VSME Reporting and CSRD for SMEs 2026: A Practical Guide

A major client, a principal contractor, or a bank has asked you for a sustainability report. You are not subject to CSRD, but you need to produce a response in weeks, not years. This guide explains how an SME can respond using the VSME standard, how Omnibus I changed the situation in 2026, and what a client can actually ask of you.

The 2026 situation: a major client requests a sustainability report, but you are not subject to CSRD

This is a typical situation for Finnish SMEs right now. A large industrial customer, a retail chain, or a financier sends an ESG questionnaire. There are dozens of questions, referencing CSRD, ESRS, or some proprietary version. The response deadline is one month, sometimes two.

The company has no sustainability manager. The CFO is tasked with finding out what the standard means, where the data comes from, and who collects it. Emissions accounting has been done once, or not at all.

The good news: there is an answer, and it is bounded. The voluntary VSME standard (Voluntary SME) has been designed precisely for this situation, and the Omnibus I reform of 2026 gave it direct statutory backing.

In practice, an SME can respond to a large CSRD-obligated client with a single VSME report that covers most questions. The same report also addresses a bank’s basic information request and serves as the basis for a potential EcoVadis assessment. The whole process can be completed in approximately 4–8 weeks when an external provider handles the data collection and calculations on your behalf.

CSRD, ESRS, and VSME: who is affected by what in 2026

The terminology is easy to confuse. The distinction is straightforward once it has been laid out clearly.

CSRD (Corporate Sustainability Reporting Directive) is an EU directive that requires large companies to report on sustainability matters. Following the Omnibus I reform (Directive (EU) 2026/470, in force 18 March 2026), the threshold rose significantly: CSRD now applies only to companies with more than 1,000 employees and more than €450 million in turnover. SMEs fall outside the scope.

ESRS (European Sustainability Reporting Standards) are the technical standards used by CSRD-obligated companies for their reporting. They are developed by EFRAG and adopted by the Commission. A simplified version, “ESRS 2.0”, was in Commission consultation in spring 2026, with the final delegated act expected in summer 2026.

VSME (Voluntary Sustainability Reporting Standard for SMEs) is the voluntary standard for SMEs delivered by EFRAG to the Commission in December 2024. The Commission issued an official recommendation on it in July 2025, and the standard’s final content is being finalised as a delegated act as part of the Omnibus I package. VSME serves as the value chain cap content basis in value chain requirements.

In plain terms: if you are an SME, CSRD does not apply to you. ESRS does not apply to you. But a CSRD-obligated client can request information from you, and in that case VSME is the standard with which you respond.

A practical example from Finland. If you supply components to an industrial company with 1,500 employees and €600 million in turnover, that customer is subject to CSRD. It must report on material emissions in its value chain and needs information from you. Another customer with 800 employees and €300 million in turnover is no longer obligated and will likely withdraw from active ESG data requests. Before Omnibus I, both would have been obligated.

What VSME contains: Basic and Comprehensive

VSME is structured into two modules. You can choose which one you complete, but Comprehensive always includes Basic.

Basic Module covers fundamental information: a description of the organisation, basic workforce figures, Scope 1 and Scope 2 emissions, energy use, waste, water, and a number of governance data points. Basic is sufficient for most SME supplier information requests and banks’ standard questions.

Comprehensive Module adds deeper themes: climate risks and transition plans, human rights, diversity, and strategic objectives. Comprehensive is needed when the client is a large CSRD-obligated company that requires information for its own reporting, or when preparing for voluntary external assurance.

A detailed comparison can be found in the article VSME Basic vs Comprehensive.

A practical rule of thumb: if the client’s ESG questionnaire mentions climate risks, a transition plan, or human rights, you will likely need the Comprehensive module. Otherwise, Basic is sufficient.

Most SMEs start with Basic and move to Comprehensive only when a specific client or investor explicitly requires it. This is a rational sequence, since Comprehensive involves approximately 50–80% more work and adds no value if no one specifically needs it.

Value chain cap: why a major client cannot ask you for just anything

This is the most important negotiating argument for an SME in 2026, and it is worth remembering.

The VSME standard functions as a legal value chain cap. This means that a CSRD-obligated client may not request more information from a supplier with fewer than 1,000 employees than is defined in the VSME standard. The rule is written into the Omnibus I reform, and it gives SMEs a concrete right to limit the scope of questions.

In practice: if a client sends a 250-item questionnaire and your company has fewer than 1,000 employees, you are entitled to respond with the VSME fields alone. The client may request additional information on a voluntary basis, but you are entitled to decline.

