EU SME standard · the value-chain cap
VSME: the EU voluntary standard, and why UK suppliers receive it
VSME is the EU’s voluntary sustainability reporting standard for smaller companies, and on 24 September 2026 it became the Voluntary Standard in Delegated Regulation (EU) 2026/1560.
It stays voluntary.
But it also sets the value-chain cap: the most a CSRD reporter can require from a supplier with 1,000 employees or fewer — UK suppliers included — from financial year 2027.
The basics
What VSME stands for, and what it is now
VSME stands for the Voluntary Sustainability Reporting Standard for non-listed Small and Medium-sized Enterprises.
EFRAG built it at the European Commission’s request, to replace the stream of uncoordinated ESG questionnaires that SMEs receive from banks, investors and larger customers, and delivered it on 17 December 2024.
The Commission endorsed it in Recommendation (EU) 2025/1710 of 30 July 2025.
Omnibus I then inserted Article 29ca into the Accounting Directive, telling the Commission to adopt a standard for voluntary use “based on” that Recommendation, by 19 July 2026.
The delegated act was adopted on 3 July 2026, published in the Official Journal on 21 September 2026 as Delegated Regulation (EU) 2026/1560, and entered into force on the third day after, 24 September 2026.
Recital 5 says that from that date the Recommendation “should be considered as no longer producing any legal effects”.
Guidance that still points to the Recommendation as “the VSME” is out of date; the new text is usually called the Voluntary Standard.
Two numbers circulate for the Recommendation, and only 2025/1710 is right.
- 17 Dec 2024EFRAG delivers VSME
Technical advice to the Commission.
- 30 Jul 2025Recommendation
Recommendation (EU) 2025/1710 endorses VSME.
- 18 Mar 2026Omnibus I in force
Creates the value-chain cap and Article 29ca.
- 3 Jul 2026Delegated act adopted
C(2026) 5011 establishes the Voluntary Standard.
- 21 Sep 2026Published
As Delegated Regulation (EU) 2026/1560.
- 24 Sep 2026In force
The Recommendation stops producing legal effects.
- FY2027Cap applies
Financial years beginning on or after 1 January 2027.
- 19 Mar 2027Transposition
Member States transpose the cap provisions.
Structure
Basic and comprehensive modules
The Voluntary Standard keeps VSME’s two modules.
The Commission’s staff working document says it adds no datapoints or modules; the changes are for coherence with the revised ESRS and presentation.
| Module | What it contains | Who it suits |
|---|---|---|
| Basic (Option A) | B1 basis for preparation, B2 practices and policies, B3 to B11 metrics | The target approach for micro-undertakings; the minimum for others |
| Basic + Comprehensive (Option B) | C1 to C9 on top of the Basic Module | Datapoints that banks, investors and corporate customers are likely to ask for |
Basic: environment
B3 energy and GHG emissions, B4 pollution, B5 biodiversity, B6 water, B7 resource use, circular economy and waste.
Basic: social and governance
B8 workforce, B9 health and safety, B10 remuneration, collective bargaining and training, B11 corruption and bribery convictions and fines.
Comprehensive
C1 business model, C2 policies, C3 GHG targets and transition, C4 climate risks, C5 to C7 workforce and human rights, C8 revenues from certain activities, C9 board gender diversity.
How the modules work
Basic is a prerequisite for Comprehensive.
Each module is complied with in full, but “if applicable” items are reported only where they apply, and some are voluntary at 10 employees or fewer.
The standard is intended for undertakings with an average of 1,000 employees or fewer in the preceding financial year.
Undertakings applying it are not obliged to seek assurance for what they report (recital 5).
BDO reports that EFRAG has updated its non-mandatory guidance for the Voluntary Standard on its Knowledge Hub.
UK angle
Why EU customers send UK SMEs VSME questionnaires
The EU’s Corporate Sustainability Reporting Directive requires in-scope companies to report on their value chain, not only their own operations.
