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Important facts
- What is the VS standard?
- A voluntary EU standard (delegated act, formerly VSME) for companies with up to 1,000 employees, designed to facilitate simple and resource-efficient sustainability reporting.
- Who does it apply to?
- All companies with up to 1,000 employees, regardless of whether they are publicly traded—a significantly broader definition than the former VSME target group (unlisted SMEs with up to 250 employees).
- What modules are available?
- The basic module (B1–B11) provides the core ESG disclosures, while the supplementary module (C1–C9) offers additional coverage for companies with more stringent stakeholder requirements.
- Why is it important?
- Following the increase in the CSRD thresholds, many companies are no longer required to report, but must continue to provide ESG data to banks, customers, and business partners.
- What is the Value Chain Cap?
- The VS also specifies the maximum amount of sustainability data that companies subject to the CSRD may request from business partners with up to 1,000 employees, thereby protecting them from excessive data requests from the supply chain.
- Benefits for Businesses
- Ease of use, improved access to financing, enhanced competitiveness, and legal protection against disproportionate ESG requests.
- When can it be used?
- Adopted as a delegated act on July 3, 2026. Currently under review (scrutiny period) by the European Parliament and the Council. Effective as of the 2027 fiscal year.
Summary of the VS Standard
The VS (Voluntary Standard, formerly VSME—Voluntary Sustainability Reporting Standard for non-listed SMEs) is the voluntary EU framework for sustainability reporting by companies with up to 1,000 employees. EFRAG published the underlying VSME standard in December 2024, and the European Commission initially designated it as a voluntary standard for SMEs via Recommendation (EU) 2025/1710 on July 30, 2025. The Omnibus I Directive (EU) 2026/470, which has been in force since March 18, 2026, established the legal basis for a mandatory framework: On July 3, 2026, the Commission adopted the VS as a delegated act to succeed the VSME Recommendation with an expanded scope of application. The act is currently undergoing the scrutiny period by the European Parliament and the Council and will apply, upon entry into force, starting with the 2027 fiscal year.
Even without a legal reporting requirement, the voluntary reporting standard is relevant for many small and medium-sized enterprises (SMEs): Large companies are increasingly passing on ESG requirements to their suppliers, banks request ESG data for credit decisions, and a structured report protects against conflicting individual inquiries. Since the introduction of the VS, another dimension has been added: As a statutory “value chain cap,” it limits the maximum amount of sustainability data that companies subject to the CSRD may request from their business partners. The standard thus creates a uniform basis and strengthens transparency and competitive position.
The VS is significantly more streamlined than the ESRS, as instead of over 1,000 data points, it consists of two modules (the basic module and the supplementary module) containing significantly fewer specific details. Compared to the VSME, certain data points have been removed (e.g., GHG intensity) or moved (e.g., employee turnover rate to the supplementary module). The dual materiality analysis is no longer required. An annual update in conjunction with the annual financial statements is recommended. Sensitive information may be omitted, but must be clearly identified as such.
Update (as of August 2026)
The VS standard has evolved from a legal perspective: The Omnibus I Directive (EU) 2026/470, published in the Official Journal on February 26, 2026, and in effect since March 18, 2026, established the legal basis for a statutory value chain cap. This authorizes the Commission to establish, by means of a delegated act, a binding upper limit for ESG data requests along the supply chain. Following a public consultation on the draft from May 6 to June 3, 2026, the European Commission adopted the Voluntary Standard (VS) as a delegated act on July 3, 2026 — together with the revised ESRS and as the official successor to the previous VSME Recommendation (EU) 2025/1710.
The delegated act is currently undergoing the so-called scrutiny period: the European Parliament and the Council are reviewing it for two months, extendable by an additional two months. If neither institution raises any objections, the VS will be published in the Official Journal of the EU and will enter into force. The standard will then be applied for the first time to fiscal years beginning on or after January 1, 2027. Until it formally enters into force, the VSME recommendation remains valid as a technical reference point; companies that already report in accordance with it can transfer their data almost entirely to the VS.
VS: Definition, Background, and Current Status
The VS (Voluntary Standard) is based on the VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) developed by EFRAG, which was originally intended for unlisted micro, small, and medium-sized enterprises (SMEs) as defined by the EU (micro/small/medium). The thresholds set forth in the EU Accounting Directive (including up to 250 employees as well as revenue and/or total assets thresholds) served as the basis for this standard. With the adoption of the VS as a delegated act on July 3, 2026, this scope of application was significantly expanded: The VS now applies to all companies with up to 1,000 employees, regardless of whether they are publicly listed.
