VSME, LSME, NESRS: The overlooked frameworks of the CSRD Universe.

In February 2025, the European Commission published a proposal, commonly referred to as the Omnibus proposal, to simplify EU sustainability reporting rules. If adopted, this would significantly narrow the scope of the European Sustainability Reporting Standards (ESRS), which were developed to support implementation of the Corporate Sustainability Reporting Directive (CSRD). Since the proposal’s announcement, many companies have slowed their CSRD compliance efforts.

But pressing pause on compliance efforts may not be a viable option since stakeholders still expect transparency, and sustainability reporting remains a critical tool for corporate communication. Proactively aligning with existing frameworks before being compelled to do so can allow companies to stay competitive and prepare for future regulatory requirements. 

The ESRS was developed by the European Financial Reporting Advisory Group (EFRAG) to operationalise the CSRD. However, EFRAG has worked on three other standards, which together will cover most companies that fall outside the scope of the ESRS: 

• VSME: the voluntary sustainability reporting standard for non-listed micro-, small- and medium-sized enterprises;

• LSME: the mandatory European sustainability reporting standard for listed small and medium-sized enterprises;

• NESRS: the mandatory ESRS for non-EU groups.

All three are designed to be more streamlined and accessible than the full ESRS, while still offering a path to transparency on key sustainability issues. Each framework has its own metrics, to adapt to the intended target entities, but generally align with the ESRS structure.

VSME - The Voluntary standard for non-listed micro-, small- and medium-sized undertakings

The VSME was developed by EFRAG to offer non-listed SMEs a structured, comparable and voluntary way to report their sustainability performance. It is intended to be practical without being overly burdensome. 

Compared to the over 1,000 reporting metrics required by the ESRS, the VSME is a much simpler framework. It includes a “Basic Module” with 11 metrics covering core sustainability topics, intended for everyone to be able to easily implement, and a “Comprehensive Module” with 9 additional metrics, intended for medium companies who feel they have capacity to disclose more in-depth sustainability information. Unlike the ESRS, the VSME does not require a complex double materiality analysis.

While the framework is voluntary, it is strategically beneficial in helping companies meet baseline ESG regulations and expectations from investors, regulators, customers and other stakeholders. 

LSME - ESRS for listed small and medium undertakings

Mandated by the CSRD, EFRAG has developed a simplified standard for listed SMEs', called "ESRS LSME". This standard will be mandatory for smaller listed EU companies that do not meet the threshold for ESRS. It is scheduled to take effect on  January 1st, 2026, with a two-year opt-out option available.

It will set reporting requirements that are relevant to the scale and capacities of smaller companies. It aims to enhance transparency and help these businesses access capital. It includes more metrics than the VSME, and requires a Double Materiality Assessment. However, it features a simplified approach to value chain reporting, making it less demanding than the ESRS while still identifying key sustainability risks and opportunities.

The Omnibus proposal has not yet addressed the LSME, but if the ESRS applicability is narrowed, a broader set of companies could fall within the scope of this simplified standard.

NESRS - ESRS for Non-EU Groups

The CSRD also requires non-EU companies with significant EU operations to prepare group-level sustainability reports. This standard, known as the NESRS, is still in draft form, being developed by EFRAG, and is expected to take effect in 2029.

The goal is to level the playing field for sustainability reporting across all companies doing business in the EU, regardless of where they’re based. The NESRS will apply to non-EU groups generating at least EUR 150 million in the EU over two consecutive years.

The working draft closely mirrors the ESRS in structure and content. However, it proposes a single materiality approach focused on impact materiality, leaving out financial materiality.

While the draft may be revised following the Omnibus proposal, no updates have been announced for the NESRS yet. A final draft is expected to be submitted to the Commission by November 2025.

In conclusion, although the Omnibus proposal announcement appears to have weakened the CSRD requirements, the Directive was designed as a tiered framework, with almost every entity operating in the EU market being covered by an appropriate framework, even if voluntary.

Now is the time for companies to get ahead and address stakeholder expectations while future-proofing themselves against shifting regulatory demands. Insig AI supports this by offering automated gap analysis tools against ESRS, LSME, VSME, and other key ESG frameworks. These tools help you easily identify blind spots, reduce compliance risks, and demonstrate transparency. Get in touch for more information.