Sustainability reporting in Europe is changing: Why VSME is more relevant than ever

The landscape of sustainability reporting in Europe is undergoing significant changes. Initially, thousands of mid-sized companies (250-1000 employees) were set to be subject to CSRD (Corporate Sustainability Reporting Directive) requirements from 2026. However, in February 2025, the European Commission announced a major policy shift: 80% of companies originally required to report under CSRD are now exempt.

This means that many mid-sized companies are no longer legally obligated to publish sustainability data. But does this mean they are free from ESG-related expectations? Not at all. Large corporations, banks, and investors will continue to request sustainability data from their suppliers. This is where VSME (Voluntary Sustainability Reporting Standards for SMEs) comes in. VSME is now emerging as the key alternative for companies that want to maintain transparency without the administrative burden of CSRD. This blog explains what VSME is and why it is a strategic choice for businesses today.

What is VSME?

VSME is a voluntary sustainability reporting framework specifically designed for small and medium-sized enterprises (SMEs). It was introduced by EFRAG (European Financial Reporting Advisory Group) as an accessible alternative for companies that do not fall under mandatory CSRD reporting requirements.

VSME aims to provide companies with a structured way to measure and communicate their sustainability efforts without the complex administrative burden associated with CSRD. With fewer companies now required to comply with CSRD, this voluntary standard has become a practical and relevant alternative.

VSME provides a framework for businesses to report on their sustainability performance without requiring an external audit, without double materiality assessments, and extensive stakeholder consultations.

Why was VSME introduced?

The European Union recognised that many small and mid-sized businesses lack the resources to produce comprehensive sustainability reports. At the same time, it became clear that even though CSRD requirements were relaxed, large corporations would still demand ESG data from their supply chains.

The VSME framework was designed to:

• Reduce the administrative burden on smaller businesses
• Provide a standardised method for sustainability reporting
• Limit the data that large corporations can request from SMEs

This means that while companies are not obligated to produce a VSME report, it can be a strategic tool to demonstrate transparency and prepare for future ESG expectations.

What does VSME mean for your business?

Although VSME is voluntary, there are several compelling reasons why it is worth considering:

• Large companies will continue to report: Even though CSRD applies only to companies with 1000+ employees, large corporations will still request ESG data from their suppliers.
• VSME may be sufficient for supply chain reporting: If you are a non-material supplier (meaning you play a more minor role in a large company’s value chain), a VSME report is often enough to meet their requirements.
• It prepares you for future regulations: VSME allows businesses to track sustainability performance in a structured way, ensuring they are ready for potential future reporting obligations.
• Sustainability as a business advantage: Transparency in ESG reporting helps with compliance and enhances a company’s attractiveness to customers, investors, and talent.

Why businesses should take VSME seriously

Even though VSME is not mandatory, it is a valuable tool for businesses aiming to manage sustainability proactively. It provides an opportunity to quantify sustainability efforts, build transparency, and be prepared for ESG-related demands from stakeholders.

Whether your business operates within the supply chain of a large corporation or you want to enhance your sustainability strategy, VSME helps you navigate ESG reporting with less complexity and greater efficiency.

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Are you curious about how VSME can help your business meet ESG expectations? Contact us or explore how our VSME reporting tool can support your sustainability strategy efficiently and effectively.

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Next blog: In our next article, we look at mid-sized companies that were initially CSRD-obligated but are now exempt. What does this mean for them, and how can VSME play a role in their sustainability strategy? Stay tuned!