The Voluntary sustainability reporting Standard for SMEs, VSME, was developed by EFRAG to give smaller, non-listed undertakings a proportionate way to disclose sustainability information, without adopting the full weight of the CSRD and ESRS built for large, mandatory reporters.
What is VSME Based On?
VSME is built on the same underlying sustainability logic as the ESRS, environmental, social, and governance disclosure, but deliberately simplified and scaled down. It draws on the structure and topic areas of the ESRS while removing the double materiality assessment requirement, reducing the number of mandatory data points, and using simpler, more standardised metrics designed to be answerable without a large sustainability team or extensive new data systems.
Who Does It Apply To, and What Is the Timeline?
CSRD applies to large EU companies (meeting size thresholds on turnover, balance sheet, and employee count) and listed SMEs, phased in progressively by company size, with the largest companies reporting first and smaller listed companies following in later phases. VSME, by contrast, applies to any micro, small, or medium sized undertaking that chooses to use it, there is no legal deadline or mandatory phase-in, since it is entirely voluntary. In practice, most VSME adoption is driven by timing pressure from elsewhere: a large customer or lender under CSRD needs sustainability data from its own suppliers, and VSME gives that supplier a standardised way to respond.
CSRD Implementation Timeline
| Reporting wave | Who | First report |
|---|---|---|
| Wave 1 | Large public-interest entities already reporting under the former NFRD (over 500 employees), still meeting the revised thresholds | FY2024, published 2025; some member states may allow a temporary exemption for FY2025–2026 |
| Wave 2 (post-Omnibus) | Companies meeting the new, higher thresholds of over 1,000 employees and €450m+ net turnover, that were not already reporting | FY2027, published 2028 |
| Wave 3 (listed SMEs) | No longer required to report at all — fully exempted under the Omnibus I Directive | Not applicable |
| Non-EU parent companies | Parent turnover above €450m in the EU, with an EU subsidiary or branch above €200m turnover | FY2028, published 2029 |
What Happened to CSRD Under the New Omnibus Rule?
In 2025 and 2026, the EU adopted a package of changes known as Omnibus I, aimed at significantly reducing the sustainability reporting burden introduced by the original CSRD. Directive (EU) 2026/470 was published in the Official Journal in late February 2026 and entered into force on 18 March 2026. The key changes are:
- Much narrower scope: CSRD now applies only to companies with more than 1,000 employees and over €450 million in net annual turnover, up sharply from the original, lower thresholds.
- Listed SMEs fully exempted: companies that were due to report under the former “Wave 3” (listed SMEs and certain small financial undertakings) no longer have to report under CSRD at all.
- A large drop in companies in scope: tens of thousands of companies that were previously expected to report, roughly 80% of the originally in-scope universe by some estimates, are now out of scope entirely.
- Simplified ESRS: the underlying ESRS themselves are being revised to cut the number of mandatory data points substantially, sector-specific standards have been dropped, and the standards are being made more proportionate and less compliance heavy.
- Assurance eased: the planned move from limited to reasonable assurance has been dropped, limited assurance remains the requirement for the foreseeable future.
- A value chain cap: companies with up to 1,000 employees that fall outside CSRD’s scope (“protected undertakings”) can now legally refuse to provide sustainability data beyond what is set out in the voluntary reporting standard, VSME, even if a large customer or lender asks for more. This is one of the clearest links between Omnibus and VSME: VSME is explicitly designed to be the ceiling on what a smaller supplier can be asked to disclose.
For a company that falls out of CSRD’s scope under these revised thresholds, VSME is now the natural landing point, a way to keep providing credible, standardised sustainability information to customers and lenders without the compliance burden of the original CSRD regime.
What is the ESRS?
The ESRS (European Sustainability Reporting Standards) are the detailed disclosure standards that implement the CSRD in practice, they set out exactly what large, in-scope companies must report, and how. VSME is a separate, standalone standard developed by EFRAG alongside the ESRS, built specifically to give smaller, non-listed undertakings a much lighter alternative rather than requiring them to follow the full ESRS.
VSME vs CSRD: What’s the Difference?
| CSRD | VSME | |
|---|---|---|
| What it is | An EU directive requiring detailed sustainability reporting, implemented through the ESRS | A standalone, voluntary standard for smaller undertakings, developed by EFRAG |
| Who it applies to | Large companies and listed SMEs, phased in by size and headcount | Micro, small, and medium sized undertakings, entirely voluntary, most often used to respond to sustainability data requests from larger customers, banks, or investors |
| Materiality | Requires a formal double materiality assessment covering impact and financial materiality | No formal double materiality assessment required |
| Modules | The ESRS set out 12 detailed standards: 2 cross cutting (general requirements, general disclosures) plus 10 topical standards across environment (climate, pollution, water, biodiversity, resource use), social (own workforce, value chain workers, affected communities, consumers), and governance | Two modules only: a mandatory Basic Module, and an optional Comprehensive Module for undertakings that want or need to disclose more |
In short: CSRD is the binding EU law, implemented in detail through the ESRS, that applies to large and listed companies. VSME is EFRAG’s separate, voluntary standard built specifically for smaller undertakings, structured around just two modules rather than the ESRS’s full set of topical standards.
The Two VSME Modules, in Detail
| Area | Basic Module (mandatory) | Comprehensive Module (optional) |
|---|---|---|
| Purpose | A minimum, standardised disclosure answerable from existing records | Extends the Basic Module for undertakings that want, or are asked, to disclose more |
| Emissions | Scope 1 and Scope 2 greenhouse gas emissions, plus basic energy consumption | Adds Scope 3 (value chain) emissions |
| Pollution | Basic disclosure of pollutant emissions to air, water, and soil | More detailed pollution and environmental performance data |
| Biodiversity & nature | Not required | Disclosure on sites in or near biodiversity sensitive areas |
| Water & resource use | Not required | Water consumption and circular economy / resource use indicators |
| Workforce | Headcount, contract types, gender split, and health and safety incidents | Adds remuneration, collective bargaining coverage, training, and human rights due diligence indicators |
| Governance & business conduct | Short narrative on policies, codes of conduct, and anti-corruption measures | More detailed governance structures, due diligence processes, and value chain policies |
| Strategy & targets | Not required | Climate transition plans, targets, and forward looking strategy disclosures |
| Typical user | Most micro and small undertakings responding to a basic data request | Medium sized undertakings, or any SME facing a more detailed request from a large customer, lender, or investor |
How Difficult Is It to Do a VSME?
Considerably less demanding than full ESRS reporting. VSME is structured around a basic module, covering a focused set of environmental, social, and governance data points such as energy consumption, emissions, workforce information, and governance basics, most of which a well organised SME can gather from existing records: utility bills, HR data, and existing policies. An optional additional module covers further detail for organisations that want to disclose more, or that are being asked to by a specific customer or financial institution.
For an MSME with straightforward operations and reasonably organised records, a first VSME report is a realistic undertaking, typically achievable in weeks rather than months, and considerably less resource intensive than a full CSRD-aligned disclosure.
How Does VSME Help Businesses?
VSME gives smaller organisations a credible, standardised way to answer the sustainability data requests that increasingly arrive from customers, lenders, and investors, without having to build a full ESRS reporting function. Because it follows a recognised EU standard, a VSME report carries more weight than an ad hoc questionnaire response, and it creates a foundation that can later be extended toward full ESRS reporting if the business grows into CSRD’s scope, or if a customer requires deeper disclosure.
How ecorune Can Help
We help SMEs and MSMEs scope, collect data for, and prepare their first VSME report, using existing records wherever possible and building a foundation that can grow with the business.