CSRD vs. VSME: Understanding the Key Differences in Sustainability Reporting

CSRD vs. VSME: Understanding the Key Differences in Sustainability Reporting

Sustainability reporting is becoming a critical requirement for businesses across the EU. With growing regulatory demands and increasing stakeholder expectations, companies of all sizes need to understand their obligations and opportunities in the ESG (Environmental, Social, and Governance) space.

Two frameworks that often cause confusion are the Corporate Sustainability Reporting Directive (CSRD) and the Voluntary Sustainability Reporting Standard for Micro-Enterprises (VSME). While both deal with sustainability disclosures, they cater to very different types of businesses.

So, what’s the difference between CSRD and VSME, and which one applies to your business? Let’s break it down.

What is CSRD? (Corporate Sustainability Reporting Directive)

The CSRD is a mandatory EU directive that significantly expands sustainability reporting requirements for larger companies and certain SMEs. It replaces and strengthens the Non-Financial Reporting Directive (NFRD), aiming to ensure greater transparency and accountability in corporate ESG performance.

Who Needs to Comply with CSRD?

• Large EU companies (those meeting at least two of the following criteria):
  • €40 million in turnover
  • €20 million in total assets
  • 250+ employees
• Listed SMEs (on EU-regulated markets)
• Non-EU companies with €150M turnover in the EU and at least one subsidiary/branch in the EU

CSRD Reporting Requirements

Companies under CSRD must:
✔️ Report in line with the European Sustainability Reporting Standards (ESRS)
✔️ Cover Environmental, Social, and Governance (ESG) factors such as:

• Climate risks and emissions
• Human rights and labor practices
• Business ethics and anti-corruption policies
  ✔️ Have sustainability reports audited/assured
  ✔️ Integrate sustainability disclosures into their annual financial reports

Essentially, CSRD brings sustainability reporting to the same level as financial reporting, making it a core part of business accountability.

What is VSME? (Voluntary Sustainability Reporting Standard for Micro-Enterprises)

While CSRD focuses on large companies, the VSME is a voluntary framework designed for micro-enterprises that want to showcase their sustainability efforts without complex regulatory burdens.

Who Can Use VSME?

• Micro-enterprises (businesses with fewer than 10 employees and turnover/balance sheet below €2M)
• Small businesses that want to demonstrate sustainability efforts to investors, banks, and customers—but are not legally required to report under CSRD

VSME Reporting Requirements

Unlike CSRD, VSME is entirely optional and much simpler in its approach. Businesses using VSME can:
✔️ Report on key ESG impacts relevant to their size and industry
✔️ Use a streamlined reporting structure without excessive documentation
✔️ Avoid mandatory audits and financial integration
✔️ Create sustainability reports to enhance brand reputation and stakeholder trust

For small businesses that want to stay ahead of the curve in ESG reporting but don’t want to deal with complex compliance obligations, VSME provides a practical, flexible alternative.

CSRD vs. VSME: A Quick Comparison

Which One is Right for Your Business?

• If your company is large, listed, or operating in the EU with substantial revenue, CSRD compliance is mandatory— so it's crucial to prepare early and integrate ESG reporting into your business strategy.
• If your business is a micro-enterprise, you have the option to report sustainability efforts through VSME—a useful tool to enhance credibility without the regulatory pressure.

Regardless of which framework applies to you, sustainability reporting is no longer optional for businesses looking to thrive in a greener, more accountable world.

Need help navigating CSRD compliance or developing a sustainability strategy tailored to your business?
Get in touch with our team at CG Business Consulting today!