In practice, the standard is particularly relevant for companies that do not fall within the scope of the CSRD but are nonetheless required to regularly provide ESG data to customers or financial institutions. What was still a political simplification during the VSME era—the informal description of these companies as having “fewer than 1,000 employees”—has become an official, legally binding threshold with the VS. It also forms the basis for the so-called “value chain cap,” which specifies the maximum amount of sustainability data that large companies subject to the CSRD may require from these companies.
The VSME standard, on which the VS is based, was developed by EFRAG (European Financial Reporting Advisory Group) and submitted to the European Commission. The Commission initially designated it as a voluntary standard for SMEs on July 30, 2025, via Recommendation (EU) 2025/1710. With the Omnibus I Directive (EU) 2026/470, which took effect on March 18, 2026, the Commission was given the legal basis to make the standard mandatory via a delegated act, which occurred on July 3, 2026, with the adoption of the VS. Compared to the comprehensive ESRS, which are primarily tailored to larger companies subject to the CSRD, the VS remains significantly more streamlined and practical in structure. If you’d like to get an overview of the “traditional” reporting standards, you can find more information in our blog post.
By applying the VS, companies can transparently present their sustainability practices. It also helps them efficiently respond to ESG data requests from banks and customers, which contributes to strengthening their market position and credibility. It takes into account the limited resources of small and medium-sized enterprises (SMEs) compared to large corporations, thereby facilitating access to financing and customers by standardizing various ESG data requests.
Unlike the original ESRS, which comprised over 1,000 data points, the VS significantly reduces the administrative burden. The standard comprises two modules—the base module (B1–B11) and the supplementary module (C1–C9)—with a total of approximately 20 overarching reporting topics. Depending on relevance and level of detail, these result in specific information and data points in practice. Compared to the VSME, certain data points have been removed (e.g., GHG intensity) or their level of detail has been reduced.
A dual materiality analysis is still not required. If you would like to learn more about materiality analysis, click here to read our article. This simplification enables small and medium-sized enterprises (SMEs) to respond more efficiently to sustainability inquiries from business partners such as banks or larger companies.
From the VSME to the VS: The History of Its Development and the Current Status
On December 17, 2024, EFRAG published the voluntary VSME guidelines for sustainability reporting by unlisted SMEs. This provided, for the first time, a significantly clearer and more practical framework that allowed SMEs to prepare their ESG information in a consistent manner and with less effort. This led to greater transparency and facilitated communication with stakeholders such as customers, banks, and business partners, especially when ESG data was regularly requested.
The consultation on the VSME draft ran from January 22 to May 21, 2024, during which time EFRAG collected feedback from various sources, including SMEs and their associations, banks, auditors and national standard setters. Based on this feedback, the standard was further simplified in several places in order to better adapt it to the practice and resource situation of SMEs.
The final standard was subsequently approved by EFRAG on October 22, 2024, and received final endorsement on November 13, 2024. In addition, EFRAG provides practical materials via the ESRS Knowledge Hub. These are currently being updated to reflect the final VS and are scheduled to be published in several phases, including in collaboration with national standard-setters for translations.
On this basis, the European Commission published Recommendation (EU) 2025/1710 on July 30, 2025, which explicitly endorsed the VSME as a voluntary, practical reference framework for SMEs. The primary goal was to standardize ESG information requests from supply chains and financial institutions and to significantly reduce the burden on SMEs.
Since then, the standard has evolved from a legal standpoint: With the Omnibus I Directive (EU) 2026/470, published in the Official Journal on February 26, 2026, and in effect since March 18, 2026, the Commission was given the legal basis to make the existing VSME binding as a “Value Chain Cap” via a delegated act. Following a public consultation on the draft from May 6 to June 3, June 2026, the Commission adopted the Voluntary Standard (VS) as a delegated act on July 3, 2026, together with the revised ESRS and as the official successor to the VSME recommendation, with a scope of application expanded to 1,000 employees.
The delegated act is currently undergoing the so-called scrutiny period: the European Parliament and the Council are reviewing it for two months, extendable by an additional two months. If neither institution raises any objections, the VS will be published in the Official Journal of the EU and will enter into force. The standard will then be applied for the first time to fiscal years beginning on or after January 1, 2027. Companies that already report under VSME can transfer their existing data set almost entirely to the VS.
