The European Commission adopted a recommendation on voluntary sustainability reporting for SMEs on 30 July 2025. It encouraged large companies and financial institutions to base requests for sustainability information from SMEs on the standard as far as possible.
EFRAG says the VSME standard is voluntary and intended for companies with fewer than 250 employees. That is narrower than the group covered by the value-chain protection described by Generation Impact: it says the protection extends to undertakings with fewer than 1,000 employees on average, whether or not they have published a VSME report.
Where the limit applies
Under Directive (EU) 2026/470, companies subject to CSRD reporting cannot require protected undertakings to disclose sustainability information beyond VSME for that reporting purpose, according to Generation Impact. Generation Impact says a protected supplier cannot be required to provide sustainability information beyond VSME for a customer's CSRD reporting purposes.
Generation Impact says the cap applies only to requests for CSRD reporting purposes. Generation Impact says requests for supplier qualification, customer due diligence and insurance underwriting fall outside the cap. The European Commission encourages large companies and financial institutions to base sustainability-information requests to SMEs on the voluntary standard as far as possible.