After Omnibus I, scope is companies with more than 1,000 employees and net turnover above €450 million — and to report on their suppliers, they ask their suppliers.
The Commission calls this the “trickle-down effect”, which “sometimes creates undue burden on companies in value chains, particularly smaller companies”.
VSME was designed to make those requests predictable, and Omnibus I turned it into a legal ceiling; our guide to CSRD after Omnibus I covers the scope change.
A UK SME will rarely be a CSRD reporter itself.
But it can sit in a reporter’s value chain, and the definition of a protected undertaking turns on headcount and on being in that value chain — it does not say where the supplier is established.
There is no turnover test, so a supplier above €450 million turnover with fewer than 1,000 employees is still protected.
The value-chain cap
What the cap lets a UK supplier decline
The cap sits in Article 19a(3) and Article 29a(3) of the Accounting Directive, as amended.
The Regulation fills it in, and Article 3(2) says the cap “shall only comprise the datapoints specified in Annex II” — not the whole standard.
| 10 employees or fewer | More than 10 employees | |
|---|---|---|
| Datapoints in the cap | 9 | 23 |
| B1 module chosen, reporting basis, general information | In the cap | In the cap |
| B8 headcount by contract and gender; B9 accidents; B10 minimum wage, collective bargaining and training | In the cap | In the cap |
| B3 energy; Scope 1 and location-based Scope 2 | Not in the cap | In the cap |
| B6 water withdrawal; B7 circular economy and waste | Not in the cap | In the cap |
| C1 business model; C5 employee turnover; C6 and C7 human rights policies and incidents | Not in the cap | In the cap |
| Scope 3, GHG targets (C3), climate risks (C4), biodiversity (B5), ratings (¶28) | Not in the cap | Not in the cap |
Right to decline
A protected undertaking may refuse information beyond Annex II.
Customer’s duty
Say which requested items exceed the cap, and that you may decline them.
Contract terms
A clause requiring over-cap data is not binding to that extent; the rest of the contract stands.
Self-declaration
The customer may rely on your statement that you are protected, unless manifestly incorrect.
Customer’s cover
A reporter that takes nothing over the cap is “deemed to have complied” (Art 19a(3), point (d)).
Assurance
The customer’s assurance opinion must fully respect your right to decline (Art 34(2a)).
Law firms reading the Official Journal text, including Arthur Cox, describe the same two-level structure.
Not every point of a listed disclosure is capped: B8’s country split, B9’s fatalities and B10’s pay gap sit outside Annex II.
Timing: the cap applies to financial years beginning on or after 1 January 2027, and Member States must transpose the Directive’s cap provisions by 19 March 2027 under Article 5 of Directive (EU) 2026/470.
A request for a 2026 year is not yet covered.
Worked example
Sorting a customer’s VSME questionnaire
A UK manufacturer with an average of 180 employees last year receives a questionnaire from a German customer collecting data for its FY2027 CSRD sustainability statement.
The purpose is CSRD reporting and the supplier is protected, so the question for each item is where it sits: inside the Annex II cap, inside the Annex I standard but outside the cap, or not in the standard at all.
The sorter beside this text runs the twenty requests customers most often send.
Total energy in MWh, Scope 1 and location-based Scope 2, water withdrawal, waste, headcount by contract and gender, accidents, and a human rights policy all sit in the cap.
The renewable and non-renewable energy split sits in B3 only “if it can obtain” the data, and outside the cap.
Market-based Scope 2 is beyond the standard, because B3 paragraph 33 asks for location-based; decline it and point to the location-based figure.
Scope 3 across all fifteen categories is named in the standard only as a consideration for significant categories, so it is outside the cap.
GHG reduction targets (C3) and climate-related hazards (C4) are in the standard but outside the cap; C4 asks for hazards, exposure, time horizons and adaptation, not a named scenario, so a “1.5°C scenario analysis” question needs mapping before it can be answered.