The delegated act is currently undergoing the so-called scrutiny period:
The European Parliament and the Council will review it for two months, extendable by an additional two months. If neither institution raises any objections, the VS will be published in the Official Journal of the EU and will enter into force. The standard will then be applied for the first time to fiscal years beginning on or after January 1, 2027. Companies that already report under VSME can transfer their existing data set almost entirely to the VS.
Omnibus I: What Has Changed for SMEs and Small and Medium-Sized Businesses?
The EU Omnibus I initiative aimed to significantly streamline the CSRD’s reporting requirements. Following a legislative process that began in February 2025 and a political agreement between the Commission and the Parliament in December 2025, the Council of the EU adopted the Omnibus I Directive on February 24, 2026. It was published in the Official Journal on February 26, 2026, and entered into force as Directive (EU) 2026/470 on March 18, 2026. The reform is thus complete at the EU level. The transposition into the national laws of the member states remains pending; a transposition deadline of March 19, 2027, applies. In Germany, the CSRD has not yet been fully transposed into national law. Learn more about the CSRD requirements in detail.
The most important planned changes at a glance:
- Narrower Scope of Application: In the future, the CSRD reporting requirement will apply only to companies with more than 1,000 employees and net revenue exceeding €450 million; according to initial estimates, this represents a reduction of up to 80% in the number of companies previously subject to the requirement.
- Extended deadlines: Reporting requirements will not take effect until the 2027 fiscal year, with the first reports due in 2028. The “Stop-the-Clock” Directive had already postponed these deadlines.
- Significantly fewer data points: The revised ESRS reduce the number of mandatory data points by approximately 61–70% (from about 1,073 to about 320), there are no longer any sector-specific ESRS; instead, there is a legally binding “value chain cap” under the new VS standard, which limits the sustainability data that CSRD-subject companies may require from smaller business partners.
- Audit: No “reasonable assurance”; the transition originally planned has been completely canceled, not merely postponed. “Limited assurance” remains in effect permanently.
- EU Taxonomy & CSDDD: Significant simplifications and higher thresholds; the CSDDD (Supply Chain Due Diligence Directive) will in the future apply only to companies with more than 5,000 employees and over €1.5 billion in revenue, with a risk-based approach replacing a comprehensive mapping process.
As a result, many companies are no longer subject to reporting requirements. However, the need for clear ESG data on the part of investors, customers, and banks remains. This is precisely where the VS gains significance: It enables structured, robust ESG reporting with manageable effort, without the full complexity of the ESRS, and, through the Value Chain Cap, simultaneously provides legal protection for affected companies against excessive data requests from the supply chain. As a result, it becomes not only a response to current inquiries but also a strategic lever for competitiveness and trust.
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Companies affected
The VSME standard, on which the VS is based, was originally intended for unlisted micro, small, and medium-sized enterprises. It is based on the size categories defined in the EU Accounting Directive: micro (up to 10 employees), small (up to 50), and medium (up to 250), each combined with thresholds for revenue and total assets. These size categories remain relevant, in part because certain data points that are actually required are explicitly voluntary in the VS for micro-enterprises with up to 10 employees.
However, the VS itself, as a delegated act, goes well beyond this traditional definition of an SME: It applies to all companies with up to 1,000 employees, regardless of whether they are publicly traded, and thus also covers medium-sized companies that are no longer SMEs in the strict sense. The goal is to establish a practical standard that allows these companies to provide consistent responses to typical ESG inquiries from banks, customers, and large corporations.
The standards help companies that are not subject to reporting requirements to address the most important ESG issues—namely, environmental, social, and governance—in a structured manner without introducing unnecessary complexity. With the adoption of the VS as a delegated act on July 3, 2026, this framework has since become significantly more relevant than the VSME was on its own: As a statutory value chain cap, the VS also specifies the maximum amount of sustainability data that large companies subject to the CSRD may require from these companies. As a result, it no longer serves merely as a voluntary, uniform framework for responding to ESG inquiries, but also as a legal safeguard against customers, banks, and business partners.
Even though small and medium-sized enterprises (SMEs) are not required to report, the importance of such reporting is growing.
Relevance for Companies Not Subject to Reporting Requirements
An important aspect of ESG compliance is the so-called trickle-down effect: requirements set by large companies “trickle down” through the supply chain. If a company is required to report on ESG itself, it often requests the necessary information from its suppliers. In practice, these are frequently small and medium-sized enterprises.
