CSRD VSME Standard: What Non-EU Suppliers Need to Know
If you supply companies in Europe, you've likely heard about CSRD—the Corporate Sustainability Reporting Directive. This EU regulation is transforming sustainability reporting requirements for European companies and, by extension, their global supply chains. For small and mid-sized suppliers, particularly those outside the EU, CSRD raises important questions: Does this apply to me? What will my European customers expect? How do I prepare?
The practical answer centers on the VSME—the Voluntary SME Standard—which provides a simplified framework that many suppliers will be asked to follow. This guide explains what CSRD means for non-EU suppliers and how to approach the VSME standard without hiring expensive consultants.
Understanding CSRD and Its Supply Chain Impact
The Corporate Sustainability Reporting Directive requires approximately 50,000 European companies to publish detailed sustainability reports following standardized European Sustainability Reporting Standards (ESRS). These reports cover environmental, social, and governance topics in unprecedented depth—everything from carbon emissions to worker rights to biodiversity impacts.
CSRD-obligated companies must report on their entire value chain, not just direct operations. This means they need sustainability data from their suppliers. Since directly regulated companies can't meet CSRD requirements without supply chain transparency, they're cascading data requests down to suppliers globally.
Here's the critical part: CSRD doesn't directly obligate most non-EU SMEs. However, your European customers are obligated, and they will ask you for data to fulfill their reporting requirements. Your ability to provide that data efficiently affects your relationship with EU buyers.
The VSME Standard: CSRD-Lite for SMEs
Recognizing that full ESRS standards are disproportionately burdensome for small companies, EU regulators developed the VSME—Voluntary SME Standard. This simplified framework covers the same sustainability topics but with reduced datapoints and less complexity.
The VSME is "voluntary" in the technical sense that regulators won't fine you for non-compliance. However, when your European customer asks you to report using VSME, it becomes voluntary in the same way that responding to customer questionnaires has always been voluntary—technically optional, but commercially necessary if you want to maintain the relationship.
The VSME is designed to serve two purposes: helping SMEs meet their own reporting obligations if they fall under CSRD, and providing a standardized format for suppliers to report to their CSRD-obligated customers. For most non-EU suppliers, you're in the second category.
Key VSME Datapoints and Requirements
The VSME standard is organized around material topics—the sustainability issues most relevant to your business. Unlike full ESRS, which requires detailed disclosures across all topics, VSME allows focus on what actually matters for your industry and operations.
Governance disclosures include who's responsible for sustainability decisions, how sustainability is integrated into business strategy, and what policies you have in place. This doesn't require sophisticated governance structures—even a small company should document who owns environmental and social responsibility and how leadership discusses these topics.
Environmental datapoints cover energy consumption, greenhouse gas emissions (Scope 1 and 2 minimum, with Scope 3 encouraged), resource use (water, materials), waste generation and circularity, and pollution prevention. The VSME requires less granular breakdowns than full ESRS, but the underlying data needs are similar to what platforms like CDP or EcoVadis request.
Social datapoints address your own workforce: health and safety metrics, working conditions, equal treatment and opportunities, training and development, and respect for human rights. You'll also need to address working conditions in your supply chain, though expectations scale with company size.
Business conduct covers ethics, anti-corruption measures, responsible tax practices, data protection, and political engagement. For most SMEs, this means documenting that you have basic policies and actually follow them.
The VSME uses both quantitative metrics (emissions in tonnes CO2e, injury frequency rates, gender pay ratios) and qualitative disclosures (policy descriptions, risk assessments, target setting). You're expected to report annually, and data should cover the most recent fiscal year.
What "Materiality" Means in Practice
One of CSRD's core concepts is double materiality: reporting on sustainability topics that are material either because they affect your company financially (financial materiality) or because your company affects them (impact materiality).
For a small manufacturer, climate change is likely material in both directions: carbon emissions regulations and energy costs affect your business (financial), while your emissions contribute to climate change (impact). Workplace safety is material because injuries affect productivity and legal exposure (financial) and because you impact workers' wellbeing (impact).
The VSME simplifies materiality assessment, but you still need to think through which topics genuinely matter for your business. Not every company needs to report on every topic—a service-based business with minimal environmental footprint can explain why biodiversity isn't material rather than fabricating data.
European customers may provide guidance on which topics they consider material for their supply chain, effectively doing the materiality assessment for you. If a customer specifically requests water data, they've determined water is material to their value chain.
Timeline: When This Becomes Real
CSRD is being phased in based on company size. Large EU companies started reporting in 2025 (covering fiscal year 2024). Listed SMEs begin reporting in 2026, with some exemptions extending to 2028. Non-EU companies with significant EU operations follow a parallel timeline.
