VSME explained for UK SMEs

VSME is the Voluntary Sustainability Reporting Standard for non-listed SMEs, developed by EFRAG and delivered to the European Commission in December 2024. It gives small businesses a single, proportionate format for sharing ESG data with customers, banks and investors. For UK SMEs selling into the EU, it matters more than ever, because the EU now limits what large companies can demand from smaller suppliers to roughly what this standard covers.

If a European customer has asked for “VSME data” and you are wondering whether you are suddenly subject to EU law, you are not. But it is worth understanding, because it can make your life easier.

What is the VSME standard?

The VSME was built to replace the dozens of different questionnaires SMEs were receiving with one common set of disclosures. It has two modules:

• Basic Module (B1 to B11). The minimum. Basis for preparation, sustainability practices and policies, energy and greenhouse gas emissions, pollution, biodiversity, water, resource use and waste, workforce characteristics, health and safety, pay and training, and convictions for corruption or bribery.
• Comprehensive Module (C1 to C9). Extra disclosures that banks, investors and corporate customers commonly ask for, including your business model, reduction targets and climate transition, climate risks, human rights policies and board gender diversity.

You only report items that apply to you. A consultancy with no factory does not report pollution figures. The full text is on EFRAG’s website, and our VSME glossary entry gives a short summary.

The Commission endorsed the VSME in a Recommendation on 30 July 2025.

The Omnibus value-chain cap, explained

This is the part that changes things. In 2026 the EU passed the Omnibus I Directive, which narrowed the Corporate Sustainability Reporting Directive (CSRD) to the largest companies (more than 1,000 employees and more than €450 million turnover) and introduced a value-chain cap.

Under the cap, companies reporting under the CSRD cannot require suppliers with 1,000 employees or fewer to provide sustainability information beyond what the EU’s voluntary standard specifies. That voluntary standard was adopted by the Commission in a delegated regulation on 3 July 2026 and published in September 2026. It is based on the VSME.

A few details are worth knowing:

• It applies from financial years beginning on or after 1 January 2027.
• Only datapoints marked as “necessary” fall within the cap. Customers can still ask for the rest, but cannot insist.
• Businesses with 10 employees or fewer get extra protection: some disclosures marked as “necessary” for larger businesses are voluntary for them.
• If a customer asks for information beyond the cap, it must say which requests go beyond it and tell you that you have a right to decline them.

The European Commission has published a Q&A on the value-chain cap if you want the detail.

Why VSME matters to a UK business

The cap is EU law, so a UK customer is not bound by it. But in practice, VSME is becoming a shared language:

• EU customers reporting under the CSRD will design supplier requests around it.
• UK customers with EU parents or EU reporting often use the same templates.
• Banks and investors like a standard format, and the Commission has encouraged financial institutions to keep SME requests within it.

There is a defensive benefit too. If a large EU customer sends you a 300-question survey, you can politely point out that, from 2027, the value-chain cap limits what they can require from a business your size, and offer a VSME-based response instead.

For UK-specific reporting, see our guide to UK SRS for SME suppliers.

What does the Basic Module ask for on climate?

Disclosure B3 asks for:

• total energy consumption in MWh, split between renewable and non-renewable where you can
• gross Scope 1 emissions in tCO2e
• location-based Scope 2 emissions in tCO2e
• GHG intensity: your Scope 1 and 2 total divided by turnover in euros

Scope 3 is not part of the Basic Module. You consider disclosing it where it is relevant to your business.

How an ESG Now report maps to the Basic Module

The ESG Now report is not formatted as a VSME report, but it gathers much of the same information:

VSME disclosure	Covered by ESG Now?
B2 Practices and policies	Yes: which policies you have in place, risk management, commitments
B3 Energy and GHG emissions	Yes: kWh, Scope 1, Scope 2 location-based and market-based
B6 Water	Yes, measured or estimated from headcount
B7 Waste	Yes, measured or estimated from bin sizes and collections
B8 to B10 Workforce	Partly: headcount, diversity monitoring, training, benefits, health and safety practices
B11 Corruption convictions	Answer yourself (for most SMEs, simply “none”)

For B3’s intensity figure, divide your Scope 1 and 2 total by your actual turnover in euros, since the questionnaire only asks for a turnover band. For B9, you will need your count of recordable workplace accidents, which you should already keep.

What to say when a customer asks for more

The cap does not stop customers asking. It stops them requiring. If an EU customer reporting under the CSRD sends you a long questionnaire for a financial year starting in 2027 or later, you are entitled to decline the parts that go beyond the voluntary standard. You do not need to be confrontational about it. A reply like this usually works:

We are a 40-person business and fall within the CSRD value-chain cap. We are happy to provide the information set out in the EU voluntary standard for SMEs, which we have attached. We have answered the additional questions where we hold the data.

Answering extra questions voluntarily can still be good for the relationship. The point is that you get to decide, based on what is proportionate for your business.

A sensible way to prepare

1. Calculate your footprint for your last financial year. You can start your free report and your progress saves as you go.
2. Get your basic policies written. Your ESG Now action plan shows which policies you already have in place and which are worth adding next.
3. Pull together your workforce numbers: headcount by contract type and gender, training hours, accidents.
4. Keep it in one file and update it every year.

That puts you in a strong position for EU customers, UK customers and lenders alike. Our supplier questionnaires hub has more on handling requests.