This is why the VSME report is in practice a single-report solution for many different client requests. The same report addresses questions from Stora Enso, KONE, and a bank, as long as each of them is obligated to respect the cap.

Leveraging the cap requires one additional step: when you deliver the VSME report to a client, note in the covering letter that the report has been prepared in accordance with the VSME standard and covers the information defined by the Omnibus I value chain cap. This brief reference significantly reduces the number of follow-up questions, because the client’s sustainability team will immediately recognise the standard and the significance of the cap.

The cap does not, however, prevent a client from requesting collaboration in producing additional information. In practice, large CSRD-obligated companies are willing to pay separately for supplier-specific emissions calculations or product carbon footprints when these are needed. This provides a good basis for negotiation: VSME baseline data at the SME supplier’s standard cost, additional work agreed at a separate price.

Double materiality at SME scale

Double materiality is a core concept in CSRD. It means that a company assesses two things: how its operations affect the environment and society (impact materiality), and how sustainability matters affect the company’s finances (financial materiality).

For CSRD-obligated companies, a double materiality assessment is mandatory and a fairly burdensome project. VSME does not require a full analysis. An SME can in practice carry out a lighter assessment that lists the company’s activities, identifies the most material themes, and documents the decisions.

A practical model can be found in the article Double Materiality Assessment at SME Scale. Most SMEs can complete a light assessment in a single half-day management team workshop.

In practice, the light assessment asks two questions about each theme (climate, water, circular economy, employees, human rights, governance): how significantly the company affects it, and how significantly it affects the company financially. A simple three-point scale (low, medium, high) is sufficient. Themes where one or both impacts are high are flagged as material. The rest are excluded with a brief justification.

What happens in a VSME project in practice

An NGS VSME project typically progresses through five phases, with a typical duration of 4–8 weeks.

1. Requirements mapping. We review the client’s information request or the bank’s form, compare it against the VSME standard, and determine whether Basic is sufficient or Comprehensive is needed. This usually takes 30–60 minutes.

2. Data collection. This is often the most labour-intensive part of the project. We collect energy consumption, fuel, waste, and workforce data. Most figures come directly from the accounts, the utility company’s reports, and the payroll system. You do not need to build a separate sustainability function.

3. Emissions calculation. We calculate Scope 1, Scope 2 (both location-based and market-based), and the relevant Scope 3 categories. We use the GHG Protocol, which is compatible with VSME. This phase is described in more detail on the carbon accounting service page.

4. Reporting. We produce a VSME-compliant report covering all required fields of the standard. We deliver a PDF that you can send to your client or bank as it is.

5. Delivery and ongoing use. We review the report with you and provide guidance on further use. The same report often addresses multiple client requests within the same reporting period.

Our promise here as well: it is often assumed that the data is already in order. We do not assume that.

What is required of you during the project. A total of approximately 4–8 hours of management and finance team time. A 60-minute kick-off meeting, 2–3 data collection meetings of approximately one hour each, a 60-minute interim report review, and a 60-minute final meeting. Data is extracted directly from the accounts, utility bills, and the payroll system; NGS handles the extraction once we have been granted access. No internal project team or consultants are needed.

Emissions calculation as part of VSME: Scope 1, 2, and relevant Scope 3 categories

Emissions calculation is the backbone of the VSME report. Without the numbers, the report is little more than a policy document.

Scope 1 covers direct emissions from own operations: fuel used by company vehicles, heating of premises where oil or gas is used, and process emissions.

Scope 2 covers purchased energy: electricity, district heating, and cooling. VSME requires both location-based and market-based calculations if you use renewable energy guarantees of origin.

Of the Scope 3 categories, VSME requires only those that are material to the company. Typical categories for an SME are purchased goods and services (Cat 1), business travel (Cat 6 and Cat 7), and waste (Cat 5). Spend-based calculation is sufficient to start with; primary data becomes relevant when a client or an SBTi target requires it.

An example of a typical distribution for a manufacturing SME: Scope 1 accounts for 10–20% of emissions (building heating, machinery), Scope 2 approximately 10–20% (purchased electricity), and Scope 3 the remaining 60–80%. On the Scope 3 side, purchased goods and services (raw materials, subcontracting) is typically by far the largest category, often more than half of total emissions. This makes supplier data requests strategically significant if the company wishes to reduce its emissions.

Cost estimate: a VSME project for an SME typically costs €8,000–25,000 depending on whether Basic or Comprehensive is selected and how complex the company’s emissions profile is.

Verification and credibility

A VSME report does not require external assurance. If you nevertheless wish to increase the weight of the report, an independent third party can perform limited assurance. This enhances the report’s credibility, particularly in the eyes of banks and investors.

