How the VSME standard unlocks value beyond CSRD reporting

As regulatory thresholds change, VSME offers a credible standard to support transparency, resilience, and long-term value.

In brief

• The VSME standard helps organizations turn sustainability reporting into a driver of efficiency, value creation and stronger decision-making.
• By structuring ESG data in a proportionate way, VSME strengthens resilience, supports risk management, and improves supply chain transparency.
• Adopting VSME positions companies to meet rising market and finance expectations while remaining flexible amid changing regulatory thresholds.

With the plenary vote in the European Parliament on December 16, 2025, the impact of the legislative initiatives of the Omnibus I package, as proposed by the European Commission (EC) on February 26, 2025, is becoming clear. These initiatives will streamline and simplify existing sustainability disclosure requirements, including those under the Corporate Sustainability Reporting Directive (CSRD)¹.

A key amendment in this package involves raising the threshold for large undertakings, exceeding the average number of 1,000 employees during the financial years and a net turnover of €450 million, resulting in many undertakings² that were previously subject to CSRD obligations are now exempt from Environmental, Social and Governance (ESG) reporting requirements³.
 

A shifting reporting landscape: from obligation to opportunity

In anticipation of the sustainability reporting requirements mandated by the CSRD, many undertakings have already begun preparatory steps. Recognizing this momentum, the EC announced on July 30, 2025, the recommendation on the Voluntary Standard for Small and Medium Enterprises (VSME⁴) as reporting standard for companies out of scope of the CSRD.

The VSME highlights three key points:

1. SMEs and micro-enterprises are encouraged to use the standard’s basic and optional comprehensive modules to report on sustainability in a simple and proportionate way.
   
   
2. Large companies, banks, and other stakeholders are urged to limit and align their data requests with VSME, avoiding heavy ad-hoc questionnaires.
   
   
3. Member States are invited to raise awareness, support implementation, and promote digital tools that make reporting easier.
   

Together, these recommendations aim to reduce the reporting burden on SMEs while boosting transparency, credibility, and access to sustainable finance.

Among the impactful revisions set forth by the Omnibus is the 'value chain cap⁵, which limits the sustainability data that in-scope companies can request from smaller partners. This will shield firms from disproportionate data demands while still enabling them to move toward more sustainable supply chains.

In this context, three focus areas have been identified to support companies aiming to stay ahead and unlock the added value of sustainability reporting. These areas highlight the benefits of engaging through:

• corporate value creation and operational excellence
• strategic resilience
• anticipation of tomorrow’s business standards

Corporate value creation and operational excellence

The adoption of the VSME presents a forward-looking approach to enhance competitiveness and create value. By offering a structured standard for sustainability reporting, VSME supports data-driven decision-making, operational efficiency, and cross-functional collaboration, ultimately reducing costs and fostering innovation. Failing to report under such a standard can lead to time-consuming stakeholder requests, higher perceived risk in banking, and consequently, in some cases, to missed business opportunities.

This reporting standard helps companies deepen their understanding of customer needs, enhance product and service quality, and respond more effectively to market changes. By increasing transparency in sustainability practices, it also strengthens brand reputation, builds investor trust, and may facilitate access to sustainable financing. Experience with clients has shown that companies communicating their sustainability efforts openly tend to benefit from stronger brand perception and increased loyalty from investors, customers, and other stakeholders.

Within supply chains, the relevance of the VSME becomes especially clear. Large companies rely on ESG data from their suppliers to meet their own reporting obligations, and VSME simplifies this exchange. Instead of responding to fragmented questionnaires and inconsistent requests, firms, regardless of size, can use a unified standard to share relevant ESG information. This not only strengthens SMEs’ position in value chains but also contributes to a more coherent and efficient flow of sustainability data across industries. 

The VSME reinforces corporate credibility and helps attract talent aligned with sustainability values. This iteration between stakeholder trust and employee engagement plays a critical role in driving long-term business success and cultivating a resilient organizational culture.

Strategic resilience through VSME

In an increasingly volatile business environment, resilience is no longer optional; it is a strategic imperative. Companies must be equipped not only to withstand disruption but to adapt, recover, and thrive.

The VSME standard enhances this resilience. It encourages companies to assess their processes thoroughly, collect relevant data and, through this, identify risks and dependencies, and develop proactive strategies to mitigate them. This approach supports cost optimization and profitability, for example through energy-efficiency or waste-reduction initiatives uncovered during sustainability assessments. Ultimately, what is measured is more effectively managed; conversely, decisions grounded in assumptions rather than empirical evidence risk leading to costly errors. This is further applicable to supply chain management, where the VSME can play a critical role. It enables the mapping of supply chains and, in doing so, the identification points of vulnerability, which leads to the implementation of targeted action plans.

Beyond providing potential risk mitigation, VSME can serve definitively as a catalyst for innovation. By identifying short-, medium-, and long-term impacts, risks, and opportunities, clear sustainability targets can be defined and actions that reinforce resilience and competitiveness can be implemented.
 

Anticipating tomorrow’s business standards

The shift towards voluntary reporting should be viewed as a strategic opportunity to stay aligned with evolving market expectations. Across Europe, financial institutions are increasingly embedding ESG criteria into their lending practices, prompting a growing demand for reliable sustainability data from clients. Regulatory bodies are also raising the bar. For instance, the European Securities and Markets Authority (ESMA) has introduced guidelines requiring that at least 80% of a fund’s assets be allocated to environmental or social objectives if marketed as such⁶, aiming to prevent greenwashing.

Large corporations subject to the CSRD are expected to cascade ESG data requirements through their value chains, as previously mentioned, while the proposed ‘value chain cap’ limits the scope of information that can be requested from smaller suppliers. It also creates a clear incentive for those suppliers -regardless of size- to proactively adopt the VSME. By doing so, they can position themselves as credible and forward-thinking partners.

Implementing VSME reflects a proactive mindset. It helps companies meet emerging sustainability expectations and stand out in a competitive landscape, positioning themselves as future-ready contributors to responsible business ecosystems.
 

From voluntary to visionary

The VSME represents far more than a voluntary reporting standard; it is a strategic way for companies of all sizes to proactively respond to the evolving demands of today’s business landscape. Beyond operational benefits, VSME contributes to a strong organizational culture by attracting talent aligned with responsible values and fostering a positive, inclusive work environment.

This standard equips firms not only to prepare for the future but also to create value today, driving a transformation that is sustainable, resilient, and competitive. Ultimately, the cost of not reporting will be significantly higher than the relatively low investment required for VSME reporting.