In many cases, these companies do not yet have systematic processes in place for collecting such data. However, the VS offers them an effective way to organize their sustainability data and thus ensure recognized and consistent sustainability reporting. This not only promotes compliance but also strengthens trust throughout the supply chain and contributes to the creation of sustainable business practices.
Under the VS, companies with up to 1,000 employees receive legally enshrined protection against excessive or contradictory ESG requests from major customers. As a delegated act of the European Commission, the VS also serves as a statutory value chain cap: Companies subject to the CSRD may not require sustainability data from their business partners with up to 1,000 employees that goes beyond the scope of the VS. If they nevertheless request more, they must disclose what additional information they are requesting—and that their counterpart may refuse to provide it. In this way, the VS goes well beyond the earlier VSME framework: Instead of merely referring to a recognized but purely voluntary standard, companies will be granted an active right to refuse excessive requests once the legal act enters into force following the conclusion of the current scrutiny period. It is already worthwhile to prepare reports in the VS format so that companies can invoke this protection as soon as it takes effect.
Banks and financial institutions are now asking about ESG issues much more frequently. This is usually done via questionnaires or scorings. Those who can provide reliable data often have a better chance of obtaining financing, for example through more favorable conditions. If this information is missing, on the other hand, it can become more difficult to obtain loans or maintain existing credit lines.
Reporting in accordance with the VS framework helps companies address these requirements in a structured manner: environmental, social, and governance issues are presented in a transparent way. At the same time, the company demonstrates that it takes these issues seriously and acts proactively, which can significantly strengthen the trust of lenders.
EU sustainability requirements continue to evolve. Reporting under the VS remains voluntary for the affected companies themselves; however, the Value Chain Cap—which sets an upper limit on requests from companies subject to the CSRD—has already been adopted as a delegated act and will become mandatory once the scrutiny period ends. Companies that address the VS early on are thus not only prepared for potential future regulatory tightening but also for a legally binding framework that is already foreseeable, thereby gaining a competitive advantage.
A transparent sustainability report in accordance with VSME shows that the company takes responsibility and is seriously concerned with sustainability. Especially as public, political and market expectations are rising, this can improve the company's public image and build trust.
Many customers, investors and business partners are increasingly paying attention to whether ESG issues are disclosed in a comprehensible manner. Those who create clarity here at an early stage can stand out positively and derive new opportunities in competition from this.
Differences Between ESRS and VS
The ESRS are mandatory for large companies and require very comprehensive reporting, for example on climate change, biodiversity, and social issues. The VS, on the other hand, is intended for companies with up to 1,000 employees and is voluntary. It is significantly more streamlined and focuses on the issues that are truly relevant in practice for companies of this size.
A materiality analysis is mandatory under the ESRS, whereas it is merely optional under the VS. The original ESRS included more than 1,000 mandatory data points; this number was significantly reduced as part of the Omnibus reform. In comparison, the VS requires noticeably fewer data points, which represents a significant efficiency advantage for companies with limited resources. This reduced data collection makes the standard more cost-effective and practical for small and medium-sized enterprises (SMEs) that strive for sustainable business management despite limited resources.
The VS and ESRS differ in the following ways:
- Voluntary vs. Mandatory: The ESRS are mandatory for large companies in the EU that are subject to CSRD reporting requirements. The VS, on the other hand, is an optional standard for companies with up to 1,000 employees, which can decide for themselves whether and to what extent they wish to provide information.
- Scope and depth of reporting: The ESRS cover a wide range of topics, from climate change and biodiversity to social issues and governance. They require correspondingly detailed information on these topics. The VS is significantly more streamlined: It deliberately reduces the depth and scope so that even companies with limited resources can provide the most important ESG information in a structured manner.
- Materiality Analysis for Scope Determination: The ESRS require a comprehensive two-step materiality analysis to identify all relevant topics and meet legal requirements. In contrast, for the VS, a simplified materiality analysis can be conducted that requires fewer resources and focuses specifically on the aspects that are directly material to the company.
- Costs and Resources: Implementing the ESRS requires a significant investment of resources, which often involves hiring external consultants and allocating additional internal resources. The VS, on the other hand, was designed so that even small and medium-sized enterprises (SMEs) can implement it using their existing resources, which significantly reduces the resource requirements.