The gender pay gap sits in B10 only where a law already requires the undertaking to report it; the standard does not create that duty, and whether UK gender pay gap reporting applies is a question of UK law.
A sustainability rating or certificate falls under B1 paragraph 28, outside the cap; a product carbon footprint per item is not in Annex I at all.
The customer must have marked every over-cap item and told the supplier of the right to decline; if it did not, the supplier can point that out.
The cap never obliges the supplier to answer anything, including the Annex II items.
Value-chain cap · sort a questionnaire
13 of 20 typical requests sit inside the cap for your size
- Legal form, sector code, turnover, headcount and sitesIn the capB1 ¶27(e) · No right to decline, and no duty to answer either.
- Which module you report under, and on what basisIn the capB1 ¶27(a), (c) · No right to decline, and no duty to answer either.
- Headcount by contract type and by genderIn the capB8 ¶40(a)–(b) · No right to decline, and no duty to answer either.
- Recordable work-related accidentsIn the capB9 ¶41(a) · No right to decline, and no duty to answer either.
- Minimum wage, collective bargaining coverage and training hoursIn the capB10 ¶42(a), (c), (d) · No right to decline, and no duty to answer either.
- Total energy consumption in MWhIn the capB3 ¶32 · No right to decline, and no duty to answer either.
- Scope 1 and location-based Scope 2 emissionsIn the capB3 ¶33 · No right to decline, and no duty to answer either.
- Water withdrawalIn the capB6 ¶36 · No right to decline, and no duty to answer either.
- Waste generated and share recycledIn the capB7 ¶38–39 · No right to decline, and no duty to answer either.
- Products, markets and key business relationshipsIn the capC1 ¶46 · No right to decline, and no duty to answer either.
- Employee turnover rateIn the capC5 ¶58 · No right to decline, and no duty to answer either.
- Human rights policy and complaints mechanismIn the capC6 ¶61(a), (c) · No right to decline, and no duty to answer either.
- Confirmed human rights incidentsIn the capC7 ¶62(a), (c) · No right to decline, and no duty to answer either.
- Scope 3 emissions by categoryOutside the capAnnex I ¶¶49–52, a consideration only · The customer must flag it; you may decline.
- GHG reduction targets and transition planOutside the capC3 · The customer must flag it; you may decline.
- Climate-related hazards and risksOutside the capC4 · The customer must flag it; you may decline.
- Biodiversity-sensitive sitesOutside the capB5 · The customer must flag it; you may decline.
- Your sustainability rating or certificatesOutside the capB1 ¶28 · The customer must flag it; you may decline.
- Market-based Scope 2Beyond the standardB3 ¶33 asks for location-based · Outside the cap; you may decline once it is flagged.
- Product carbon footprint for each item suppliedBeyond the standardNot in Annex I · Outside the cap; you may decline once it is flagged.
Rules: Delegated Regulation (EU) 2026/1560 Art 3(2) and Annexes I–II; Directive 2013/34/EU Art 19a(3) as inserted by Directive (EU) 2026/470.
The cap applies to financial years beginning on or after 1 January 2027.
A sorting aid, not legal advice.
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Limits
What the cap does not stop
The cap governs one thing: information a CSRD reporter requires for its own sustainability reporting.
The Commission’s value-chain cap explanation says it “does not impose or imply any obligation” on companies in the value chain to provide sustainability information.
Recital 12 of Omnibus I draws three further limits: the cap does not stop voluntary sharing, does not override an obligation under a contract or other law to provide information within the standard, and applies only to information gathered for CSRD reporting.
The Directive names one carve-out expressly: nothing in the cap affects requests “for the purpose of complying with Union requirements on undertakings to conduct a due diligence process”.
So a request made under the Corporate Sustainability Due Diligence Directive is untouched by the 1,000-employee cap; the CSDDD has its own, different limit for business partners with fewer than 5,000 employees.
