VSME and the SME pathway

The short version

VSME has two functions. Voluntary disclosure: SMEs and other non-listed undertakings can use VSME to communicate sustainability performance to lenders, customers, and investors in a structured, comparable format. Regulatory ceiling: under Omnibus I, in-scope CSRD filers cannot require sustainability information from “protected undertakings” — those with fewer than 1,000 employees — beyond what is specified in VSME. The cap applies only to CSRD-reporting requests; other commercial information exchanges are unaffected. Contractual provisions that breach the cap may be void.^[2]

1. What VSME is

VSME is a single voluntary standard built around two modules. The Basic Module is the entry-level disclosure set, designed to be feasible for an SME with limited reporting capacity. The Comprehensive Module adds further disclosures relevant for businesses subject to greater stakeholder scrutiny — typically larger SMEs or those engaged with regulated lenders or large value-chain customers.

The standard was developed by EFRAG following a mandate from the European Commission, building on field tests and a public consultation that drew over 200 responses. Final standard was issued 17 December 2024. The Commission Recommendation followed on 30 July 2025, encouraging uptake and confirming VSME as the bridge framework for non-listed SMEs.^[1]

2. The trickle-down problem VSME solves

Before Omnibus I, large CSRD filers routinely demanded extensive ESG questionnaires from SME suppliers. Some surveys ran to several hundred questions. The justification was always the same: “we need this for our CSRD reporting.” The result was a substantial reporting burden on undertakings well outside the direct CSRD scope, with each customer asking different questions in different formats.

Directive (EU) 2026/470 addresses this directly. The trickle-down provision states that in-scope undertakings cannot require “protected undertakings” to disclose sustainability information beyond what is specified in VSME, where the request relates to CSRD reporting purposes. Directive (EU) 2026/470, value chain cap

“Protected undertaking” is defined as any undertaking with fewer than 1,000 employees on average. This includes SMEs and mid-market firms that fall under the new CSRD threshold of 1,000 employees plus €450M turnover. The cap is symmetrical — it protects them whether they are SMEs in the traditional sense or simply undertakings outside CSRD’s mandatory scope.

3. How the cap operates in practice

Three supplementary provisions matter:

• Self-declaration reliance. Reporting undertakings can rely on a self-declaration from value-chain partners that they fall under the protected category, unless the declaration is manifestly incorrect. SMEs do not need to provide audited employee headcounts to assert their status.
• Three-year transition. For the first three years of CSRD reporting, undertakings unable to obtain all the required information from their value chain may explain the reasons, document their efforts, and describe plans to obtain it. After three years, either direct collection or documented estimates are required.
• Void clauses. Contractual provisions that breach the cap may be deemed invalid. This is the strongest of the three — it gives the protected undertaking direct legal grounds to refuse a contractually imposed but cap-breaching information demand.

The practical effect is that SME suppliers can now respond to a sprawling ESG questionnaire with a measured response: provide the VSME-aligned information, and explain (politely) that the remaining questions fall outside the scope of what the customer is entitled to require for CSRD reporting purposes.

4. Voluntary VSME: pre-empting customer requests

For SMEs that anticipate ongoing pressure from larger customers — particularly in industries like food, automotive, fashion, and energy where supply-chain ESG scrutiny is structural — voluntary VSME disclosure pre-empts the question.

The approach is simple: publish a VSME-aligned sustainability statement (Basic Module suffices for most SMEs; Comprehensive Module for larger or higher-scrutiny operators) and direct customer requests to it. This shifts the dynamic from each customer asking different questions to a single published disclosure that satisfies all reasonable VSME-scope requests.

The benefits compound. Stakeholder communication becomes one task rather than dozens. Lenders increasingly use VSME-aligned data for sustainability-linked finance pricing. Insurance underwriters, increasingly under pressure to assess climate exposure across portfolios, recognise VSME structure. The investment in disclosure produces ongoing returns.

5. The boundary between voluntary and mandatory

VSME remains voluntary for SMEs themselves. The Commission Recommendation of 30 July 2025 encourages uptake; it does not mandate it. The trickle-down protection operates whether or not the SME has voluntarily disclosed under VSME — what matters is the scope of the request, not the presence of a published disclosure.

That said, the path of least friction for a SME facing increasing customer ESG pressure is voluntary VSME disclosure. It demonstrates good faith engagement with sustainability reporting, satisfies most reasonable requests in a single document, and positions the undertaking for finance, insurance, and procurement contexts where VSME alignment is increasingly expected. Commission Recommendation, 30 Jul 2025

6. The future Delegated Act

Under Directive (EU) 2026/470, the Commission is expected to adopt a VSME Delegated Act in June 2026, giving the standard formal legal status as the proportional reporting framework for non-CSRD undertakings. The Delegated Act will likely codify the relationship between VSME and the trickle-down cap more formally, removing residual ambiguity about scope and enforcement.^[3]

For undertakings preparing voluntary disclosures now, the Commission Recommendation provides sufficient policy basis. There is no requirement to wait for the Delegated Act — published voluntary VSME disclosures will remain compliant under the future legal framework.

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