VSME or ESRS: what's the buzz?

I'm writing about this because, let's face it, sometimes life throws too much at you and you end up having a little meltdown. Some of you are already in the know about ESG, what it means, and what VSME and ESRS are all about. But hey, a little refresher never hurt anyone, right? Plus, I'm here to break it down into plain english and highlight the benefits.

To begin, I would like to clearly explain the position of VSME, the concept of ESG, and the reason for the existence of ESRS:

• CSRD represents the Law (The "Why").

• ESG refers to the Category/Topic (The "What").

• ESRS and VSME are the Standards (The "How"):

  • ESRS is the standard applicable to Large Companies.

  • VSME is the standard applicable to Small Companies.

1. What is VSME?

Under ESG, there's a whole buffet of topics and categories to chew on. But if you're a small company, don't worry, you won't need to tackle the mountain of paperwork that big companies do. For the little guys, there's VSME, which is like the basic elementary school exam of the business world. It's important, sure, but it's not a gigantic, scary monster of a task!

Unlike the big corporate rulebook (ESRS), which is one massive guide, VSME is divided into two modules. You pick which one to use based on who's asking for your info.

• Module 1: The "Must-Haves"

  • Who it's for: Micro-enterprises and small companies just starting out.

  • Purpose: To answer common questions from banks and big clients without needing a consultant.

  • What's included? It has 11 Core Disclosures. These are simple data points you probably already have in your invoices or HR software.

    
    

Real-World Data Points:

• Environment: Total energy use (MWh), Gross Scope 1 & 2 GHG emissions (tCO2e).

• Social: Number of employees (Headcount), Gender breakdown (Male/Female), Number of work-related accidents.

• Governance: Convictions or fines for corruption (Yes/No).

  
  

• Module 2: The "Level Up"

  • Who it's for: Companies needing a loan, aiming for a government contract, or dealing with a very strict supply chain partner.

  • Purpose: To provide the "Narrative" (the story) and specific "Financial" data.

  • What's included? It adds 9 Additional Disclosures focused on Strategy and Risks.

    
    

Real-World Examples:

• Strategy: Your business model and how you make money.

• Narrative: A description of your Policies (rules), Actions (what you did), and Targets (goals like "reduce CO2 by 10%").

• Financial/Risk: Your "Transition Plan" (how you'll handle climate change) and specific exclusions (e.g., confirming you don't make weapons or tobacco).

1.2. The Secret Weapon: The "If Applicable" Principle

This is the key technical difference between VSME and the big rules.

• Big Companies (ESRS): Have to do a "Double Materiality Assessment"—a complex, costly study to show what's important.

  
  

• Small Companies (VSME): Use the "If Applicable" principle.

  • How it works: You check the list. If a topic (e.g., Pollution) matters to your business (e.g., you're a chemical plant), you report it. If you're a software company, you just skip it. No need for a 50-page study to explain why you skipped it.

1.3. Why VSME was actually created?

VSME solves a specific hassle. Before VSME, a small supplier would get 5 different Excel sheets from 5 different clients:

• BMW asks: "What's your CO2?"

• Siemens asks: "What's your Carbon Footprint?"

• Your Bank asks: "What are your GHG Emissions?"

  
  

These are all the same question, just asked differently. VSME standardizes this. Instead of filling out 5 Excel sheets, you make one VSME Report. You send that same report to BMW, Siemens, and your Bank. It creates a "common language" that saves you time.

2. What is ESRS, and why can't I simply perform VSME?

If VSME is a "Simple Tax Form," ESRS is a full forensic audit. It is designed to be rigorous because large companies have a massive impact on the world, so they require massive scrutiny.

ESRS is not just one list. It is a system of 12 Standards grouped into four categories:

• Cross-Cutting Standards:

  • ESRS 1 (General Requirements): The rulebook on how to report (concepts like "Double Materiality").

  • ESRS 2 (General Disclosures): The mandatory data about strategy, governance, and how you manage impacts. Note: Everyone must do this part, no exceptions.

    
    

• Topical Standards:

  • Environmental (E1-E5): Climate Change, Pollution, Water, Biodiversity, Circular Economy.

  • Social (S1-S4): Own Workforce, Workers in Value Chain, Affected Communities, Consumers.

  • Governance (G1): Business Conduct.

    
    

The Scale: A full ESRS report can involve over 1,100 potential data points.

2.2. Why can't big companies just use VSME?

You might think, "If VSME is simpler, why doesn't everyone use it?" The answer lies in Legal Liability and Scope of Impact.

• Reason A: The Law (CSRD) forbids it.

The Corporate Sustainability Reporting Directive (CSRD) divides companies into "scopes."

• Large Undertakings (companies with >250 employees, >€50M turnover, etc.) are legally mandated to use the full ESRS.

• The law explicitly states that the "simplified" standard (VSME/LSME) is only for Small and Medium Enterprises.

• Reason B: The "Double Materiality" Requirement

This is the biggest technical difference.

• VSME approach: "Report what is on this simple list if it applies to you." (Checklist approach).

• ESRS approach: "You must prove what is important."

• Big companies must perform a Double Materiality Assessment. They must interview stakeholders, analyze risks, and mathematically prove which topics (e.g., Water usage vs. Child labor) are "material" to their business.

• They cannot just "skip" a topic. They must explain why it is not relevant with evidence. VSME does not require this level of rigorous proof.

  
  

More about Double Materiality Assessment read: here

• Reason C: The Value Chain Complexity

Big companies are responsible not just for their own office, but for their entire Value Chain (suppliers, transport, end-users).

• VSME focuses mostly on the company's own operations.

• ESRS forces big companies to look deep into their supply chain.

  Example: A clothing giant (ESRS) must report on labor rights in the factories they buy from in Asia. A small local boutique (VSME) might not need to go that deep.

• Reason D: Investor Needs (Comparability)

Investors (BlackRock, Pension Funds) need to compare "Apples to Apples."

• If Siemens used a simple 10-page VSME report, and competitors used a 100-page detailed report, investors couldn't compare their risks accurately.

• The ESRS ensures that all large companies report data in the exact same machine-readable format (XBRL) so computer algorithms can compare them instantly.

  
  

Summary Table: The "Why"

Feature	VSME (Small)	ESRS (Big)	Why Big Companies can't switch
Legal Basis	Voluntary (Optional)	Mandatory (Law)	It would be illegal non-compliance.
Philosophy	"Tell us what you have."	"Prove what matters."	Investors demand proof, not just data.
Scope	Mostly internal operations.	Entire Value Chain (Up/Downstream).	Big corps have huge supply chain risks.
Data Points	~20 - 50	~1,100+	VSME is too "shallow" for big risks.

Don't worry, be happy! We've got an ESG platform that's like a superhero for your problems. Just contact us: esg@mitigate.dev, and we'll save the day!