The VS Standard is the EU's new voluntary sustainability reporting standard, designed for companies with up to 1,000 employees. It provides a consistent framework for collecting and presenting sustainability information related to environmental, social and governance (ESG) matters.
The VS Standard is based on the previous VSME Standard but also includes changes and clarifications. The European Commission adopted the standard through Delegated Regulation (EU) 2026/1560, which entered into force on 24 September 2026. The standard aims to make it easier for companies to respond to the information needs of customers, financial institutions and other stakeholders, while supporting their own sustainability efforts and business development.
How Does the VS Standard Differ from the Previous VSME Standard?
The VS Standard is based on the VSME Standard developed by EFRAG, but it is more than just a name change. The new standard has been formally adopted through an EU delegated regulation, and its content has been refined, particularly regarding the proportionality of reporting requirements and information requests within value chains.
The standard retains the two modules of the previous VSME Standard, but the information to be reported may be mandatory when applying the standard, conditional or voluntary. For companies with up to 10 employees, certain disclosures are voluntary, even though they are required for larger companies reporting in accordance with the standard.
The VS Standard also provides the basis for limiting information requests within value chains, under the so-called Value Chain Cap principle.
Why is a Voluntary Standard Needed if Reporting is not Mandatory?
SMEs should distinguish between two things: a statutory reporting obligation and the sustainability information that companies may be asked to provide in practice. Most SMEs are not subject to mandatory reporting under the CSRD. Nevertheless, sustainability information may be needed, for example, when a company acts as a supplier or subcontractor to a large company, applies for financing, participates in a tender or responds to a customer’s supplier questionnaire. This is precisely where the voluntary standard provides a common framework.
The EU defines three very practical purposes for the standard. It enables companies to respond to the information needs of value chains and to information required by banks and investors. At the same time, the standard is intended to help companies better manage their own sustainability issues related to the environment and people. This last point is easily overlooked in discussions about reporting. The purpose of collecting sustainability information is not merely to produce a report. The information should help the company make better decisions.
Basic Module or Comprehensive Module?
The VS Standard consists of two modules: the Basic Module and the Comprehensive Module. The Basic Module includes general information about the company and key disclosures related to environmental, social and governance matters. It is intended particularly for micro-enterprises and also serves as the foundation for reporting by larger companies.
The Comprehensive Module includes additional information on matters such as the company's strategy, climate targets, climate risks and human rights issues concerning employees. It addresses the broader information needs of customers, banks and investors. When applying the Comprehensive Module, the requirements of the Basic Module must also be met. Reporting takes into account the conditional and voluntary disclosures specified in the standard, as well as the exemptions available to the smallest companies.
The Value Chain Cap Limits Information Requests from Large Companies
The new EU regulatory framework includes a principle known as the Value Chain Cap Value Chain Cap, which limits sustainability information requests within value chains. Its purpose is to protect companies with up to 1,000 employees from excessively extensive sustainability information requests. Companies reporting under the CSRD are not permitted to require companies in their value chains that fall within this size category to provide information exceeding the disclosure limits established under the VS Standard. These limits are defined in Annex II to Regulation (EU) 2026/1560.
The restriction on value chain information requests applies to financial years beginning on or after 1 January 2027. However, it does not eliminate all sustainability information requests between companies. Information may still be required under other legislation, contractual obligations or companies' own procurement criteria. Companies should therefore identify their customers' information needs and establish an effective foundation for collecting sustainability data.
What Does this Mean for a Micro-Enterprise?
The standard has been further simplified for the smallest companies. The Basic Module is specifically designed as an approach for micro-enterprises, and some information that constitutes relevant data points for larger companies is voluntary for companies with up to 10 employees.
This is an important principle. It is not reasonable to expect a two-person consultancy to manage sustainability information in the same way as an industrial company employing hundreds of people. Nevertheless, even a small company can benefit from having its key sustainability information in one place and readily available to customers when needed.
What about an SME with 10–250 Employees?
For companies in this group, the standard may be even more relevant. They often already have employees, premises, energy consumption, procurement activities, supply chains and larger corporate customers. At the same time, customer sustainability requirements can be considerably more detailed than those faced by micro-enterprises. For these companies, the voluntary standard provides a useful framework for managing sustainability information. However, simply completing the reporting standard does not in itself solve the company’s sustainability work. The company still needs to decide, for example:
- which sustainability topics are most important to the business
- what targets are set for them
- what practical actions will be taken
- who is responsible for implementing them
- which indicators will be used to monitor progress.
Reporting comes on top of this work – it does not replace it.
What if a Large Customer Requests Sustainability Information?
The first question to ask is: what is the information request based on? If the customer needs the information for its own CSRD reporting, the new value chain cap is relevant. If the information is requested for purposes such as supplier selection, a procurement contract, environmental requirements or other legislation, the situation may be different.
The second important question is whether the company already has the required information. When sustainability information is collected systematically according to a common standard, there is no need to start from scratch every time a customer sends a questionnaire.
A Reporting Tool does not Determine what is Material
An increasing number of tools are entering the market that allow companies to produce sustainability reports in accordance with the standard. This is a positive development. Reporting does not need to be, and should not be, a burdensome or expensive project for an SME. But tools have their limits. They do not automatically tell a company which sustainability issues are most important to its specific business or what it should do about them next.i.
Sustainability work should therefore be built in the following order: current state → material topics → targets and actions → indicators → data → reporting and communication. When the groundwork has been done properly, reporting in accordance with the voluntary standard also becomes substantially easier.
Where Should Companies Start?
The first step is to identify what sustainability information the company already has, what customers and other stakeholders need, and where the most significant gaps exist. The VS Standard provides a consistent framework for collecting and reporting this information. It enables companies to respond systematically to information requests and use the collected data to improve their own operations.
Käkikuu helps companies identify material sustainability topics, develop practical actions and performance indicators, and compile the necessary sustainability information in accordance with the new VS Standard.
See also: VS Standard – Frequently Asked Questions.
Käkikuu helps SMEs identify the material topics in their sustainability work, develop practical actions and indicators, and produce the sustainability information required under the new voluntary sustainability reporting standard.
Read Käkikuu's blgo post: VSME Reporting Has Changed – What Does Omnibus I Mean for SMEs?
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