(13.05.26)

In parallel to the ESRS Simplified consultation drafts, the European Commission has also published a draft for the future voluntary sustainability reporting standard based on the existing VSME Standard.

What has changed compared to the previous VSME Standard?

The overall structure of the existing VSME remains unchanged – in particular the division into a Basic Module and a Comprehensive Module, as well as the voluntary nature of the standard. However, the Commission has further developed the VSME and aligned it more closely with the new Omnibus rules, the Value-Chain-Cap, and the requirements of banks, investors and large companies. Overall, the standard is becoming more clearly structured and significantly more relevant from a regulatory perspective for companies across the value chain.

1. The scope has changed

Previous VSME Standard

The VSME was:

• a voluntary standard for non-listed SMEs.

The size categories were based on:

• micro

• small

• medium-sized undertakings

using the existing balance sheet and turnover thresholds.

New in the Commission Draft

The standard now applies to:

• companies with fewer than 1,000 employees.

Practical implications

The standard will become significantly more relevant:

• not only for traditional SMEs

• but also for larger mid-caps.

Especially for:

• companies that will fall out of scope of the CSRD

• but will still need to provide sustainability information.

2. The VSME is now directly linked to the “Value Chain Cap”

Previous situation

The VSME mainly functioned as a voluntary reporting framework.

New in the Commission Draft

The standard is now explicitly positioned:

• as the reference framework for information requests along the value chain.

In addition, for the first time, a concrete list has been introduced defining which sustainability information large companies and banks may request from smaller companies within the supply chain (“Value-Chain-Cap”).

Practical implications

Large companies and banks should in future limit their information requests to smaller companies to this framework as far as possible.

3. Introduction of new disclosure categories

Previous situation

The previous VSME distinguished between:

• Basic Module vs. Comprehensive Module

• but did not explicitly classify individual datapoints.

New in the Commission Draft

Each datapoint is now categorised as:

• mandatory

• required only if relevant

• voluntary

• additional sector-related disclosures

Practical implications

This makes the standard:

• much clearer

• easier to apply

• more materiality-oriented

Companies can now understand much more clearly:

• what is actually mandatory

• and what remains optional.

4. New reliefs for very small companies (<10 employees)

New

Several datapoints are now:

• only mandatory for companies with more than 10 employees

• and voluntary below that threshold.

Examples:

• B3 – Energy & GHG

• B6 – Water

• B7 – Waste

Practical implications

Micro undertakings are significantly relieved.

5. Rules on omission of information have been expanded significantly

Previous situation

The VSME already included exemptions for:

• classified information

• sensitive information

New in the Commission Draft

Now explicitly extended to:

• trade secrets

• intellectual property

• know-how

• innovation results

• other legally protected information

Practical implications

Significantly stronger protection of:

• sensitive business information

• especially for technology-oriented companies.

6. B3 – Greenhouse gas emissions & energy has been adjusted

Previous situation

Disclosures on:

• total greenhouse gas emissions

• Scope 1 emissions

• Scope 2 emissions

were already part of the existing VSME Standard.

New

Now explicitly defined as:

• “absolute gross greenhouse gas emissions”

In addition:

• alignment with ISSB and the GHG Protocol has been strengthened,

• definitions clarified

• and categories structured more clearly.

Additional change

Scope 3 disclosures are now explicitly classified as:

• additional sector-related disclosures

and are therefore significantly less mandatory in nature.

Practical implications

Scope 3 remains relevant, but becomes significantly less mandatory.

7. Water reporting has been simplified

Previous situation

Disclosures on water withdrawal were mandatory, while requirements on water consumption were broader and less clearly defined.

New

Disclosures on water consumption are now only mandatory:

• for significantly water-intensive processes

• and only for companies with more than 10 employees.

Practical implications

This represents a major relief particularly for:

• service providers

• software companies

• consultancies

• office-based businesses

8. Waste reporting has been simplified

New

Instead of:

• detailed waste flows

the focus is now on:

• total waste volume

• hazardous vs. non-hazardous waste

• recycling share

9. Gender Pay Gap requirements have been significantly reduced

Previous situation

The gender pay gap was:

• generally part of the standard.

New

Now only mandatory:

• where already legally required.

Practical implications

This especially reduces burden for smaller companies.

10. Human rights incidents have been eased

Previous situation

Confirmed incidents were already part of the VSME.

New

The Commission now further specifies:

• confirmed incidents

• only in relevant cases

• with a stronger proportionality approach

In addition:

• for companies with ≤10 employees

• many disclosures become only voluntary.

11. The new “Value-Chain-Cap” table has been introduced for the first time

New

ANNEX II now explicitly lists which datapoints may be requested by business partners.

Practical implications

This is expected to significantly limit:

• ESG questionnaires

• supply chain requests

• bank information requests

towards smaller companies.

12. The standard becomes much more integrated into the regulatory framework

New

The new draft is much more closely aligned with existing EU regulations and sustainable finance requirements, especially:

• SFDR

• EBA Pillar 3

• Benchmark Regulation

• CSRD

• Omnibus

• CSDDD

Practical implications

The voluntary standard is effectively becoming:

• the official European SME sustainability reporting standard.

Overall conclusion

The Commission is developing the previous VSME into a significantly more practical and regulatorily relevant standard. The most important change is the direct link to the new Value-Chain-Cap, which will make the standard highly relevant for smaller companies within the supply chains of large CSRD companies. At the same time, many requirements have been simplified, the focus on proportionality for smaller companies has been strengthened, and the standard has been aligned more closely with the needs of banks, investors and large companies.