Most SMEs do not need assurance in the first reporting period. Assurance is worthwhile when the report is being used to support a significant financing decision, or when the competitive situation calls for it. NGS also offers separate emissions verification.

Once the report has been delivered, it is worth using systematically. Send the report in the same round to all major clients that have sent information requests in the past 12 months. Publish the report on the company website, so that it also addresses proactive requests. Use the figures in tenders and financing negotiations. One report, multiple purposes.

What client questionnaires typically ask

ESG questionnaires sent to Finnish SME suppliers follow a fairly standard pattern, and their core content repeats across sectors and clients. A typical questionnaire contains four groups of questions.

Emissions and energy data. Scope 1 and Scope 2 emissions (tCO2e), total energy use (MWh) broken down by electricity/heat/fuel, share of renewable energy, use of guarantees of origin. Most clients want both location-based and market-based figures for Scope 2. When relevant, also the most significant Scope 3 categories, with purchased goods and services typically first.

Workforce and social matters. Total number of employees, ratio of full-time to part-time, gender distribution overall and in management, staff turnover, workplace accidents (LTIFR or injury frequency rate), collective agreement coverage.

Governance and ethical practices. Whether there are documented business principles, anti-bribery policies, a whistleblower channel, and a human rights due diligence process. For an SME, this often comes down to a lack of documentation even when the practices themselves are in good order.

Certifications and commitments. Whether the company holds ISO 14001, ISO 14064 (calculation verification), ISO 27001, an SBTi commitment, or an EcoVadis assessment. Certifications are not mandatory, but having them simplifies responses significantly.

Almost all of these questions are found directly in the VSME Basic module. Questions in a client questionnaire that fall outside the standard are typically either Comprehensive-level items (climate risks, transition plan) or details specific to the client’s own reporting, which can be negotiated.

Timeline and common pitfalls

An SME’s VSME project generally succeeds when it is started early enough. The most common mistake is to start only when the client’s deadline is a week away.

Plan for 8–10 weeks of buffer. Even though the project itself takes 4–8 weeks, searching for data, checking accounting systems, and gathering utility bills often take additional time. Start as soon as the first information request arrives; do not wait for the deadline to approach.

Decide on the module in the first meeting. Basic vs Comprehensive is the single most important decision, and it significantly affects the workload and cost. In practice, the client’s information request reveals the answer after 30 minutes of reading, as long as it is reviewed against the VSME standard’s themes.

Do not try to build everything at once. An SME does not need a sustainability strategy, certified processes, or extensive stakeholder engagement in the first reporting period. VSME is designed so that the baseline level is sufficient and depth can be added later.

Set aside a modest budget for next year’s update. The first report involves the most work because the data collection structures are built from scratch. Next year’s update is typically 30–50% cheaper because the methods and data sources are already in place.

The most common pitfalls are underestimation (the project always takes longer than expected) and the pursuit of perfection (the report does not need to meet CSRD standards, only VSME standards). The SME that starts pragmatically and improves year on year is best positioned.

Frequently asked questions

Is VSME mandatory for SMEs?

No. VSME is a voluntary standard. In practice, it nevertheless becomes mandatory when a large CSRD-obligated client or financier requires sustainability data.

What is Omnibus I and how did it affect SMEs?

Omnibus I is EU Directive (EU) 2026/470, which entered into force on 18 March 2026. It raised the CSRD threshold to 1,000 employees and €450 million in turnover. It also introduced the value chain cap principle, and VSME is being finalised as a delegated act as the content basis for the cap. In practice, an SME can limit what information a major client may request.

Can a VSME report be produced without a full-time sustainability manager?

Yes. NGS’s working method is designed specifically for SMEs where sustainability is not a dedicated role. We collect data from the accounts, the payroll system, and utility bills, and your involvement is limited to a few one-hour meetings.

How much does VSME reporting cost for an SME?

A typical price is €8,000–25,000 depending on the company’s size and the scope of the module selected. Basic projects are at the lower end; Comprehensive and reports prepared for assurance are at the higher end.

Is a VSME report sufficient for a major client’s sustainability data request?

In most cases yes, and under the value chain cap rule, the client must accept it if you are a company with fewer than 1,000 employees. If the client requests more, you can invoke the Omnibus I value chain cap rule.

Does a VSME report need to be verified by an external party?

Not by law. Assurance is voluntary and adds weight to the report when it is being used to support a significant financing or investment decision.

A VSME report that answers your client’s request

We collect the data, calculate the emissions, and deliver a completed VSME report in 4–8 weeks. You do not need to build a sustainability function.

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