CSRD vs VSME Explained
If you run a small and growing business (SME) in Europe, you’ve probably heard of the Corporate Sustainability Reporting Directive (CSRD) and the Voluntary Sustainability Reporting Standard for SMEs (VSME). The two are related but serve different purposes. Knowing the difference will save you time and stress.
1. What is CSRD?
The CSRD is an EU law that applies mainly to large companies. It requires them to publish detailed reports on their environmental, social, and governance (ESG) impacts. These reports are prepared using the European Sustainability Reporting Standards (ESRS), which set out exactly what must be disclosed.
For example, a multinational retailer must report its greenhouse gas emissions, workforce diversity, waste management, and supply chain policies in a standardised way. The CSRD is legally binding for large firms, with strict deadlines and audit requirements.
2. What is VSME?
The VSME is not a law. It’s a voluntary standard designed specifically for SMEs. It helps smaller businesses respond to requests from banks or large clients who need sustainability information for their own CSRD reports.
The VSME has two levels:
- Basic Module — the minimum set most SMEs are expected to provide. It covers data such as energy bills, fuel use, waste, headcount, and simple governance information.
- Comprehensive Module — a more detailed set, sometimes requested by banks or large clients. It includes strategy, transition plans, and sustainability targets.
Think of the VSME as a toolkit. It gives you a clear, simple way to present your data without the heavy reporting burden placed on large corporations.
3. Key Differences Between CSRD and VSME
| Feature | CSRD | VSME |
|---|---|---|
| Legal status | Mandatory EU law | Voluntary guidance |
| Who must report | Large companies, some listed SMEs | Any SME that wants to respond to client/bank requests |
| Reporting standard | ESRS | VSME (Basic or Comprehensive) |
| Level of detail | High (full ESG strategy, risks, targets, audited data) | Light-touch (energy, workforce, waste, governance basics) |
| Purpose | Public accountability and investor transparency | Practical information exchange in supply chains and finance |
4. Why SMEs Should Care
Even if your small and growing business is not legally in scope of the CSRD, you may still feel its effects. Large companies and banks will rely on suppliers’ data to complete their own reports. If you cannot provide it, you may risk losing contracts or face delays in securing finance.
For example, a small bakery might be asked by its bank to share annual electricity bills, the number of employees on permanent and temporary contracts, and basic waste figures. With this simple data, the bank can complete part of its CSRD reporting.
By using the VSME — starting with the Basic Module — you’ll be prepared to answer client or bank requests quickly and professionally. This builds trust and may even give you a competitive edge over less-prepared competitors.
Key Takeaway
CSRD is mandatory for large companies, but its effects ripple down the supply chain. VSME is your practical tool to respond without heavy reporting burdens. Start with the Basic Module and you’ll be ready when clients or banks come calling.
Key Terms
- Corporate Sustainability Reporting Directive (CSRD) — An EU law that requires large companies — and eventually some medium-sized ones — to report on their environmental and social impacts. Smaller suppliers are not directly in scope but may be asked for CSRD-style data by banks or bigger clients.
- Voluntary Sustainability Reporting Standard for SMEs (VSME) — A simplified framework designed to help SMEs share sustainability information. It is voluntary but can help SMEs respond to client or bank requests.
- Basic Module — The minimum set of sustainability disclosures under the VSME. It covers essential topics such as energy use, greenhouse gas emissions, waste, workforce data, and basic governance issues.
- Comprehensive Module — An extended version of the VSME reporting standard. It includes additional details on strategy, transition plans, and targets. Banks or large clients may request this level of detail.
- European Sustainability Reporting Standards (ESRS) — The detailed reporting rules that apply to large companies under CSRD. The VSME is a simplified, proportionate version for smaller businesses.
- SME (Small and Medium-sized Enterprise) — A business with fewer than 250 employees, a turnover under €50 million, or a balance sheet total under €25 million. Micro-enterprises are even smaller (fewer than 10 employees).
- Scope 1 and Scope 2 emissions — Scope 1 refers to greenhouse gas emissions from sources a company directly controls (like fuel used in company vehicles). Scope 2 refers to emissions from purchased energy (like electricity or heating). SMEs may only need to report these two.
- Turnover — The total income a company earns from its normal business activities, usually measured over one year.