A bank’s or investor’s ESG questionnaire, or a tender requirement, carries no statutory right to decline either; our guide to handling ESG questionnaires covers those cases.
The cap is a ceiling, not a floor: a customer may ask for less than Annex II, and recital 12 says it should if it does not need everything.
The four questions beside this text place you in one of four positions.
Value-chain cap · can they require this?
Answer the four questions
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Rules: Directive 2013/34/EU Art 19a(3) and 29a(3) as amended by Directive (EU) 2026/470; Delegated Regulation (EU) 2026/1560 Arts 3–4.
A provisional reading, not legal advice.
Inside the standard
Four kinds of datapoint, and only one is capped
The Commission’s explanation of 6 May 2026 sorts the standard’s disclosures into four categories.
Only the first sits inside the cap, which is why a supplier can be asked about something the standard covers and still decline it.
| Category | What it means | Inside the cap? |
|---|---|---|
| Necessary | Disclosures the undertaking reports when it applies the module | Yes, where listed in Annex II for its size band |
| Necessary if applicable | Reported only where the circumstance applies, such as targets the company has set | No |
| Voluntary | Disclosures the undertaking may choose to report | No |
| Consideration when reporting sector information | Points to consider, such as significant Scope 3 categories | No |
The smallest suppliers get extra protection.
The Commission says companies with 10 employees or fewer “are therefore given extra protection from the trickle-down effect”, and the Regulation makes certain datapoints voluntary for them even where they are essential for larger undertakings.
That is why the micro cap has nine datapoints and leaves out energy and emissions altogether.
Customers are told to ask for less where they can: recital 12 of Omnibus I says reporters should request less than the standard specifies if they do not need all of it, and the Commission adds that they “should only seek to obtain the information that they really need”.
None of this makes VSME the same as the ESRS.
The ESRS are the mandatory standards for CSRD reporters, built on double materiality; the Voluntary Standard is a short, module-based set, applied “if applicable” item by item, and written for undertakings that are not obliged to report at all.
Comparison
VSME, UK SRS and SECR for UK SMEs
The UK has no SME sustainability standard of its own.
Two UK frameworks sit near VSME, and neither is designed for a small supplier answering a customer.
| VSME (Voluntary Standard) | UK SRS S1 and S2 | SECR | |
|---|---|---|---|
| Legal status | Voluntary; the cap binds CSRD reporters | Voluntary for any entity; comply or explain for listed companies from 2027 | Mandatory for those in scope |
| Who it is for | Undertakings up to 1,000 employees | Investor-focused reporting | Quoted companies, large unquoted companies and large LLPs |
| Climate data | Energy, Scope 1 and location-based Scope 2 | Scope 1, 2 and 3, risks, plans | UK energy use and related emissions |
| Audience | Customers, banks, investors | Investors and lenders | Shareholders, through the directors’ report |
GOV.UK says UK SRS is “available for voluntary use, by any entity that chooses to do so”.
It is built on IFRS S1 and S2, a far heavier exercise than VSME, and the FCA’s final rules attach it to listed companies only; see our UK SRS thresholds page for who that is.
An unquoted company is outside SECR unless it is large: it must exceed at least two of £36 million turnover, £18 million balance sheet and 250 employees, under Schedule 7 Part 7A of SI 2008/410.
Most UK SMEs are therefore outside it.
Those that do report under SECR already hold much of the energy and emissions data VSME’s B3 disclosure asks for, and the government conversion factors work for both.
For a broader view of the UK pair, see UK SRS S1 and S2.
Next steps
How a UK supplier should respond
1. Check headcount
Average employees in the preceding financial year: over 10, and no more than 1,000?
2. Ask the purpose
CSRD reporting, CSDDD due diligence, financing or a tender?
Only CSRD reporting is capped.
3. Map to Annex II
Mark each question as inside or outside the cap for your size band.
4. Self-declare
Tell the customer, in writing, that you are a protected undertaking.