- Legal Status: The ESRS are part of an EU regulation and are legally binding under the CSRD. The VS is a delegated act of the European Commission that also serves as a statutory “value chain cap ”: It specifies the maximum amount of sustainability data that companies subject to the CSRD may require from their business partners with up to 1,000 employees—a function that the former VSME did not have.
VS Compared to Other Voluntary Sustainability Standards
In addition to the VS, there are a number of other voluntary standards that small and medium-sized enterprises (SMEs) can use for their sustainability reporting. Choosing the right standard depends on a company’s objectives and the requirements set by customers, banks, or investors.
VS in Comparison
The GRI Standards (Global Reporting Initiative) are the most widely used framework for sustainability reporting internationally. They are comprehensive, flexible, and widely recognized, but also significantly more resource-intensive than the VS. While GRI is suitable for companies seeking broad, international stakeholder communication, the VS is specifically tailored to the resource constraints and typical requirements of European SMEs and mid-sized companies. Companies that primarily want to respond to ESG inquiries from the EU supply chain or from European banks will find the VS to be a more efficient option.
The DNK is a voluntary standard established in Germany that comprises 20 criteria covering strategy, process management, the environment, and society. It is accessible and well-documented, but is particularly well-suited for companies that are primarily focused on the German market. The VS, on the other hand, is recognized throughout the EU and, via the Value Chain Cap, is directly aligned with the CSRD supply chain requirements, making it the better choice for companies operating internationally. The DNK and VS are no longer merely alternatives to one another: The DNK platform is currently upgrading its existing VSME module into a VS module, with the transition expected to be completed by the end of 2026. Data already entered will be automatically transferred, so that only modified data points need to be updated; previously published VSME reports will remain available as PDFs. For companies already using the DNK, the VS therefore does not necessarily require an additional transition but can be implemented directly via the familiar platform.
ISO 26000 is not a reporting standard, but rather a guide to social responsibility. It provides guidance but does not create a structured, comparable database. For companies that are required to provide specific ESG metrics, ISO 26000 alone is not sufficient. However, it can be used as a guide for content when the VS is implemented in parallel.
When is the VS the right choice?
VS is the top choice for companies in Europe with up to 1,000 employees that want to provide ESG data in a structured and efficient manner without the effort involved in a full GRI report or ESRS-compliant reporting. Companies that serve international markets or aim for broad public communication should also consider GRI. However, for getting started and meeting typical supply chain and banking requirements in the EU, the VS is the most pragmatic and resource-efficient approach, especially since it can now be implemented with minimal technical complexity via platforms such as the DNK.
Base Module and Add-on Module
The VS Standard consists of two modules: the base module and the supplementary module. Both modules can be applied at the individual company level as well as on a consolidated basis. The following applies: The basic module forms the foundation and is a prerequisite, while the supplementary module can be used in addition (“on top”) if more detailed reporting is required or desired.
In practice, it is recommended to update the report annually in accordance with VS. This is particularly true when the report is prepared at the request of larger companies or financial institutions. This allows the report to be effectively synchronized with the annual financial statements or financial reporting. The company decides for itself whether to publish the VS report. Certain sensitive information may be omitted; in this case, however, it must be clearly stated that this information could not be disclosed. Starting in the second reporting year, comparative figures from the previous year should also be included to provide a clear picture of trends.
The modules also follow the “if applicable” approach. This means that a company applying the VS is only required to provide the information that is actually relevant to its own business model and situation. For companies with up to 10 employees, certain data points that would otherwise be required are explicitly optional. This makes the standard even more streamlined for microenterprises.
Key point: The base module provides a robust ESG foundation for typical inquiries, while the add-on module adds context and depth when stakeholders expect more details.
Basic Module (B1–B11)
The basic module includes the minimum disclosure requirements (B1–B11) and is designed so that even microenterprises and SMEs with limited resources can prepare a consistent report.
1) General company information (B1/B2)
- Module used (Basic or additionally Comprehensive) and reporting boundary (single entity/consolidated)
- Company profile: legal form, sector (e.g. NACE), size (turnover/total assets), employees (headcount & FTE), country of main activity
- Group information: subsidiaries and addresses, if applicable
- Locations of significant assets (land/real estate, if applicable)
- Certificates/awards (if available): Issuer, date, result if applicable
- Reference to undisclosed sensitive information (if applicable)
- Brief description of existing practices, policies, objectives and measures (if any)
2) Environment (E) - Basic key figures (B3-B7)
- Energy consumption, broken down by renewable/non-renewable (B3); voluntary for companies with up to 10 employees
- Scope 1 and Scope 2 greenhouse gas emissions; estimates are permitted depending on the available data (B3); this is also voluntary for companies with up to 10 employees. New in the VS: The additional disclosure regarding GHG intensity, which was still part of B3 in the VSME, has been removed.
