CSRD vs VSME: Which One Applies to My Business?

If your organisation operates in Europe — whether you are a small business, supplier, or subsidiary — you will eventually hear about CSRD and VSME. One is mandatory for certain companies. The other is voluntary but increasingly expected across supply chains.

Many businesses ask the same question: “Do we need CSRD, VSME, or both?”

This guide gives you a clear, plain-English comparison. You will see how the two standards differ, how the rules apply to SMEs and non-SMEs, and what suppliers need to prepare as their clients transition to CSRD.

For a deeper comparison, you can also explore: CSRD vs VSME: What’s the Difference and Why It Matters for SMEs

1. CSRD vs VSME — The Clear Explanation

CSRD

The Corporate Sustainability Reporting Directive is the EU’s mandatory reporting law for:

• All large undertakings that meet two of:

  • 250 employees

  • €20 million balance sheet

  • €40 million turnover

• Most listed SMEs (with micro-undertakings exempt)

• Some non-EU companies with significant EU turnover

CSRD uses the European Sustainability Reporting Standards (ESRS). These require double materiality, detailed environmental and social metrics, forward-looking plans, and assurance.

VSME

The Voluntary Standard for non-listed micro, small, and medium-sized undertakings (VSME) is optional and far simpler. EFRAG created it to help SMEs:

• Respond to sustainability data requests from clients and banks
• Understand and manage their environmental and social impacts
• Align with ESRS topics in a proportionate way

VSME does not require assurance, double materiality, or strategy disclosures at the same depth as CSRD. It is a practical baseline that mirrors what large companies ask their suppliers for.

2. Visual Decision Tree: CSRD or VSME?

Below is a simple text-based decision tree you can use to identify your path.

                           START
                             |
     ---------------------------------------------------
     |                                                 |
Are you a large undertaking?               No → Are you a listed SME?
(>250 staff OR >€20m assets OR >€40m)                |
     |                                                |
Yes → CSRD applies                          Yes → CSRD applies (2026–2028)
     |
     No
     |
Are you a non-listed SME? (micro / small / medium under EU definitions)
     |
     Yes → VSME is recommended (voluntary but widely used)
     |
     No
     |
Are you a non-EU company with >€150m EU turnover
AND an EU branch/subsidiary?
     |
     Yes → CSRD applies from 2028
     |
     No → Neither required, but clients may request VSME data

The decision tree shows the most important point: CSRD applies to specific company types; VSME applies everywhere CSRD pressure “flows down” the supply chain.

3. SMEs vs Non-SMEs — How the Rules Actually Apply

Non-SMEs (large entities)

If your organisation is large under EU accounting rules, CSRD applies directly. These companies must report using full ESRS and obtain assurance.

This includes many manufacturing groups, retailers, logistics companies, financial institutions, and technology providers.

Listed SMEs (except micro)

These companies must report under CSRD starting in 2026 (with an option to delay to 2028). They will use the proportionate ESRS for listed SMEs, not the VSME Standard.

Non-listed SMEs (micro, small, medium)

These companies are not in scope of CSRD. VSME confirms this explicitly: micro-, small-, and medium-sized undertakings whose securities are not admitted to trading fall outside CSRD.

However, they still need to prepare for data requests.

Subsidiaries of large or listed groups

Subsidiaries may not publish a standalone CSRD report, but parents often require ESRS-aligned data from them for group consolidation. CSRD allows consolidated reporting, meaning internal data requests become more structured.

Non-EU companies

If they generate over €150m in EU turnover and have at least one substantial EU entity, they must report under CSRD from 2028.

4. What Suppliers Face from Large Clients

Large companies subject to CSRD must disclose:

• Their full value-chain impacts
• Scope 3 emissions
• Workforce information across the value chain
• Risks, dependencies, and policies tied to supplier relationships

This is why suppliers increasingly receive:

• Emissions questionnaires
• Workforce breakdown requests
• Waste and water metrics
• ESG policy reviews
• Evidence for human-rights or social due diligence

Many SMEs now face multiple requests each year from clients in Germany, France, the Netherlands, Denmark, Sweden, and Poland — often in different formats.

A simple way to manage these requests is covered in: How SMEs Can Handle Sustainability Data Requests from Large Clients

5. Why VSME Is Your Safe, Minimal-Compliance Starting Point

VSME is becoming the standard supplier format because:

1. It aligns with ESRS topics without overwhelming SMEs

The Basic Module includes 12 disclosures on energy, GHG emissions, waste, water, workforce, and governance.

These are the exact datapoints large clients commonly request.

2. It prevents repetitive work

Instead of filling dozens of separate questionnaires, SMEs create one structured report to share with multiple clients.

3. It builds credibility with banks and investors

Banks increasingly use sustainability data to assess lending risks. VSME provides a format they recognise and trust.

4. It matches what corporate groups need from subsidiaries

Multinational groups use VSME-aligned datapoints to collect consistent information across subsidiaries.

5. It prepares SMEs for future regulation without requiring it

VSME gives SMEs a low-cost, low-burden path into sustainability reporting. No assurance. No significant strategy documentation. No double materiality. Just clear, relevant data.

For a more detailed overview of VSME requirements, see: CSRD for Beginners: A Plain-Language Guide for Small Businesses

Frequently Asked Questions

If I’m an SME, can I ignore CSRD entirely?

You can ignore the legal obligation, but not the practical impact. Most SMEs receive data requests as part of their clients’ CSRD obligations. Using a VSME report helps you answer these efficiently. For details on deadlines, see: CSRD Deadlines for SMEs.

Should SMEs ever choose CSRD voluntarily?

Only in rare cases — usually when SMEs want to list on a regulated market or operate as a critical subsidiary within a large group. VSME is the recommended pathway for 95% of SMEs.

What if I do not have full environmental data yet?

VSME allows reasonable estimates and gradual improvement. Most SMEs begin with utility invoices, waste reports, and simple workforce data. For help selecting emissions factors, see: Emission Factor Selection: How to Choose Data Sources

Key Terms

• CSRD — Mandatory EU sustainability reporting for large and listed companies.
• VSME — Voluntary sustainability reporting standard for non-listed SMEs.
• ESRS — Detailed reporting standards used under CSRD.
• Scope 3 — Indirect value-chain emissions.
• Large undertaking — Company meeting EU accounting thresholds.

Conclusion & Next Steps

The difference is simple: CSRD applies when the law requires it. VSME applies everywhere sustainability expectations show up in day-to-day business.

If your organisation is a small or medium business, VSME is the safest and most efficient starting point. It prepares you for client requests, improves access to finance, and avoids the heavy requirements of CSRD.

A structured approach and steady progress make sustainability reporting achievable. And with each reporting cycle, your organisation gains clarity and confidence.

To continue, you may want to explore: CSRD vs VSME: What’s the Difference and Why It Matters for SMEs