On 3 July, the European Commission published the delegated act that establishes the European voluntary sustainability reporting standard, VSME (Voluntary Sustainability Reporting Standard for Non-Listed SMEs) for companies that are not subject to the reporting obligations of the CSRD (Corporate Sustainability Reporting Directive). The main new feature of this delegated act is that the scope of application of the standard is extended to all companies with fewer than 1,000 workers. It thus clarifies the existing gap between companies required to report under the CSRD and those that will be able to use the VSME as a voluntary reporting tool.

The standard provides a common model to meet the demands for ESG (Environmental, Social and Governance) information from customers, financial institutions and investors; it also establishes a limit on the information that CSRD companies may require from smaller organisations in their value chain. 

The European Commission has thus left the EFRAG model practically unchanged and has established a single reporting framework for all the companies included in its scope of application, including those with between 250 and 1,000 workers. 

Towards greater simplification of ESG reporting

The new regulation includes a measure aimed at streamlining sustainability information requests within the value chains. The Value Chain Cap imposes a limit on the information that companies subject to CSRD can request; therefore, the information to be sought from companies with fewer than 1,000 workers should be limited to the information included in the VSME to meet their reporting obligations.

The European Commission believes that this measure will help to simplify the multiple ESG questionnaires that many organisations received from major customers, financial institutions and other economic stakeholders. Furthermore, the regulation details which indicators form part of this common information framework and provides a clear benchmark both for the requesting companies and the providers.

Entry into force

The standard may be used voluntarily by companies with fewer than 1,000 workers from when the regulation comes into force. In turn, the maximum limit for the value chain will be applicable for the financial years beginning from 1 January 2027 onwards.

The European Commission has thus established the VSME as the voluntary sustainability reporting standard for companies outside the scope of application of the CSRD.