How to transition from CSRD to VSME

If you’re a mid-market enterprise that’s been working toward CSRD compliance, the EU’s recent Omnibus proposal may have shifted your reporting obligations. With the employee threshold likely rising to 1,000, many mid-sized companies are now expected to fall outside the scope for mandatory sustainability reporting.

But here’s the thing: ESG reporting is still worth doing, and arguably more important than ever. Stakeholders haven’t stopped caring. Banks, investors, and customers still want to know you’re building a responsible, future-ready business. In fact, nearly 80% of global investors consider sustainability reporting a key factor in their decision-making.

So, rather than seeing this shift as permission to pause ESG efforts, companies should see it as an opportunity to right-size their sustainability strategy. 

The Voluntary Sustainability Reporting for SMEs (VSME) was introduced for exactly this purpose. Designed for smaller businesses, it offers a lighter, more manageable way to stay transparent without the heavy compliance burden of the CSRD. 

And the best part? You don’t have to start from scratch. This guide walks through how to transition from the CSRD to VSME by reusing the work you’ve already done, like materiality assessments and IROs, and shows how the right tools can simplify the process even further.

Quick recap: Key CSRD changes proposed under Omnibus

The Omnibus package proposes a number of changes to make the CSRD more manageable for companies. 

The most significant is a narrowing of the scope: only large companies with over 1,000 employees and either €50 million in revenue or €25 million in assets would need to report. That’s expected to reduce the number of companies in scope by about 80%, a number below even the previous Non-Financial Reporting Directive (NFRD) levels.

The proposal also introduces a “value chain cap,” which means companies under 1,000 employees can’t be pressured by larger businesses or banks to provide ESG data beyond what’s legally required. 

To support smaller companies that are no longer in scope but still want to stay transparent, the proposal also recommends the VSME, a new voluntary ESG reporting framework designed specifically for SMEs.

The European Sustainability Reporting Standards (ESRS), which underpin the CSRD, will also be revised to reduce the number of required data points and make the rules clearer and more consistent. Sector-specific standards and the planned shift to stricter “reasonable assurance” will be dropped. 

Lastly, the timeline for reporting has been pushed back by two years for large companies that haven’t started yet and for listed SMEs, giving everyone more time to adapt.

Why ESG reporting still matters in a post-Omnibus world

There’s no doubt that the Omnibus package would ease the compliance burden for many companies. But it’s important to remember that ESG reporting still holds real strategic value. Rather than treating it as a box-ticking exercise, companies should see it as a tool for building a stronger, more resilient business. Here’s how:

• Better visibility into risks: Companies with strong ESG practices tend to manage risks more effectively. 
• Smarter operations: 51% of companies say ESG reporting helps them spot inefficiencies and improve internal processes.
• A stronger brand: 20% of companies expect ESG reporting to enhance their reputation with customers and partners.
• A hiring advantage: 15% of companies say ESG plays a role in attracting and retaining top talent.
• A boost in innovation: A 2024 study of 3,000+ companies found that ESG information disclosure significantly boosts green innovation, especially by easing financing constraints and drawing analyst attention.
• Stronger stakeholder relationships: Clear ESG reporting helps build trust with investors, regulators, and business partners.
• Greater investor confidence and access to capital: A Morgan Stanley report found that more than three-quarters of investors say companies should address environmental and social issues, and they’re actively considering ESG practices when making investment decisions.

The differences between the CSRD and VSME

Before we dive into how to transition from the CSRD to VSME, it’s worth taking a moment to understand how the two frameworks differ, and why that matters.

What is the CSRD?

The CSRD is an EU regulation that requires certain companies operating in Europe to publish detailed reports on their environmental, social, and governance (ESG) impacts. These reports must follow the ESRS which include general reporting requirements plus 10 topical ESG standards.

Companies don’t need to report on all 10 topics, only the ones that are relevant, or “material” to their business. To figure that out, companies must start with a double materiality assessment, which helps identify which topics matter from both an impact perspective and financial perspective.

Once the material topics are defined, companies need to collect the right data for the relevant sub-topics. The report must then be structured in .XBRL format (a specific digital format required by the ESRS), and it needs to be assured, meaning the data must be verified by an independent auditor.

As you can see, CSRD compliance is detailed, time-consuming, and requires solid resources. For small to mid-market enterprises, this level of complexity can be a lot to take on. That’s where the VSME comes in.

What is the VSME?

Introduced in December 2024 and recommended under the EU Omnibus Proposal, the VSME is a lighter, more proportionate framework built for companies with fewer than 1,000 employees. It’s not mandatory, but it gives businesses a structured way to keep ESG reporting on the agenda, without the complexity of the CSRD.

