VSME: A proportionate sustainability reporting route for companies outside CSRD

With CSRD scope narrowed, most Irish companies now sit outside mandatory EU sustainability reporting — but data demands from larger customers and finance providers remain. The Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) offers a clear framework to answer these requests and report performance in a proportionate way.

What did the Omnibus directive say about the VSME?

The Omnibus directive was published in the Official Journal of the European Union on 26 February 2026, following its official adoption by the Council of the European Union on 24 February 2026. This directive is the outcome of an agreement reached in December 2025 on the European Commission’s February 2025 Omnibus proposal intended to simplify and reduce EU sustainability reporting rules.

The Omnibus directive significantly narrowed the scope for CSRD, leaving many companies who were previously in scope of CSRD unsure about how they should report going forward. For these companies, the European Commission has recommended the VSME be used as the key standard for voluntary reporting on sustainability.

CSRD in scope companies and regulated financial institutions must report on their value chains. That has translated into a proliferation of questionnaires and templates landing on the desks of smaller suppliers and borrowers. The directive has introduced a value chain cap for those reporting under CSRD. Such companies cannot request information from entities with up to 1,000 employees beyond that set out in the future VSME Delegated Act (as far as possible).

For Irish companies outside the scope of CSRD, the VSME framework is one potential answer to the question: “When my larger business partners ask for data, what should I provide?”

What is the VSME?

The VSME is a simplified standard that was developed by EFRAG in response to the SME Relief Package published by the European Commission in September 2023. The VSME standard was originally designed for non-listed micro, small, and medium-sized entities (non-listed SMEs) with fewer than 250 employees. EFRAG’s advice on the VSME standard was delivered to the European Commission in December 2024 following a public consultation and field testing. EFRAG has also published supporting guides as well as a digital template to help companies start reporting using the VSME now.

The standard consists of two levels: the basic module and the comprehensive module. Reporting under the basic module serves as a prerequisite for the comprehensive module. Both modules can be tailored with entity- or sector-specific sustainability topics, ensuring the reporting remains relevant and meaningful for your company and its stakeholders.

The basic module contains 11 disclosure requirements and focuses on key sustainability topics such as greenhouse gas emissions (scope 1 and scope 2), environmental metrics, own workforce, and anti-corruption. The basic module does not include disclosure requirements about an entity’s value chain.

The comprehensive module builds on the basic module with 9 additional disclosure requirements, which include a short description of sustainability practices or future initiatives, greenhouse gas reduction targets and transition plans, confirmed value chain incidents, and the exclusion from EU reference benchmarks. This module is tailored to the information needs of stakeholders such as banks, investors, and business customers.

Key differences between the ESRS and VSME

VSME has been identified as a potential option for those organisations not in scope for CSRD. Another option available to such organisations is to voluntarily report under CSRD (using the European Sustainability Reporting Standards (ESRS)). Although both sit under the broader EU sustainability agenda, there are some key differences between them that you should be aware of when deciding which might best suit your organisation.

The original VSME was conceived for smaller SMEs. This narrower scope of the VSME is intended to reduce complexity for SMEs, even though it may result in less granular insight into value chain-wide sustainability issues. For companies that sit closer to the CSRD revised scope — for example, those with more complex group structures, cross-border activities, diverse value chains or closer to 1,000 employees — the VSME may not be the most suitable standard and reporting voluntarily under the ESRS might be preferable.

What’s next for the VSME?

Looking ahead, the VSME framework is expected to be the foundation for the EU’s future voluntary sustainability reporting standard. The current VSME has been issued as a recommendation, with the European Commission expected to publish a delegated act containing the VSME standard in June 2026.

Although the delegated act will be based on the current European Commission recommendation, it’s not guaranteed, however, that it will remain unchanged. As a result of the narrowing in scope of CSRD, a future delegated act may introduce additional expectations or refinements to better reflect the realities and risks of these more sophisticated organisations while keeping the framework proportionate for smaller companies wishing to report.

For the future VSME Delegated Act to be adopted, it must follow the European Commission’s due process, including discussions with member states’ experts and certain EU bodies, followed by a period for public feedback. The amendments will then be subject to scrutiny by the European Parliament and Council.

Four actions businesses can take today

1. Establish your reporting ambition
VSME represents the entry level in sustainability reporting, but larger customers, banks, and investors increasingly require data aligned with ESRS. While reporting under VSME may reduce short-term costs, peers could adopt more advanced disclosures, leaving you behind. Defining your sustainability ambition is key — whether to lead in reporting or meet basic requirements. Irish companies can adopt a phased approach, starting with VSME and progressively enhancing ESRS alignment, ensuring reporting reflects business priorities, not just obligations.

2. Focus on material topics
Although the VSME doesn’t require a materiality assessment, it’s still useful to understand the key sustainability topics for your business and to determine applicability. Complete or refresh your materiality or double materiality assessment to identify material topics and guide “no regrets” actions.

3. Prioritise data quality
Sustainability leaders should run a light-touch gap analysis and test data collection with existing systems. Establish data quality checks, calculation methodologies, processes, and controls. Consider how technology or automation can enhance efficiencies and drive insight.

4. Standardise responses
Procurement and finance leaders in Irish companies should instruct teams to answer ESG questionnaires from larger customers and financial institutions using VSME/ESRS disclosures as the reference set. Develop a simple VSME/ESRS data pack that can be shared proactively with value chain partners. These steps will reduce repetitive bespoke requests, improve consistency, and ensure you stay within the information limits expected from larger CSRD in scope companies.

We’re here to help

If you’re considering which framework to report voluntarily against, or how to respond to sustainability data requests from larger business partners, our sustainability reporting and assurance team can help you assess options and navigate implementation. To discuss what this means in practice for your business, get in touch.