What is the VSME standard? A 2026 guide for SME suppliers
Over the past two years a great many companies supplying the European market have received the same email: would you please share your sustainability data with us? Attached is a forty-page questionnaire, and below it a deadline. This article explains where that request comes from, what the VSME standard is, and what your company should do about it.
What is VSME?
VSME is the Voluntary Sustainability Reporting Standard for non-listed small and medium-sized undertakings. It was developed by EFRAG, the European Financial Reporting Advisory Group, delivered in December 2024, and formally recommended by the European Commission in July 2025.
Its purpose is proportionality. Applying the full reporting regime designed for large listed groups to a company of eighty employees is neither feasible nor useful. VSME meets the same information need through a considerably shorter and clearly defined set of disclosures.
Why these requests are arriving now
The answer lies in the supply chain. Large companies subject to sustainability reporting obligations in the European Union must report not only on their own operations but on their value chain. That value chain consists of their suppliers. In order to complete their own reports, they must obtain data from you.
A parallel pressure comes from the financial side. European banks have begun to take sustainability information into account in SME lending, and many now treat the VSME Basic Module as their minimum data set.
The 1,000 employee threshold: the rule that protects you
The 2026 Omnibus package, given effect through Directive (EU) 2026/470, drew an important boundary. A company with fewer than 1,000 employees on average is treated as a protected undertaking. A buyer subject to CSRD may not require sustainability information from such a company beyond what the VSME standard covers.
This has two practical consequences. First, you are not obliged to answer most of the forty-page questionnaire in front of you. Second, and more importantly, a properly prepared VSME report constitutes a sufficient answer. Your customer cannot demand more.
One qualification is worth noting. The cap applies to requests made for CSRD purposes. Requests arising from other frameworks, such as the deforestation regulation or forced labour rules, and requests of a purely commercial nature, fall outside this protection.
The Basic Module and the Comprehensive Module
The standard is built from two modules.
The Basic Module (B1–B11)
The core of the standard, and the scope actually requested from most companies. It covers:
- Basis for preparation and company profile
- Energy consumption and greenhouse gas emissions
- Pollution, water, biodiversity and land use
- Waste and circular economy practices
- Workforce characteristics, health and safety, and pay
- Convictions and fines relating to corruption and bribery
The Comprehensive Module (C1–C9)
Intended for companies whose customers or lenders require a fuller picture. It covers business strategy and model, reduction targets, climate-related risks, the management of human rights matters, additional workforce and remuneration data, governance and stakeholder engagement.
Which should you begin with? The Basic Module. It satisfies the majority of requests. Move to the Comprehensive Module only where your customer has specifically asked for the disclosures it contains.
The most common mistakes
- Unit confusion. Electricity is billed in kWh, gas in cubic metres, diesel in litres. All must be converted to a common basis, and conversion error is the single most frequent problem we see.
- An undefined boundary. Does the report include the leased warehouse, the subcontracted vehicle fleet, the overseas branch? If the boundary is not stated at the outset, the figures cannot be compared from one year to the next.
- Estimating in place of “not available”. The standard allows you to state that a figure is not available. Inventing one damages both credibility and next year’s comparison.
- Treating it as a one-off exercise. Reporting is annual. If you establish a data collection routine in the first year, the second year takes a fraction of the effort.
Where to begin
Three steps are enough. Gather the documents you already hold: twelve months of energy bills, payroll summaries, accident records, and any environmental or ethics policies you have. Then fix your reporting year, most practically in line with your financial year. Finally, work through the Basic Module questions in order.
VSMESmart takes on that third step. It presents the standard as guided questions, provides an explanatory video and sector examples alongside each one, and generates your report from the data you enter. You may download it as a draft while the work is in progress, and again once it is complete.