VSME 2026: Why the New EU Draft Is Becoming More Relevant for SMEs

The revision of the VSME standard marks another significant shift in European sustainability reporting.

The original VSME standard, introduced by EFRAG in 2024, was designed as a voluntary reporting framework for small and medium-sized enterprises. The new draft published by the European Commission in May 2026 goes considerably further: while the standard remains voluntary, it will now be formally embedded into the EU legal framework through a Delegated Regulation.

This changes not only the legal status of the VSME, but also redefines its scope of application, disclosure logic, and role within European supply chain regulation.

As a result, the key question is no longer simply whether companies should report voluntarily under the VSME, but rather: What strategic role will the standard play within the future CSRD ecosystem?

Why the New VSME Will Affect Significantly More Companies

Perhaps the most important change concerns the scope of companies covered by the standard.

While the original version primarily targeted traditional micro, small, and medium-sized enterprises with clearly defined revenue and balance sheet thresholds, the European Commission is now substantially expanding the scope. In the future, the VSME is intended to apply to all companies that are not subject to the CSRD and employ fewer than 1,000 people.

The previous turnover and balance sheet thresholds will be removed entirely.

As a result, the VSME is increasingly evolving into a central ESG standard for a large share of the European economy — particularly for mid-sized companies that may not be directly subject to reporting obligations but are increasingly required to meet ESG expectations within supply chains.

The New Categorization System Changes the Logic of Reporting

One of the most important structural innovations is the revised categorization system for disclosure requirements.

Each disclosure will now be assigned to a clearly defined category:

• “Necessary”
• “Necessary if applicable”
• “Voluntary”
• “Consideration when reporting sector information”

This creates much greater transparency regarding which disclosures are mandatory, which apply only under certain conditions, and which remain voluntary.

Particularly relevant is the differentiation based on company size: for companies with ten or fewer employees, many disclosures become voluntary that remain mandatory for larger businesses.

This makes the VSME more modular and better tailored to smaller enterprises.

Which Requirements Have Been Simplified

In addition to the new structure, the revision pursues one overarching objective: simplification.

Several detailed requirements from the original version have been removed or reduced entirely, including:

• the GHG intensity metric
• land-use metrics within the biodiversity context
• hectare-based reporting for biodiversity-sensitive areas
• gender-specific breakdowns of training hours

Certain environmental and social metrics have also been clarified or softened.

At the same time, companies are now given broader possibilities to omit certain information, for example in cases involving trade secrets, sensitive information, or legally protected data. However, such omissions must be reassessed regularly.

The “Value Chain Cap” Fundamentally Changes the Role of the VSME

A particularly strategic addition to the standard is Annex II, the so-called “Value Chain Cap.”

For the first time, it specifies which ESG data large CSRD-reporting companies may request from smaller companies within their value chains. In doing so, the European Commission further clarifies its previously announced approach to a Value Chain Cap.

The objective is to prevent smaller companies from being indirectly overwhelmed by full CSRD-level reporting requirements.

For many mid-sized businesses, the VSME could therefore become the central framework for responding to ESG information requests from large customers and business partners.

As a result, the standard is evolving not only into a voluntary reporting framework, but increasingly into a practical supply chain standard within European sustainability regulation.

What the Revision Reveals About the Future of ESG Reporting

The direction of the revision is clear: less complexity, a broader scope of application, and stronger integration into the EU regulatory framework.

At the same time, the current draft remains explicitly open to further adjustments during the legislative process. So far, the European Commission has revised the standard only selectively. A comprehensive content revision by EFRAG has not yet taken place.

Nevertheless, one major trend is already becoming evident: European sustainability reporting is increasingly being differentiated according to company size and role within the value chain.

Not every company will be expected to bear the same regulatory burden in the future — but nearly every company will remain part of the ESG data landscape.

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“The VSME is evolving from a voluntary SME standard into a strategic ESG framework for the European mid-market.”

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Our Conclusion

The revision of the VSME standard is far more than a technical adjustment of individual data points. It demonstrates how the EU is attempting to simplify sustainability reporting while simultaneously embedding it more broadly across the economy.

For mid-sized companies, the VSME is therefore becoming increasingly relevant — not only from a regulatory perspective, but above all as an interface for customers, supply chains, and the ESG requirements of larger business partners.

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