CSRD and VSME for SMEs

SMEs are generally outside the scope of the EU's CSRD, but they can still receive data requests from larger companies that are in scope. VSME is the voluntary EU standard an SME can use to answer those requests in one consistent format.

This article reflects the position as of November 2026. EU sustainability reporting has changed repeatedly since 2025, and several details below come from law-firm summaries rather than the legal text. Check the legal text before you act on a threshold or date.

What the CSRD does

The Corporate Sustainability Reporting Directive (CSRD) requires in-scope companies to report on sustainability using the European Sustainability Reporting Standards (ESRS). In April 2025 the EU agreed a stop-the-clock measure that postponed the second and third waves of companies. The European Commission's own page confirms the postponement.

A much smaller scope

The Omnibus I reform then changed who is covered. According to law-firm summaries of Directive (EU) 2026/470, the CSRD now applies only to EU undertakings with more than 1,000 employees on average and more than EUR 450 million in net turnover, for financial years beginning on or after 1 January 2027. The same summaries report that Member States may exempt companies below the new thresholds for financial years beginning from 1 January 2025 to 31 December 2026, so the position varies by country.

For groups outside the EU, summaries report a threshold of EUR 450 million of EU turnover, plus EUR 200 million for an EU subsidiary or branch. Summaries also report that only limited assurance has been retained. The Commission is consulting on a limited-assurance standard until 18 January 2027.

Revised ESRS

The Commission adopted revised ESRS on 3 July 2026. EFRAG, which advises the Commission on the standards, says they apply to financial years beginning on or after 1 January 2027. Companies reporting for 2026 can choose to adopt them early, or use the existing ESRS with certain reliefs and say which they have used.

The value-chain cap

The value-chain cap is the part that matters most to smaller companies. According to law-firm commentary, a company in scope of the CSRD may not require a value-chain partner protected by the cap to provide information beyond the voluntary standard. The partner has the right to refuse. The cap is reported to apply to larger CSRD companies from financial year 2027.

The size boundary of the protected group is described differently in different sources, so check the legal text for the exact wording before you rely on it.

What VSME is

VSME is the voluntary sustainability reporting standard for SMEs. The Commission adopted its Recommendation on VSME on 30 July 2025, and EFRAG developed the standard. We have not described the contents of the standard here, so use the Commission or EFRAG publication for that.

On 3 July 2026 the Commission also adopted standards for voluntary use by undertakings protected by the value-chain cap. According to a law-firm summary, this is based on the VSME Recommendation with minimal changes to align with the revised ESRS.

Why it matters to a UK business

The CSRD is EU law, so a UK SME has no direct CSRD obligation. The practical question is who is asking you for data. A UK company with EU customers, or with operations in the EU, may be asked for sustainability information by a customer in scope.

If the cap protects you, the voluntary standard sets the limit on what an in-scope customer can require of you. A single voluntary format can also save you answering each customer's separate questionnaire. These are reasoned points rather than guarantees, and they depend on how your customer interprets the rules.

Non-EU parents are in scope through the EU turnover thresholds above. ESRS for non-EU groups are still being developed. EFRAG consulted from July to October 2026, and adoption is expected in 2027, according to IFRS Foundation slides.

Next steps

List your EU customers and ask them whether they are in CSRD scope. Check whether the value-chain cap covers your business. Then decide whether to prepare data against the voluntary standard before you are asked.

aida from Carbon Happy World helps small and medium-sized businesses respond when larger customers ask them for data, using the VSME guidelines.