Your key customer just sent you a 40-page document titled “Supplier ESG Due Diligence Questionnaire.” They want your scope 1 and scope 2 carbon emissions, your workplace accident rate, your anti-corruption policy, and your share of renewable energy. Deadline: 45 days. Unspoken consequence: contract renewal depends on your response.
You’re not listed on any stock exchange. You have 80 employees. You’ve never heard of the VSME.
Yet that standard — published by EFRAG on 17 December 2024 (EFRAG press release) and officially recommended by the European Commission on 30 July 2025 — has become the reference framework for SME suppliers navigating ESG demands from their customers. This guide explains what it requires, why you cannot ignore it, and how your ERP can help you respond without building an entire compliance department.
What Is the VSME (Voluntary Sustainability Reporting Standard for SMEs)?
Context: Why EFRAG Created a Dedicated SME Standard
The Corporate Sustainability Reporting Directive (CSRD) requires around 50,000 European companies to publish sustainability reports compliant with ESRS (European Sustainability Reporting Standards). These standards are comprehensive: 12 thematic areas, several hundred data points, mandatory third-party audit. They are calibrated for large enterprises with dedicated sustainability teams.
Most SMEs are not directly subject to CSRD. But they are the suppliers, sub-contractors, and partners of companies that are. Those large companies need ESG data from their supply chain to calculate their own indicators — particularly scope 3 emissions, which typically represent 70–80% of a manufacturing company’s total carbon footprint.
Faced with the risk of a flood of non-standardised questionnaires, EFRAG developed a dedicated standard for non-listed SMEs: the VSME. Its stated objectives are twofold: standardise requests from large customers, and reduce the administrative burden on SMEs.
Timeline and Regulatory Status
The VSME followed a rigorous development process:
- January–May 2024: Public consultation conducted by EFRAG
- 17 December 2024: EFRAG submits the finalised VSME to the European Commission
- 30 July 2025: European Commission officially recommends adoption of the VSME
- 6 June 2026: Delegated act published, making VSME an official regulatory reference
- 1 January 2027: Entry into force of the “value chain cap” protecting SMEs with fewer than 1,000 employees
Two Modules with Different Ambitions
The VSME is structured in two levels of engagement:
| Module | Number of disclosures | Target |
|---|---|---|
| Basic Module (B) | 11 disclosures (B1 to B11) | All SMEs, including microenterprises |
| Comprehensive Module (C) | 9 additional disclosures (C1 to C9) | SMEs with demanding financial partners or major customers |
The basic module is the universal starting point. It does not require a double materiality assessment, and indicators are proportionate to company size. For the vast majority of SME suppliers, this is the module their customers will request.
Why Non-Listed SMEs Are Affected Despite the “Voluntary” Label
How the CSRD Supply Chain Mechanism Works
Large companies subject to CSRD must report their scope 3 emissions — indirect emissions generated throughout their value chain, both upstream and downstream. These figures can no longer be indefinitely estimated from generic industry factors: auditors and financial markets increasingly demand real data collected directly from suppliers.
The result: an automotive OEM subject to CSRD from fiscal year 2024 needs its tier-1 suppliers to provide actual emission data, social indicators, and certifications. They will ask for it — with or without a formal legal framework compelling them to do so.
ESG Contract Clauses Becoming Standard
Since 2025, procurement processes at large companies systematically include ESG clauses. In practice these take several forms:
- Mandatory ESG qualification questionnaires before any tender process
- Supplier ESG scoring (EcoVadis, Ecodesk, Sedex) as an award criterion
- Contractual commitment to provide annual ESG data compliant with the VSME
- Supplier audit clauses allowing customers to verify declared data
These clauses are spreading rapidly in automotive, aerospace, retail, and capital goods manufacturing. For suppliers in these sectors, VSME compliance is not optional.
The “Value Chain Cap”: A Shield That Also Defines the Perimeter
One of the most important provisions of the 6 June 2026 delegated act is the “value chain cap”: a large company subject to CSRD cannot require a supplier with fewer than 1,000 employees to provide data beyond what the VSME specifies.
In practice, this means two things:
- If your customer asks for more than the VSME requires, you can legally refuse the excess from 1 January 2027 onward.
- If your customer asks for data compliant with the VSME, you have no alternative if you want to maintain the commercial relationship.
The VSME is voluntary for SMEs, but effectively mandatory in practice for any supplier working with CSRD-bound customers.
The 11 Core Module Disclosures: What You Need to Produce
The basic module covers three pillars across 11 disclosures numbered B1 to B11:
Cross-Cutting Pillar
- B1 General Information: description of activities, sector, headcount, main markets and geographies
- B2 Sustainability Policies and Initiatives: existence of a formal environmental or CSR policy, commitments made or planned
Environmental Pillar
- B3 Energy and GHG Emissions: total energy consumption (in MWh), share of renewables, GHG scope 1 emissions (direct combustion: gas, heating oil, LPG) and scope 2 (electricity consumed multiplied by the relevant national grid emission factor)
- B4 Pollution: pollutant releases into air, water, or soil above regulatory thresholds
- B5 Biodiversity: activities on sites located in or near sensitive habitats protected under national or EU conservation frameworks
- B6 Water Consumption: annual water consumption volume, expressed in m³
- B7 Resources, Circular Economy, and Waste: types and quantities of waste generated, recycling or recovery rate
Social Pillar
- B8 Workforce Characteristics: total headcount by contract type, gender, and working time
- B9 Health and Safety: number and rate of workplace accidents (frequency and severity), recognised occupational diseases
- B10 Pay, Collective Bargaining, Training: gender pay gap, collective bargaining coverage rate, training hours per employee per year
Governance Pillar
- B11 Corruption and Fines: existence of an anti-corruption code of conduct, convictions and fines related to ESG violations during the reporting period
How Your ERP Can Capture and Report VSME Data
Data Already Available in Most ERPs
The good news: a significant share of basic module data is already in your ERP — provided the relevant modules are activated and properly configured.