5. Choose a module
Basic only, or Basic plus Comprehensive if banks or key customers want more.
6. Name the text
State that you apply the Voluntary Standard in Delegated Regulation (EU) 2026/1560.
If you choose to report under the standard rather than questionnaire by questionnaire, B1 asks you to state which option you selected, whether the report is individual or consolidated, and to make an explicit statement of compliance.
A single report that customers can be pointed to often saves more effort than it costs.
Linklaters’ note of 21 September 2026 sets out both September regulations side by side, and the Omnibus I scope rules tell you which of your customers are reporters.
For a harder case, put it to the member agent after creating a free account, or book a free 15-minute call.
It classifies by the purpose the customer gives and your headcount.
Where a questionnaire mixes purposes, separate the items first, and ask the customer to say in writing which duty each serves.
Terms
VSME terms, at the provision
DR (EU) 2026/1560, Annex I
Voluntary Standard
The EU’s standard for voluntary use by undertakings protected by the value-chain cap, based on VSME.
B1–B11; C1–C9
Basic and Comprehensive Modules
The minimum module, and the additional disclosures banks, investors and corporate customers are likely to ask for.
Art 3(2)
Annex II
The closed list of datapoints the cap comprises: 23 above 10 employees, 9 at 10 or fewer.
Dir 2013/34/EU Art 19a(3)
Protected undertaking
A value-chain undertaking with an average of 1,000 employees or fewer in the preceding financial year.
Art 19a(3)
Self-declaration
A supplier’s statement that it is protected, which the reporter may rely on unless it is manifestly incorrect.
Annex I ¶33
Location-based Scope 2
Scope 2 emissions from purchased energy using grid-average factors — the Scope 2 figure B3 asks for.
Frequently asked
Questions people ask
What does VSME stand for?
VSME stands for the Voluntary Sustainability Reporting Standard for non-listed Small and Medium-sized Enterprises.
EFRAG developed it at the European Commission’s request and delivered it on 17 December 2024.
Since 24 September 2026 its successor is the Voluntary Standard in Delegated Regulation (EU) 2026/1560, which is based on it.
Is VSME reporting mandatory?
No. The standard is voluntary in the EU and has no legal status in the UK.
What has legal force is the value-chain cap: from financial years beginning on or after 1 January 2027, a company reporting under the CSRD may not require a supplier with an average of 1,000 employees or fewer to provide sustainability information beyond Annex II of the Regulation, for its CSRD reporting.
Why is an EU customer sending my UK company a VSME questionnaire?
CSRD reporters must report on their value chain, so they ask suppliers for data.
The voluntary standard gives them a common format, and the value-chain cap uses the same standard to set a ceiling on what they can require.
A UK supplier in an EU customer’s value chain will see VSME-shaped requests whether or not it reports under VSME itself.
Can a UK supplier refuse to answer?
For CSRD reporting purposes, a protected undertaking has a statutory right to decline information beyond Annex II, and the customer must say which requested items exceed it.
The right comes from Article 19a(3) of the Accounting Directive as amended by Omnibus I, which Member States must transpose by 19 March 2027.
It does not cover requests for other purposes, including CSDDD due diligence.
Which parts of a VSME questionnaire can a supplier decline?
For a supplier with 11 to 1,000 employees answering a CSRD request, anything outside the 23 Annex II datapoints, including Scope 3, GHG targets, climate risks and sustainability ratings, even though the standard covers them.
Items inside Annex II, such as energy, Scope 1 and location-based Scope 2, water withdrawal, waste and headcount, carry no right to decline, but no duty to answer either.
Does the value-chain cap include Scope 3 emissions?
No. Above 10 employees the only GHG datapoint in Annex II is the undertaking’s own estimated gross emissions: Scope 1 and location-based Scope 2.
Scope 3 is named in the standard only as a consideration.
At 10 employees or fewer, energy and GHG emissions are not in the cap at all.
