Explainer
Smaller companies are not in CSRD scope, but their larger customers and lenders are, and the questionnaires are already arriving. The VSME is the standard designed to answer them once. Here is what it is, who should use it and how to produce a report without hiring a sustainability team.
By Christopher Fagan, Managing Partner, PEF Consulting Partners
The VSME is the voluntary sustainability reporting standard for small and medium sized enterprises, drafted by EFRAG, the body behind the ESRS, and published at the end of 2024. The European Commission has since recommended it as the standard that large companies, banks and investors should use when they ask smaller suppliers and borrowers for sustainability information. It is not law and nobody can be fined for ignoring it. Its purpose is to replace the dozens of incompatible questionnaires an SME receives with one report in a format everyone accepts.
The standard has a basic module and a comprehensive module. The basic module covers the essentials that almost every customer asks for: energy consumption and greenhouse gas emissions, pollution, water, waste, workforce numbers and characteristics, health and safety, pay, training, and convictions or fines for corruption. The comprehensive module adds what a bank or a large corporate customer tends to want: transition plans and targets, climate risks, workforce in the value chain, human rights policies and revenue from sensitive sectors. Most SMEs start with the basic module and add the comprehensive disclosures their largest customers actually request.
Because the demand reaches you through your customers, not through regulators. A UK manufacturer supplying a German carmaker, a UK services firm working for a French bank or a UK subsidiary of an EU group will be asked for ESRS compatible data, and the VSME is the format those companies have been told to accept. UK lenders and large UK corporates are starting to use it for the same reason: it is the only SME standard with a credible author. Producing a VSME report once a year is cheaper than answering fifteen different questionnaires, and it tends to answer the UK ones too.
The Omnibus directive that narrowed CSRD in 2026 also protects the companies in a reporter’s supply chain. A business with fewer than 1,000 employees can decline to provide more sustainability information than a voluntary standard set by the Commission allows, and reporting companies have to tell their suppliers where that limit sits. The Commission’s Sustainability Reporting Standard for Voluntary Use, consulted on in May 2026, is that limit, and it is closely based on the VSME. It is intended to apply to value chain requests from the 2027 financial year. In practice the VSME is becoming the ceiling as well as the template: a supplier that produces a VSME report is well placed to answer everything a CSRD reporter is entitled to ask.
Less than most firms expect. The basic module needs your energy bills, fuel records, headcount and HR data, waste contracts and a handful of policies. The emissions calculation for scope 1 and 2 uses published UK conversion factors and can be done in a spreadsheet for a single site business; scope 3 is only required where a customer insists. The work is in setting it up the first time: deciding who owns each number, where the evidence lives and how it is checked. After that it is an annual update. If you already produce SECR disclosures, half of the basic module is done.
For a small company the VSME can be the whole sustainability reporting system. For a mid sized company approaching the CSRD or UK SRS thresholds it is a sensible first step, because its data model is a subset of the ESRS and nothing built for it is wasted. For a large company it is the standard to point suppliers at, which simplifies your own value chain reporting. In every case the principle is the same one that runs through all ESG reporting: one set of numbers, one owner each, one evidence file, reused for every regime that asks.
Related reading: ESG reporting explained, ESRS explained, the SECR compliance and reporting guide, ESG consultancy.
No. It is voluntary, but the European Commission has recommended it as the standard for sustainability information requests to SMEs, so customers and lenders are increasingly asking for it and accepting it in place of their own questionnaires. Since the 2026 Omnibus, a version of it also caps what CSRD reporters can demand from suppliers with fewer than 1,000 employees.
Non listed small and medium sized enterprises outside the scope of CSRD, in the EU and anywhere else, including the UK, where companies supply or borrow from organisations that report under CSRD.
Energy and greenhouse gas emissions, pollution, water and waste where relevant, workforce size and characteristics, health and safety, pay and training, and business conduct matters such as convictions and fines for corruption and bribery.
SECR is the UK legal requirement for large companies to report energy and carbon. The VSME is voluntary and aimed at smaller companies, but its energy and emissions disclosures use the same underlying data, so a company doing SECR already has much of the VSME basic module.
If your customers have started asking for sustainability data and you want to answer them once rather than fifteen times, a short confidential conversation will show you how little it takes.