Carbon footprint in the VSME standard: what is left of ESRS E1?

In 2022, only 24% of EU SMEs had a concrete plan to cut their carbon footprint (Flash Eurobarometer, 2022). From financial year 2027, a large customer under the CSRD can ask a supplier with 11 to 1,000 staff for just two climate figures. These are energy use in MWh and Scope 1 and 2 emissions. You can usually work out both from your energy and fuel invoices.

• Carbon footprint in the VSME standard: the basic module covers energy use in MWh and Scope 1 and 2 emissions, location-based.
• What is left of ESRS E1: 8 of 11 requirements have a narrower match in VSME; E1-3, E1-9 and E1-10 are gone.
• Scope 3: voluntary in VSME; worth calculating in manufacturing, food, construction and packaging.
• Climate targets and risks: part of the comprehensive module (C3 and C4); you report them if you have them.
• Companies with up to 10 employees: climate data are voluntary, and customers cannot demand them.

What is the VSME standard after the 2026 changes, and who is it for?

VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) is a voluntary standard for sustainability reporting by small and medium-sized companies. EFRAG prepared it in December 2024.

Who the standard is for:

• companies outside the CSRD: it is for companies that do not have to report on sustainability under the Accounting Directive;
• size: it is meant for companies with up to 1,000 employees on average in the previous financial year, including micro companies;
• voluntary use: nobody has to use it, and the report needs no assurance.

The standard has two modules:

1. Basic module: disclosures B1 to B11; the target approach for micro companies and the minimum for all others.
2. Comprehensive module: disclosures C1 to C9, which banks, investors and large customers may ask for; you use it only together with the basic module.

You apply the chosen module in full. You state this in disclosure B1 as option A (basic module) or option B (both modules). The exception is items marked “if applicable”. You report a reduction target or a transition plan only if your company has one.

In the climate part, Delegated Regulation (EU) 2026/1560 changed three things compared with Commission Recommendation (EU) 2025/1710:

1. Emission intensity: you no longer divide emissions by turnover; the new version of ESRS E1 dropped this indicator too.
2. EU benchmarks: the statement on exclusion from Paris-aligned benchmarks was removed from disclosure C8.
3. Companies with up to 10 employees: energy use, emissions, reduction targets and climate risks are voluntary for them.

Climate disclosures in the VSME standard:

Which ESRS E1 requirements does VSME cover?

ESRS are the sustainability reporting standards for large companies under the CSRD. The ESRS E1 Climate change standard applies when the double materiality assessment finds climate change to be a material topic. From financial year 2027, it has 11 required disclosures. VSME does not require a double materiality assessment: you apply the chosen module in full. The table compares what each standard asks you to disclose about climate:

B2 and C2: climate practices and policies instead of E1-4 and E1-5

In the basic module, climate action goes into disclosure B2. You state whether you have practices, policies, future initiatives and targets to monitor policies on sustainability. The standard gives examples of practices, among them cutting electricity use and greenhouse gas emissions. In smaller companies, a set of practices often replaces a written policy, and the standard allows this.

The comprehensive module adds disclosure C2. In it, you briefly describe the practices, policies and initiatives from B2 and say whether they cover suppliers or customers. You can also name the person or body responsible for them.

In ESRS, the same topics take two requirements:

1. E1-4 Policies: you describe the content of the policy, its reach in the value chain, and the standards and initiatives it refers to.
2. E1-5 Actions and resources: you give the amounts of significant spending on actions and the emission cuts achieved and expected, split by decarbonisation lever.

In VSME, you give neither amounts nor the effect of actions in tonnes of CO₂e.

B3 and E1-7: energy use in MWh

The first climate figure in VSME is total energy use in MWh. If you can get the data, split it into electricity and fuels, and each of them into renewable and non-renewable energy. Take electricity from your utility bills; the standard says so directly. Convert fuels, such as natural gas in a boiler or diesel in company cars, into MWh using their calorific value.

The standard counts as renewable, among others, wind, solar and hydro power, geothermal energy, biomass and biogas.

ESRS E1-7 goes further:

• energy sources: you split energy use into fossil, nuclear and renewable sources, not just two groups;
• fossil fuels by type: in high climate impact sectors, you give the use of each fuel and, separately, energy bought from fossil sources;
• energy production: a company that produces energy reports renewable and non-renewable production separately.

B3 and E1-8: Scope 1 and 2 emissions

The second part of B3 is estimated gross greenhouse gas emissions in tonnes of CO₂ equivalent (t CO₂e). You calculate them in line with the GHG Protocol Corporate Standard of 2004:

• Scope 1: direct emissions from sources you own or control, such as fuel burnt in a boiler or in company cars and leaks of refrigerants;
• Scope 2: emissions from producing the electricity, heat, steam and cooling you buy. You use the location-based method, that is, the average emission factor of the grid.