Is Recommendation (EU) 2025/1710 still the VSME?
Not any more.
Recital 5 of the Regulation provides that from its entry into force on 24 September 2026 the Recommendation should be considered as no longer producing any legal effects.
The Voluntary Standard in Annex I to Delegated Regulation (EU) 2026/1560 is the text to work from.
How does VSME relate to UK SRS and SECR?
UK SRS S1 and S2 are available for voluntary use by any entity but are built for investor-focused disclosure.
SECR is a legal duty only for quoted companies and large unquoted companies and LLPs.
Most UK SMEs have neither duty, so VSME is often the most proportionate format for answering customers; SECR energy and emissions data can feed its B3 disclosures.
Does reporting under VSME need assurance?
No. Recital 5 of the Regulation states that undertakings applying the standard are not obliged to seek assurance for what they report.
A customer’s own CSRD assurance provider must prepare its opinion in a way that respects a protected supplier’s right to decline.
Is VSME the same as the ESRS?
No. The ESRS are the mandatory standards for companies in CSRD scope, built on double materiality and twelve standards.
The Voluntary Standard is a short, module-based standard for undertakings that are not obliged to report, and its Annex II sets the most a CSRD reporter may require of a protected supplier.
What is the difference between the Basic and Comprehensive Modules?
The Basic Module, B1 to B11, is the minimum: basis for preparation, practices and policies, and core environmental, social and governance metrics.
The Comprehensive Module, C1 to C9, adds the disclosures banks, investors and corporate customers commonly ask for, such as the business model, GHG targets, climate risks and board gender diversity.
Basic is a prerequisite for Comprehensive.
Is there a VSME report example?
The Voluntary Standard sets the content: B1 basis for preparation, B2 practices and policies, B3 to B11 metrics, and the optional C1 to C9 comprehensive disclosures.
A single report following that order, stating the option chosen and making an explicit statement of compliance, is the example customers can be pointed to; the worked questionnaire on this page shows which items sit in the cap.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner.
Secondary commentary is never the source for a number.
- EUR-LexDelegated Regulation (EU) 2026/1560 — standards for voluntary use, Arts 3–4, Annexes I and II, recital 5
The Voluntary Standard; the cap is Annex II only; in force 24 September 2026; cap from FY2027.
- Council of the EUC(2026) 5011 final, Annexes I and II (as transmitted)
The datapoint list, matching the published Regulation.
- EUR-LexC(2026) 5011 — the adopted act, 3 July 2026
Adoption of the delegated act.
- EUR-LexCommission Recommendation (EU) 2025/1710 of 30 July 2025
The VSME as first endorsed; no longer producing legal effects from 24 September 2026.
- EUR-LexDirective 2013/34/EU, consolidated 18.03.2026 — Art 19a(3), 29a(3), 29ca, 34(2a)
The value-chain cap: protected undertakings, self-declaration, the right to decline.
- EUR-LexDirective (EU) 2026/470 (Omnibus I) — recital 12, Art 5(1)
The cap’s limits, and transposition by 19 March 2027.
- EFRAGVoluntary reporting standard for SMEs (VSME) — concluded project
EFRAG’s standard, delivered 17 December 2024.
- European CommissionSWD(2026) 500 final
The Voluntary Standard adds no datapoints or modules to VSME.
- European Commission (DG FISMA)Additional explanatory information regarding the value chain cap, 6 May 2026
The trickle-down effect; the cap applies only to CSRD reporting requests.
- legislation.gov.ukSI 2008/410, Schedule 7, Part 7A — SECR for large unquoted companies
Why most UK SMEs have no SECR duty.
- Department for Business and TradeUK Sustainability Reporting Standards (GOV.UK)
UK SRS is available for voluntary use by any entity.
- DESNZ (GOV.UK)Government conversion factors for company reporting
The factors a UK supplier uses for Scope 1 and 2 figures.