SMEs asked to disclose even when outside the rules
CSRD directly applies to large companies. Yet for mid-sized and small manufacturers, being outside its scope is not necessarily reassurance. Large companies ask suppliers for Scope 3 supply-chain-emissions data, so disclosure requests reach companies outside the rules—the so-called trickle-down effect. EFRAG, the body that develops the technical standards for the EU, has moved on this issue. In July 2026, it opened a public consultation on sustainability-disclosure standards for SMEs. EFRAG’s Sustainability Reporting Board approved the drafts and submitted them for public comment (efrag.org).
Two standards—mandatory LSME and voluntary VSME
The consultation covers two standards.
LSME, for listed SMEs, is mandatory. It applies to companies with securities listed on EU regulated markets and enters into force on January 1, 2026, with a further two-year relief period. The exposure draft has six sections: three general requirements and three metric sections for environment, social matters, and business conduct. It narrows the requirements relative to the full ESRS for large companies, reflecting the practical capacity of listed SMEs.
VSME, for unlisted SMEs, is voluntary. It is intended for CSRD-out-of-scope “protected undertakings” with up to 1,000 employees. The European Commission explicitly cited this framework in its September 2023 SME Relief Package, and it supported the 2024 voluntary SME standard through a 2025 recommendation.
The aim is to limit trickle-down
VSME has two essential purposes. One is to make voluntary disclosure easier for SMEs through a simple, standardized format. The other is crucial: to constrain the trickle-down effect of value-chain reporting, meaning to limit the scope of information that can be requested from protected undertakings.
This matters operationally for mid-sized and small suppliers. ESG questionnaires and Scope 3 data requests from large customers differ in format and can be burdensome. A standardized voluntary standard provides a shared basis: answering in that format can be enough, and it can support a response to excessive requests. For companies asked to address ESG as a condition of continuing business even though they are not directly regulated, VSME can become a defensive tool.
Outside scope is not irrelevant
Scope 3 requests from large companies can trickle disclosure demands down to SMEs outside CSRD.
Mandatory LSME
For listed SMEs: effective January 2026 with two years of relief, in six sections of three general requirements and three metric sections.
Voluntary VSME
For unlisted companies with up to 1,000 employees; a voluntary standard cited in the EC SME Relief Package.
Limits on requests
A common format eases voluntary disclosure and limits the information customers can request.
Business implications and checkpoints
Sustainability and procurement teams should check: (1) whether the company is a listed SME subject to LSME or an unlisted SME for which VSME is voluntary, because the nature of the response differs; (2) whether Scope 3 requests from large customers exceed the limits envisioned for VSME protected undertakings; and (3) whether there is room to submit practical feedback on high-burden items during the consultation. The practical stance is not “no action is needed because we are outside the rules,” but “use a standard as a basis for negotiating the scope requested through customers.”