies that received other people’s data requests. I keep seeing the same three failures. None of them is caused by the standard being hard.

It is a data problem dressed as a writing problem

Most of what B3, B8, B9 and B10 ask for already exists inside the business: energy invoices, fuel and fleet records, payroll, the accident register. What is missing is not information. It is ownership: nobody has ever been asked to join those sources into one dated set for one period. Solve that and the report largely assembles itself. Skip it and no template will rescue you, however good the software.

Tools get bought before the decision gets made

Option A or Option B is not a technical choice. It is a commercial one. It takes a single conversation with the bank or the key account that started this. That conversation keeps getting postponed while a tool gets evaluated. The company then finds itself maintaining Comprehensive narrative that no counterparty ever asked for. Ask first, buy second.

The first report gets judged on the wrong timescale

As an owner, I understand why the first report feels like pure cost. The return does not arrive with it. It arrives the second time somebody asks, when the answer is an attachment instead of a project. It arrives again in year two, when comparative figures turn a document into a track record.

What a VSME report looks like

Almost everyone who reads a reporting standard for the first time asks the same question next: what does the finished thing actually look like? Fair question. The standard stays abstract until you see a report.

So we publish a full worked example rather than a screenshot. Blueriver Logistics BV is a fictional company taken through the VSME structure from B1 to the final export, in three formats.

That last format is becoming the interesting one. EFRAG maintains a VSME Digital Template and XBRL taxonomy so a report can travel as data, not as a document somebody has to retype. Banks and large buyers can load the figures. There is a less obvious reason. It matters more to the company that owns the data. From the second year, VSME asks for comparative figures. Those figures only stay usable if they leave the tool as a file. The PDF is what you send. The XBRL file is what you keep. If last year’s report lives only inside one supplier’s system, year two becomes a second collection project. Before you choose who prepares the report, ask whether you get an XBRL file built on the EFRAG taxonomy. EFRAG designed that taxonomy as a vendor-independent template that any solution provider can integrate. A professional preparer following that guidance should support the same taxonomy and import last year’s file instead of asking you to retype the year.

EFRAG has said its digital tools are being updated for the new standard, with publication expected in the fourth quarter of 2026. Record which taxonomy version the file used.

VSME in your language

One question comes up constantly and has a genuinely useful answer: does the standard exist in my language? It does, in yours and in the language of the colleague who has to fill in the water and waste figures.

• The VSME standard itself has been translated into all 24 official EU languages.
• The VSME Digital Template, XBRL taxonomy and converter support nine languages: English, Spanish, Polish, Lithuanian, Portuguese, Danish, French, German and Italian. The translations were prepared by EFRAG and reviewed by national standard setters.
• EFRAG’s training videos explaining the disclosures are available in seventeen languages.
• National bodies have added their own material. Poland’s Ministry of Development and Technology, for example, published a Polish translation of the standard.

The practical consequence is easy to miss. Your operations manager can work through the disclosures in the language they actually think in, while the report that leaves your company is prepared in the language your customer or bank reads. Language is a data-quality question, not a formality. People fill in fields correctly when they understand them.

FAQ

Key takeaways

• VSME is EFRAG’s voluntary sustainability reporting standard for smaller undertakings, built so an SME can answer customers, banks and investors once instead of many times.
• It has two modules. Basic (B1–B11) is the minimum and the target approach for micro-enterprises. Comprehensive (C1–C9) sits on top when a counterparty genuinely needs it.
• In 2026 the standard became the basis of Delegated Regulation (EU) 2026/1560, in force from 24 September 2026. It extends the intended audience to undertakings with up to 1,000 employees.
• The value-chain cap is the feature to understand: from financial years starting in 2027, CSRD reporters cannot require more than the standard from protected undertakings, which may refuse.
• There is no double materiality assessment and no required audit. Most disclosures apply only if applicable, with real thresholds. For instance, the gender pay gap may be omitted below 150 employees.
• The standard exists in all 24 EU languages. The digital template exists in nine, so the people filling in the data can work in their own language.
• Ask for the XBRL file, not only the PDF. Year two needs last year’s figures, and a file built on the EFRAG taxonomy is what lets those figures leave with you.

Sources

• EFRAG: VSME Standard (December 2024)
• EFRAG: Voluntary reporting standard for SMEs (VSME) project page
• EFRAG: SMEs and sustainability reporting (translations and training material)
• EFRAG: VSME Digital Template and XBRL Taxonomy
• EFRAG: New languages available in the VSME Digital Template
• EFRAG: VSME Supporting Guide on Disclosure C2
• European Commission: Commission Recommendation (EU) 2025/1710 on a voluntary sustainability reporting standard for SMEs (30 July 2025)
• European Commission: Questions and answers on the VSME Recommendation
• European Commission: Commission adopts revised sustainability reporting standards and a voluntary reporting standard (3 July 2026)
• EUR-Lex: Commission Delegated Regulation (EU) 2026/1560, Annex I (Voluntary Standard) and Annex II (value-chain cap datapoints) (adopted 3 July 2026 as C(2026) 5011, published in the Official Journal 21 September 2026)
• Linklaters Sustainable Futures: EU CSRD: revised ESRS and voluntary reporting standard are published in the Official Journal of the EU (21 September 2026)
• OECD: Financing SMEs for sustainability: financial institution strategies and approaches
• Ministry of Finance of Poland: announcement of the Polish version of the VSME standard (translation prepared by the Ministry of Development and Technology)

Founder and creator of ESGDO

Grzegorz Szyszka

LinkedIn

Entrepreneur and technologist based in Warsaw. He has spent the past two years working on sustainability reporting for smaller companies. He still builds and runs technology businesses. He has done that for close to twenty years. Along the way he has taken part in many development and deployment projects for companies of different sizes. That mix of engineering and owner-operator work is why ESGDO treats a VSME report as a data-systems problem as much as a compliance one.