| VSME Disclosure | Typical ERP source |
|---|---|
| B3 Energy consumption | Procurement module: utility invoices classified by site or cost centre |
| B3 Scope 1 | Fuel purchases (gas, heating oil) in purchase accounting or stock management |
| B8 Workforce | HR module: contract type, gender, working time, start date |
| B9 Workplace accidents | Payroll or HRIS module: incident declarations, frequency and severity calculable from raw data |
| B10 Training hours | HR or training module: hours per employee, per year |
| B10 Gender pay gap | Payroll module: calculation from gross pay data by gender |
| B11 Code of conduct | Existing document to reference — no ERP data point strictly required |
What the ERP Does Not Cover Natively
Several basic module data points require complementary collection:
- Scope 2 (B3): Your ERP contains electricity consumption in kWh if you have configured energy purchasing tracking, but not the national grid emission factor. This factor varies by country (for example, the UK’s DESNZ publishes annual grid intensity factors for conversion) and must be applied manually or via a dedicated tool.
- Waste (B7): Waste volumes are often managed by the collection contractor and not integrated into the ERP. They must be imported manually or configured through a quality or EHS module if your ERP provides one.
- Biodiversity (B5): Geographic data that does not flow through the ERP. A cross-reference with national or EU protected area databases is required, but this is a one-time exercise that remains stable over time.
- Pollution (B4): Primarily relevant for sites subject to industrial emissions regulations. If your site already makes regulatory declarations, that data is already available.
When to Add a Specialist ESG Tool
For SMEs where the basic module is sufficient — under 200 employees, simple industrial footprint — the ERP combined with a structured spreadsheet can cover most of the 11 disclosures. The main limitation is traceability: a spreadsheet does not provide a robust audit trail.
Beyond that threshold, three families of specialist tools exist for SMEs:
- Greenly and Sweep: carbon footprint platforms with ERP connectors (including Sage, Business Central, Odoo) to automate scope 1 and 2 calculations from purchasing data
- Persefoni: carbon management solution oriented toward mid-market, with API integrations to major ERP systems
- Supplier questionnaire platforms (EcoVadis, Ecodesk, Sedex): allow your customers to send structured requests and enable you to respond in a standardised format reusable across multiple customers
For larger SMEs wishing to complete the VSME comprehensive module (C1 to C9) or prepare for a future CSRD reporting obligation, integrated solutions such as SAP Sustainability Control Tower or Microsoft Sustainability Manager offer greater data depth — though their cost and complexity reserve them for organisations of 500+ employees with extensive reporting needs.
4-Step Action Plan to Structure Your VSME Reporting
1. Map Existing Data in Your ERP
Start by identifying, disclosure by disclosure, which data is already in your ERP and what its quality is: reliable, approximate, or absent. This diagnostic takes two to three days with your CFO and HR manager. Use a simple table: disclosure, current source, quality, action required.
2. Identify Gaps and Decide on Collection Method
For each missing data point, decide whether to collect it manually via a structured spreadsheet (appropriate for SMEs under 150 employees) or whether to invest in a dedicated tool. The ROI threshold for a specialist ESG tool is generally around 150–200 employees, or when you have more than three CSRD-bound customers requesting annual data.
3. Appoint an Internal ESG Lead
The VSME does not require a dedicated sustainability team. A part-time lead is sufficient to manage collection and respond to customer questionnaires. The natural fit is often the CFO (for financial and procurement data) or the HR director (for social data). Their mission: consolidate data, validate consistency, and maintain an annual history.
4. Respond to Customer Questionnaires in a Standardised Format
Adopt the VSME format as your reference response. This lets you reply to multiple customers with a single framework — and legally refuse requests that exceed this scope from 1 January 2027. Some supplier platforms (EcoVadis, Ecodesk, Sedex) allow you to share your VSME assessment directly with customers without re-entry.
SME Supplier FAQs
“Is my ERP enough to complete the VSME basic module?”
For the social disclosures (B8 to B10), if you have an active HR and payroll module, the answer is yes in most cases. For the environmental disclosures (B3 to B7), it depends on your ERP configuration: energy purchases are generally captured, but waste and biodiversity typically require supplementary collection.
“Who verifies that my VSME data is accurate?”
The VSME basic module does not require mandatory third-party audit. However, your customer may include an audit clause in their supplier contract. In the event of a discrepancy, your commercial liability is at stake — not a direct regulatory penalty.
“Will the VSME ever become mandatory for SMEs?”
The VSME remains voluntary for non-listed SMEs. What becomes binding from 1 January 2027 is the “value chain cap”: your CSRD-bound customers cannot legally require more from you than the VSME specifies. The CSRD Omnibus revision does not directly extend scope to non-listed SMEs, but commercial pressure makes basic module compliance effectively unavoidable for suppliers in major industrial supply chains.
For further reading on European regulations affecting supply chains, see our CSRD and ERP guide and our analysis of supply chain due diligence obligations (CSDDD).
