VSME and CSRD/ESRS: how they connect and where the gaps are

The VSME and ESRS are not competing standards. They are part of a single reporting architecture designed by EFRAG to serve different sizes of company within the same sustainability data ecosystem. Large companies report under ESRS. Non-listed SMEs report voluntarily under the VSME. The critical connection between the two is the value chain: when an ESRS reporter needs sustainability data from an SME supplier, borrower or investee, the VSME defines what that SME can reasonably be expected to provide.

For corporate sustainability teams managing value chain disclosures under the Corporate Sustainability Reporting Directive (CSRD), understanding how VSME data maps to ESRS datapoints is not optional — it determines what you can ask from suppliers, what data you will actually receive, and where you will need to use estimates or proxies instead.

Same topics, different depth

The VSME covers the same sustainability topics as ESRS Set 1 — climate, pollution, water, biodiversity, circular economy, workforce, value chain workers, affected communities, consumers and business conduct. The list of sustainability matters in the VSME (Appendix B) directly replicates AR 16 in ESRS Set 1. This is deliberate: it ensures that the data SMEs produce under the VSME maps structurally to the categories large companies use in their ESRS reporting.

The difference is depth and complexity. ESRS requires double materiality assessments, detailed transition plans, granular Scope 3 breakdowns and narrative disclosures with specific cross-references. The VSME strips this back to quantitative metrics and YES/NO semi-narrative disclosures, with no materiality analysis and an “if applicable” principle replacing conditional reporting. The language is simplified, the defined terms are aligned, and the reporting burden is proportionate to what a company with fewer than 250 employees can realistically deliver.

Who reports under what: the shifting landscape

The Omnibus I simplification package (February 2025) proposed significant changes to CSRD scope. Understanding who reports under which standard is essential for mapping your value chain data strategy.

The practical consequence: the VSME becomes relevant not just for non-listed SMEs but for a much broader set of companies that may fall out of mandatory CSRD scope. For ESRS reporters, this means that a larger proportion of your value chain will be reporting under VSME rather than ESRS — making the VSME-to-ESRS mapping more important than ever.

The value chain data flow

Under ESRS, large companies must report on sustainability impacts across their value chain. This includes upstream suppliers, downstream distributors and other business relationships. When those value chain partners are SMEs, the data they provide under the VSME feeds directly into the ESRS reporter’s disclosures.

ESRS Set 1 includes provisions for situations where value chain data is unavailable. Companies can use estimates, sector averages and proxy data when direct reporting is not possible. However, where an SME supplier provides a VSME report, this is primary data — more reliable and auditable than estimates, and increasingly expected by assurance providers reviewing ESRS sustainability statements.

The value chain cap explained

Article 29b(4) of the CSRD states that ESRS shall not specify disclosures that would require large undertakings to obtain information from SMEs in their value chain beyond what is covered by the ESRS LSME standard. This is the legal “value chain cap”. The VSME has no legal role in setting this cap — that function belongs to the ESRS LSME for listed SMEs, which EFRAG has not yet finalised.

However, the VSME sets the de facto practical limit for non-listed SMEs. EFRAG’s analysis (Annex 8 of the Basis for Conclusions) confirmed that the VSME covers the reasonable expectations of ESRS reporters for value chain data. This means that if you design your supplier data collection around the VSME structure, you are unlikely to ask for anything your SME suppliers cannot provide. Conversely, asking for data beyond the VSME scope will likely result in low response rates and unreliable estimates.

ESRS to VSME disclosure mapping

The table below maps key ESRS value chain datapoints to their VSME equivalents. Use the filters to focus on specific ESRS standards or to identify gaps where the VSME does not provide direct coverage.

Where the VSME falls short of ESRS needs

The VSME does not cover every ESRS value chain datapoint. EFRAG was explicit about this in the Basis for Conclusions: certain disclosures were excluded because they are disproportionately complex for non-listed SMEs. For ESRS reporters, these gaps are where you will need to rely on estimates, sector proxies or bilateral data requests.

The gaps are principally sector-specific or relate to complex quantitative models (financial effects, taxonomy alignment) that require capabilities beyond what non-listed SMEs possess. For ESRS reporters, the pragmatic approach is to use VSME data as primary input where available, supplement with sector proxies for the gaps, and document your methodology transparently as required by ESRS 1.

Interoperability with GRI and ISSB

The VSME sits within a broader interoperability framework. ESRS was designed with high interoperability with GRI standards, and the VSME inherits this alignment. An SME reporting under VSME produces data that is consistent with GRI 301–306 (environment), GRI 401–405 (social) and GRI 205 (anti-corruption). For ESRS reporters whose suppliers already report under GRI, the transition to VSME data intake is minimal — the underlying metrics are substantially the same.

The ISSB standards (IFRS S1 and S2) focus on enterprise value for investors. While the VSME’s Comprehensive Module covers climate-related disclosures that align with ISSB concepts (transition plans, climate risks, GHG targets), the VSME is primarily impact-oriented rather than investor-value-oriented. For companies reporting under both ESRS and ISSB, VSME data from suppliers serves the ESRS side of the equation; ISSB-specific financial impact data will typically need to come from the reporting entity’s own assessment.

Practical implications for corporate sustainability teams

If you manage value chain sustainability data for an ESRS-reporting company, the VSME changes your workflow in four ways. First, you can standardise supplier questionnaires around the VSME structure rather than designing proprietary forms. Second, you can expect structured, machine-readable data (via XBRL) rather than free-form responses. Third, you have a clear reference point for what is proportionate to ask from SME suppliers — anything beyond the VSME scope requires justification. Fourth, the VSME’s annual reporting cycle and comparative information requirements mean that supplier data improves over time, reducing your reliance on estimates in each successive reporting period.

At Generation Impact Global, our platform supports this end-to-end: distributing VSME-structured questionnaires to suppliers, ingesting their responses, mapping the data to your ESRS value chain disclosures, flagging gaps where estimates are needed, and generating audit-ready documentation of your data sourcing methodology.