- Pollutant emissions, only if relevant internally or by law (B4)
- Sites located in or near areas with biodiversity requiring protection, if applicable (B5). New in the VS: This information is now required only on a qualitative basis; land-use indicators have been eliminated.
- Water withdrawal and water consumption, if applicable (B6) – Water withdrawal reporting is voluntary for companies with up to 10 employees
- Waste & Recycling / Circular Economy Practices (B7) – also voluntary for companies with up to 10 employees
3) Social (S) - Employee-related information (B8-B10)
- Employee structure, e.g., contract types (B8). New in VS: The turnover rate, which was still part of the base module in VSME, is now only part of the add-on module (C5).
- Breakdowns, e.g., by gender, and, where applicable, by country of origin—only to the extent that such data is collected or permitted (B8)
- Remuneration-related disclosures, aggregated, as specified (B10). New in the VS: The pay gap is no longer generally required for companies with 50 or more employees, but only “if applicable” or if the company is already legally required to report on this matter for other reasons. Furthermore, continuing education hours no longer need to be broken down by gender.
4) Governance (G) - Integrity/compliance (B11)
- Convictions and fines in connection with corruption and bribery (if any)
Additional Module (C1–C9)
The add-on module expands the base report with more in-depth information. This is particularly helpful when banks or clients request more context, or when a company wants to highlight its ESG positioning more prominently.
Typical additional content:
- Business model & strategy (C1) - central value creation, strategic orientation
- Policies, measures & transformation plan (C2) - existing practices, goals, planned steps
- Detailed environmental disclosures (C3–C4)—including GHG targets and climate risks, as well as additional metrics and explanations as appropriate
- Detailed Social Data (C5–C7)—including the turnover rate (C5) moved from the base module, e.g., additional HR/labor practices, human rights, incidents
- Revenue from specific sectors (C8)—if applicable. New in the draft: The data point “Exclusion from EU benchmarks” has been removed.
- Diversity in management and supervisory bodies (C9) - in particular gender diversity
To ensure that the VS report doesn't become unnecessarily time-consuming, it's worth establishing a clear process.
Implementation of the VS Standard
Before you begin, you should take a moment to familiarize yourself with the VS requirements. It is also important to clearly define internal responsibilities—for example, within executive management, in financial control, or with a person responsible for sustainability. This is the only way to ensure the process is managed effectively.
- Which topics and key figures need to be recorded?
- Which internal departments are responsible for data collection?
- Do ESG data already exist that can be used?
To determine what information is needed for the report, it is necessary to conduct an assessment. This analysis helps in developing a realistic plan for data collection. In doing so, the following points, for example, can be clarified:
- What ESG data is already available (e.g. energy consumption, CO₂ emissions, social responsibility)?
- What gaps still exist?
- Where can the missing data be obtained (e.g. from suppliers, external consultants)?
The standard goes beyond mere reporting and gives companies the opportunity to formulate a well thought-out ESG strategy. Companies should ask themselves the following questions:
- What long-term sustainability goals do we want to strive for?
- What steps can we take to improve our ESG performance?
- Are there existing initiatives that can be integrated into the report?
SMEs and mid-sized companies should conduct a simplified materiality analysis to prioritize the issues that truly matter in their own business, such as energy consumption, CO₂ emissions, or working conditions. It is helpful to engage with key stakeholders, especially major customers: this quickly clarifies what information is actually expected in practice.
An internal system for collecting sustainability data should be used as early as possible. This is the only way to ensure effective data collection and regular reporting, even if it is initially only used internally.
SMEs and mid-sized companies should take proactive steps to clearly signal to large customers that they report in accordance with the VS. This pays off in two ways: First, it helps avoid excessive or contradictory demands from business partners from the outset. Second, companies with up to 1,000 employees can invoke the statutory Value Chain Cap and actively reject requests that go beyond the scope of the VS—a right that the former VSME did not offer in this form. In this way, transparency and consistency can be promoted throughout the entire supply chain.