Companies can choose from two levels of detail when reporting under the VSME:

Basic Module
A high-level snapshot covering:

• Company details
• Environmental performance (energy use, GHG emissions, waste)
• Social performance (workforce structure, pay, diversity, safety)
• Governance (anti-corruption, compliance)

Comprehensive Module
Builds on the Basic Module with deeper disclosures, including:

• Business strategy and risk management
• Climate transition plans and emissions targets
• Detailed human rights and social policies
• Sector-specific ESG topics

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Are there overlaps between the CSRD and VSME?

One of the biggest upsides of moving from the CSRD to VSME? You don’t have to start from scratch. The two frameworks share a lot of common ground, which means much of the work you’ve already done can still be used.

How the CSRD’s double materiality assessment (DMA) aligns with the VSME

The VSME doesn’t officially require a double materiality assessment, but it’s still incredibly useful. The VSME framework asks companies to disclose key risks and impacts, and a solid DMA can help you answer those questions with confidence.

If you’ve already completed a DMA under the CSRD, you can absolutely reuse it here. And if you haven’t? ESG compliance software like Coolset offers a DMA Lite module tailored for VSME reporting. It’s simpler than the full CSRD version, with no thresholding of IROs required.

Reusing your IROs (Impacts, Risks, and Opportunities)

IROs are a core outcome of your CSRD double materiality assessment, and they don’t go to waste in the VSME. You can use them to shape your disclosures around risks, strategies, and policies, saving time while keeping your reporting structured and meaningful.

Why the transition isn’t starting over

Much of the data you’ve gathered for the CSRD can be carried over into your VSME report. And looking ahead, companies that begin with the VSME will be well positioned if they choose, or are required, to report under the CSRD later on. 

That could be as early as 2027, depending on the outcome of the proposed two-year CSRD delay under the EU’s upcoming “stop-the-clock” vote.

Step-by-step: How to transition from the CSRD to VSME

Here’s how to make a smooth, efficient transition to the VSME framework using what you’ve already got.

1. Start by reviewing what you’ve already done

Take stock of your existing CSRD assets: things like your DMA, identified IROs, and the data you’ve gathered. You don’t need to reinvent the wheel,  just get a clear view of what’s already on hand.

2. Map out what overlaps between the CSRD and VSME

Next, compare the two frameworks and spot the disclosures that align. You’ll likely find a surprising amount of crossover. For example, data you’ve already collected for the CSRD will also show up in the VSME template, including:

• Scope 1, 2, 3 emissions of reporting year and targets
• Revenues from certain sectors and exclusion from EU reference benchmarks
• Workforce breakdowns, like gender representation

This step is about recognizing where you can save time and avoid duplication.

3. Reuse your materiality matrix and IROs

Your materiality matrix and the IROs identified under the CSRD are gold. Use them to answer key questions in the VSME template, especially those about risk exposure and management strategies.

This makes your reporting more efficient and keeps it grounded in real business insights.

4. Populate the VSME template with pre-filled data

Now you’re ready to start filling in your VSME report. If you’re using a platform like Coolset, up to 25% of the VSME template can be auto-filled based on your existing CSRD data, assuming your CSRD inputs are complete.

That’s a big time-saver, and it helps ensure consistency between the two frameworks.

Using software tools to simplify the transition

The shift from the CSRD to VSME gets a lot easier with the right ESG compliance software in place. ESG platforms that support both frameworks can save time, reduce errors, and give you confidence that nothing gets lost in the process.

Look for platforms that come with pre-built, interoperable templates for both the CSRD and VSME. Features like data pre-filling, audit trails, and automation can significantly cut down on manual rework, especially if you’ve already built a solid CSRD foundation.

These platforms help maintain reporting continuity as your business scales or requirements change. Instead of juggling spreadsheets or re-entering data, you can carry over what you’ve already done and focus on what really matters: keeping your ESG efforts transparent, efficient, and credible.

Explore how Coolset automates your CSRD to VSME transition with zero duplication.

Use the VSME transition to stay credible, not just compliant

The VSME isn’t just a simplified version of CSRD. It’s a strategic bridge between regulation and reputation. It gives mid-market enterprises a way to keep ESG on the agenda, even without a legal obligation to report.

As outlined above, ESG reporting still brings real business value, from enhanced risk management to investor confidence. Companies that keep reporting stay visible, trusted, and prepared for what’s next.

And with the right ESG compliance software and support, making the switch to VSME doesn’t mean starting from scratch. It means continuing with what you’ve already built, just in a way that fits your business today.

Curious to see how Coolset can help? Get in touch to see the platform in action today.