Highlights
Smaller companies – i.e. those outside the scope of the Corporate Sustainability Reporting Directive (CSRD) – may now report their sustainability-related information under the VSME1 standard following a temporary relief announced by the European Commission.
Which companies are affected?
Temporary use of the VSME standard
Non-listed SMEs2 and micro-undertakings can apply the VSME standard to help them respond to information requests from larger companies in their value chain.
However, certain large companies and listed SMEs that will no longer be required to apply European Sustainability Reporting Standards (ESRS) after the Omnibus proposals are adopted may also apply this standard as an interim solution.
Reporting after the Omnibus proposals
The following table summarises which companies would apply the standard, based on the Omnibus proposals.
What would companies report under the VSME standard?
The VSME standard requires a company to provide relevant information about its impacts on people and the environment, and the effects of environmental and social issues on its financial position, performance and cash flows in the short, medium or long term.
Its requirements are simpler than those under ESRS.
What’s next?
The Commission’s recommendation is a temporary measure until it adopts a voluntary sustainability reporting standard on conclusion of the Omnibus proposals. It intends for this standard to:
- broadly follow the requirements of the VSME standard; and
- serve as a value-chain cap to protect smaller companies from excessive information requests by larger companies – i.e. the voluntary standard will define what information companies in scope of the CSRD can reasonably request from companies outside the CSRD’s scope.
What does management need to consider?
Understand the VSME standard and decide whether to adopt it for their company.
Assess whether to report in accordance with the basic or the comprehensive module.
Prepare a gap assessment to assess what information needs collecting and whether systems, processes and controls need to change.
Monitor development of the future voluntary sustainability reporting standard closely, as it could differ from the VSME standard.
For further information on the Commission’s recommendation, speak to your KPMG contact.
1 Voluntary sustainability reporting standard for non-listed small and medium-sized entities (SMEs), developed by the European Financial Reporting Advisory Group (EFRAG).
2 Under the current scope of the CSRD, an SME cannot exceed two of the following three thresholds as at the reporting date for two consecutive financial years.
| Small companies | Medium-sized companies | |
| Balance sheet total | EUR 5 million | EUR 25 million |
| Net turnover | EUR 10 million | EUR 50 million |
| Number of employees | 50 employees | 250 employees |
3 Threshold currently still under discussion by legislative bodies of the EU (initial proposal: 1,000 employees).
4 Currently, apply the VSME standard; in future, apply the voluntary sustainability reporting standard to be adopted by the European Commission.
5 ESRS currently being revised, expected to apply for FY27 (reporting in 2028), potentially with an option to apply for FY26 (reporting in 2027).
6 Threshold for non-EU reporting might differ.
7 Drafted by EFRAG and was expected for public consultation in Q1 2025. Timing depends on the Omnibus proposals to amend ESRS.
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