Even though voluntary sustainability reporting is optional, it is worthwhile for small and medium-sized enterprises to adopt a long-term approach to this issue, with clear goals and a strategy that is regularly reviewed and adjusted. This strengthens the company’s position in the supply chain and makes it more resilient as sustainability reporting requirements continue to evolve in the future.
A clear strategy not only supports reporting but also helps a company position itself advantageously in the marketplace. Especially now that many companies are no longer subject to the CSRD as a result of the Omnibus I reform, resources can be used to focus specifically on concrete sustainability measures.
VS in Practice: An Example from Production
A medium-sized automotive supplier with 80 employees supplies several Tier 1 suppliers to major vehicle manufacturers. Until now, the company has not engaged in structured sustainability reporting. Individual ESG data points were compiled on an ad hoc basis upon request, often requiring considerable effort and yielding inconsistent results.
Faced with increasing pressure from the supply chain—including standardized ESG questionnaires from three different customers—management decides to implement the VS.
Step 1: Assessment The company first reviews what ESG data is already available. Energy consumption and waste volumes are already tracked as part of the quality management system. CO₂ emissions and information on working conditions, however, are completely missing. The assessment takes two weeks and is coordinated internally by the quality manager.
Step 2: Module Selection Since the company’s primary goal is to respond to customer inquiries, it initially opts for the base module with its 11 key ESG disclosures. The supplemental module is planned as an optional next step for the following year.
Step 3: Fill in Data Gaps Missing metrics—particularly Scope 1 and Scope 2 emissions—are identified using energy bills and a simple calculation tool. For information on working conditions and training hours, the company draws on existing HR data. Since the add-on module is also planned for the following year, the company is proactively tracking the turnover rate now; unlike in the VSME, this is part of the add-on module (C5) in the VS and would not have been strictly necessary for this year’s basic module reporting alone.
Step 4: Create and Use the Report After about six weeks, an initial VS-compliant report is available. This report is not published as a standalone document, but serves as a standardized basis for all incoming ESG inquiries. Instead of filling out three different questionnaires separately, the company will in the future refer to the structured report, thereby saving several hours of work per inquiry.
Result: The VS report has not only helped the company respond to customer inquiries more efficiently; it has also created internal transparency: For the first time, management has a complete overview of the company’s own carbon footprint and can plan targeted energy-efficiency measures.
This example shows that getting started with VS does not require a dedicated sustainability department. With existing data, clear coordination, and a structured approach, it is possible to produce a solid initial report even with limited resources.
Conclusion and Outlook
The VS provides small and medium-sized enterprises (SMEs) with a practical way to present sustainability information in a structured manner without the burden of the full ESRS. This is particularly relevant for companies that must regularly provide sustainability reports to customers, business partners, or banks. A duplicate materiality analysis is not required, and the scope remains manageable.
With the final Omnibus I reform, the regulatory burden imposed by the CSRD has already eased for many companies. However, the demand for ESG data from supply chains, banks, and investors remains. Companies that adapt to the new requirements early on will not only create transparency but also secure a genuine competitive advantage.
With the European Commission’s official recommendation in July 2025, the then-VSME received its first institutional backing. This question has since been answered: The standard remains voluntary for reporting companies, but with the adoption of the VS as a delegated act on July 3, 2026, it has taken on a significantly more binding role —as a statutory “Value Chain Cap,” it already limits the sustainability data that CSRD-subject companies may require from their business partners. The legal act is currently still undergoing the scrutiny period by the European Parliament and Council; once it enters into force, it will apply to fiscal years beginning in 2027. Pressure from supply chains and financial markets is thus already effectively making the VS the de facto standard—regardless of how firmly it is enshrined in law. For SMEs and mid-sized companies, this means: Those who start today will already be well-positioned tomorrow.
Frequently asked questions
The VS Standard (Voluntary Standard, formerly VSME), also known internationally as the Reporting Standard for SMEs, is a voluntary sustainability reporting framework for companies with up to 1,000 employees that are not subject to CSRD requirements, but still need to provide ESG data, for example to business partners or banks. It offers a simplified alternative to the comprehensive ESRS standards and helps SMEs and mid-sized companies document their sustainability practices efficiently and in a standardized manner.