The standard speaks of “estimated” emissions. In a small company, you multiply the amounts of fuel and energy used by emission factors. CO₂ equivalent also includes methane, nitrous oxide and fluorinated gases, converted with GWP factors. Disclosure B1 sets the boundary: an individual or a consolidated report, with subsidiaries.

ESRS E1-8 requires four items that B3 does not have:

1. Scope 2 market-based: you report it next to the location-based result; in VSME, you can add it as extra information.
2. Scope 3: you report it in total and for each significant category.
3. EU ETS share: you disclose the percentage of Scope 1 emissions covered by the EU Emissions Trading System.
4. Biogenic emissions: direct CO₂ emissions from burning or breaking down biomass are reported separately from Scope 1.

We explain how to calculate both scopes step by step in the article How to calculate a company’s carbon footprint step by step.

Scope 3 in VSME: when is it worth calculating?

Scope 3 is not mandatory in VSME. The standard treats it as extra information that you may add when it is relevant for your sector. It covers it in paragraphs 49 to 52:

• when it is worth it: in manufacturing, food and farming, construction and packaging, significant Scope 3 categories are likely;
• method: the reference is the 15 categories of the GHG Protocol Scope 3 Standard; you include those you judge to be relevant;
• presentation: you report Scope 3 emissions together with Scopes 1 and 2 in disclosure B3.

In ESRS E1-8, Scope 3 is mandatory. You update the significant categories every year and do a full inventory at least every three years.

If you calculate Scope 3 for the first time, the spend-based method is a sensible start. It shows which categories hold most of the emissions. You choose the categories for a more precise calculation in a Scope 3 screening.

C3 and E1-1, E1-6: reduction targets and transition plan

You fill in disclosure C3 if your company has set greenhouse gas reduction targets. You give the targets in absolute values for Scopes 1 and 2. If you have a Scope 3 target, you also give it for the significant categories. You disclose five items:

1. Target year: the year the target refers to and the target emissions value.
2. Base year: the reference year and the emissions in that year.
3. Units: the units of the target, for example t CO₂e.
4. Coverage: what part of Scope 1, 2 and, if relevant, Scope 3 emissions the target covers.
5. Actions: the main actions you plan to reach the target.

A transition plan for climate change mitigation appears in C3 only in high climate impact sectors. These are sections A to H and M of the NACE classification. They include farming, mining, manufacturing, energy, construction, trade, transport and real estate. A company in such a sector that has a plan may describe it and explain how it cuts emissions. A company without a plan states whether and when it will adopt one.

ESRS asks for more:

• 1.5°C alignment: in E1-6, you state whether the targets are science-based and in line with limiting warming to 1.5°C;
• transition plan: in E1-1, you describe it in five points, including the money for it, the assumptions and locked-in emissions.

You can move a target validated by the SBTi into C3 if you give it in absolute values. A carbon reduction plan makes the list of actions easier.

C4 and E1-2, E1-11: climate-related risk

You fill in disclosure C4 if you have identified climate hazards and transition events that cause serious risks. In it, you give:

• hazards and events: a short description of physical hazards, such as floods and heatwaves, and transition events, such as new laws or higher carbon prices;
• exposure assessment: how you assessed the exposure and sensitivity of your assets, operations and value chain;
• time horizons: over what period the hazards may occur;
• adaptation: whether you have taken action to adapt.

You may add an assessment of the possible negative effects of these risks on your financial results, on a scale of high, medium and low.

In ESRS, this area takes three requirements:

1. E1-2: you describe how you identify risks. For a scenario analysis, you also say whether you used a high-emission scenario and a 1.5°C scenario.
2. E1-3: you assess the resilience of your strategy and business model, which VSME does not require.
3. E1-11: you give the book value of assets exposed to risks and the revenue from activities exposed to them.

We show how to carry out such an assessment in the article on climate risks and opportunities.

The value chain cap: what can a customer ask for from 2027?

A company under the CSRD calculates Scope 3, so it asks suppliers for ESG data, including emissions. But for financial years from 1 January 2027, it has a limit. From companies with up to 1,000 employees, it cannot demand more than Annex II of Regulation 2026/1560 lists. For climate data, the cap looks like this:

The cap has three limits:

1. Only for the CSRD: it does not apply to requests that come from other EU or national laws.
2. Banks and insurers: the regulation encourages them to limit requests to data from the standard, but it does not bind them.
3. Voluntary answers: a supplier may share more, for example a reduction target, if it chooses to.

The regulation also advises customers to ask only for the data they need, even if this is less than the standard covers. If you collect carbon footprint data from your own suppliers, our checklist with a model email will help.

Do you need climate data for VSME?

We can prepare all the data for the climate chapter for your company. We will calculate your corporate carbon footprint in Scopes 1, 2 and 3 under the GHG Protocol. You get data for disclosure B3 and for customer questionnaires. We can also help you set a reduction target for C3 and prepare your SBTi submission for validation. Our team prepared one in four validated SBTi submissions from Poland.