For suppliers, the impact lags slightly. Your customers need time to establish their own CSRD reporting before fully cascading requirements. However, smart companies are requesting supplier data now to establish baselines and avoid scrambling when their first CSRD report is due.
Practically, if you supply mid-to-large EU companies, expect formal data requests using VSME or similar frameworks beginning in 2026-2027. If you supply smaller EU firms, you may have until 2028-2029 before requests become systematic. Either way, preparation now is more efficient than reaction later.
How to Prepare Without Hiring Consultants
The VSME might sound daunting, but remember: it's asking for data most sustainability-conscious SMEs should already be tracking or can begin tracking with reasonable effort.
Start with emissions. If you haven't calculated your carbon footprint, do it now. Scope 1 and 2 are mandatory across virtually all sustainability frameworks. Use free tools like the GHG Protocol calculators or industry-specific calculators from trade associations. Track energy consumption systematically—electricity bills, fuel receipts—and calculate emissions using standard factors.
Document your policies. Write down your actual practices around environmental management, health and safety, business ethics, human rights, and data protection. These don't need to be elaborate—2-3 pages each is sufficient. What matters is that they're dated, approved by leadership, and communicated to employees. Keep evidence of communication (training records, signed acknowledgments).
Gather your metrics. Collect 2-3 years of data on injury rates, employee turnover, training hours, energy use, waste generation, and whatever else is measurable in your operations. Trends are more valuable than single-year snapshots. Set up systems to track these metrics going forward.
Assess your supply chain. You'll be asked how you manage sustainability risks in your own suppliers. Even basic approaches count: supplier questionnaires, contractual clauses requiring compliance with labor and environmental laws, or focusing on tier-1 suppliers for critical materials. Document your approach and implement it consistently.
Consider your targets. CSRD expects companies to have sustainability targets and track progress. Set realistic targets for your most material impacts—perhaps a 25% emissions reduction by 2028, or achieving zero lost-time injuries, or reducing water consumption 15%. Targets demonstrate intentionality and improve your CSRD profile.
Organize your evidence. VSME reporting requires supporting documentation. Maintain a centralized repository of policies, certifications, audit reports, training records, calculation methodologies, and performance data. When customers request VSME data, you can respond efficiently rather than scrambling. Tools like ESG Passport help suppliers organize this documentation in formats aligned with multiple frameworks including VSME.
VSME vs. Other ESG Questionnaires
If you're already responding to EcoVadis, CDP, or similar platforms, you'll find substantial overlap with VSME. The underlying data is largely the same—emissions, policies, social metrics—but the presentation format differs.
VSME is more structured and prescriptive than typical questionnaires. It follows a disclosure-based model (report against specific datapoints) rather than assessment-based model (answer questions and be scored). This makes VSME less subjective but more demanding in terms of required datapoints.
The good news is that VSME preparation makes every other questionnaire easier. A supplier with VSME-ready data can quickly complete EcoVadis, CDP, customer questionnaires, or any other framework because the hard work—data collection and policy documentation—is already done.
The Strategic View for Non-EU Suppliers
For suppliers outside Europe, CSRD and VSME might seem like another compliance burden imposed by distant regulators. But consider the broader context: sustainability reporting is converging globally. The ISSB standards (International Sustainability Standards Board) are being adopted worldwide, California has mandatory climate disclosure laws, and major economies are implementing similar frameworks.
CSRD and VSME aren't isolated EU requirements—they're the leading edge of a global shift toward mandatory sustainability transparency. Suppliers who build robust ESG data infrastructure now will find themselves well-positioned regardless of which specific framework dominates.
Moreover, sustainability data capability is becoming a competitive differentiator. As buyers increasingly factor ESG performance into sourcing decisions, suppliers who can quickly and credibly provide VSME-aligned data gain advantage over those who can't.
The learning curve is real, particularly for first-time sustainability reporting. But VSME is deliberately designed to be proportionate for SMEs. You don't need perfect data or gold-standard practices—you need honest disclosure of your actual performance, clear policies, and commitment to improvement.
Start by understanding which European customers are CSRD-obligated (typically those with 250+ employees, €50M+ revenue, or listed on EU exchanges). These are the relationships where VSME capability will matter most urgently. Build your data infrastructure starting with those commercial priorities, then extend to other customers as capacity allows.
CSRD and VSME represent a fundamental change in expectations for supply chain transparency. For non-EU suppliers, particularly small and mid-sized companies, this creates both pressure and opportunity. The pressure comes from needing to develop new reporting capabilities. The opportunity comes from differentiation—suppliers who embrace this early will be preferred partners as EU buyers navigate their own CSRD compliance.
The key is treating VSME not as bureaucratic compliance but as infrastructure for measuring and improving the aspects of your business that increasingly determine long-term competitiveness: resource efficiency, workforce stability, operational resilience, and reputation. Those are worth measuring regardless of regulatory requirements.