The VS builds on the VSME standard in terms of content and adopts its modular structure almost unchanged. The key difference lies in its legal status and scope of application: While the VSME was a non-binding Commission recommendation aimed at unlisted SMEs with up to 250 employees, the VS, since its adoption on July 3, 2026, has been a delegated act of the European Commission that applies to all companies with up to 1,000 employees—regardless of whether they are publicly traded. In addition, the VS acts as a statutory value chain cap, a function that the VSME did not have.
The standard itself is voluntary for reporting companies and is aimed at companies not subject to the CSRD—typically SMEs and mid-sized companies—that wish to engage in structured and credible voluntary reporting. For large companies subject to the CSRD, however, the VS has a de facto binding effect: As a statutory “value chain cap,” it limits the sustainability data they may require from smaller business partners. The VS thus enables structured ESG reporting to meet the sustainability requirements of business partners, banks, or investors without the high bureaucratic hurdles of the ESRS.
The Value Chain Cap stipulates that companies subject to the CSRD may not require business partners with up to 1,000 employees to provide sustainability data that goes beyond the scope of the VS. If they nevertheless request more, they must disclose what additional information they are requesting—and that their business partner has the right to refuse to provide it. For your company, this means: As soon as the VS legislation takes effect following the conclusion of the current scrutiny period, you will have a legal right to refuse excessive ESG requests from your supply chain.
The VS is a simplified and voluntary alternative to the ESRS. The original ESRS included over 1,000 mandatory data points; this number was significantly reduced as part of the Omnibus reform. Compared to the ESRS, the VS requires noticeably fewer data points and does not require a duplicate materiality assessment. It is specifically tailored to the limited resources of small and medium-sized enterprises (SMEs) and significantly simplifies ESG reporting.
The VS collects key ESG data on environmental, social, and governance issues. This includes energy consumption, CO₂ emissions (Scope 1 & 2), water consumption, waste management, headcount, diversity, and governance practices. Depending on the module (basic module or supplementary module), the requirements vary in scope but are always designed to be practical and resource-efficient.
The VS standard consists of two modules:
- Core Module (B1–B11): The intended approach for micro-enterprises and, at the same time, the minimum requirement for all other companies that apply the VS—e.g., corporate structure, energy consumption, CO₂ emissions, water and waste management, as well as social aspects such as number of employees and diversity.
- Add-on Module (C1–C9): Provides more detailed reporting, including business model, sustainability strategy, supply chain information, and more comprehensive environmental and social data—particularly relevant for companies facing higher stakeholder expectations.
Companies choose between Option A (base module only) and Option B (base module plus add-on module), depending on their needs and resources.
No, a materiality analysis is not mandatory under the VS, but it is an optional option. Unlike the ESRS, which require a comprehensive two-step materiality assessment, companies under the VS can decide for themselves which ESG issues are relevant to them and report on those. This saves time and reduces administrative burden.
The standard enables simple, cost-effective, and standardized ESG reporting without the stringent requirements of the ESRS. It helps document sustainability data transparently, facilitates access to financing, and strengthens competitiveness. In addition, the Value Chain Cap protects affected companies from excessive ESG requests by large companies through a statutory right to refuse and prepares them for future regulatory requirements.
The VS enables structured ESG reporting that meets the requirements of major business partners. Since many corporations require ESG data from their suppliers, the standard helps ensure that relevant sustainability information is provided in a consistent manner and reduces red tape. Through the Value Chain Cap, companies also gain a legal right to reject requests that go beyond the scope of the VS. This helps improve supply chain compliance and strengthen long-term business relationships.
Yes, the VS can help companies secure bank financing, as many financial institutions incorporate ESG criteria into their assessments. A standardized sustainability report prepared in accordance with VS demonstrates that a company operates sustainably, improves its ESG score, and can lead to better loan terms. It also increases transparency and strengthens the trust of investors and financial partners.
Companies should first understand the VS standard and assign internal responsibility for ESG reporting. This should be followed by an assessment of existing sustainability data (e.g., energy consumption, CO₂ emissions, number of employees). They should then define a sustainability strategy, implement a simple internal reporting system, and, where applicable, take supplier and stakeholder requirements into account. A phased implementation facilitates integration into existing processes.
Alexander Hilmar
LinkedInESG compliance expert - lawcode GmbH
Alexander Hilmar advises companies on the implementation of ESG compliance, sustainable reporting and supports the implementation of digital solutions for legally compliant supply chains. His specialist articles on the lawcode blog combine regulatory depth with practical recommendations for action.
