CO₂ balancing for VSME and CSRD
CO₂ accounting explained simply: How VSMEs and companies subject to CSRD can get off to a structured start with climate reporting
- Carbon accounting covers Scope 1 (direct), Scope 2 (purchased energy) and Scope 3 (value chain) emissions, all expressed in CO₂ equivalents.
- Under the Omnibus package (in force since March 2026), only companies with more than 1,000 employees AND more than €450m net turnover must report under CSRD, including full CO₂ accounting per ESRS E1.
- SMEs outside the CSRD scope can use the VSME standard for voluntary, structured emissions reporting covering Scope 1 and Scope 2 as mandatory, Scope 3 as optional.
- The VSME is evolving into the broader "VS (Voluntary Standard)", which will also cover non-SMEs outside the CSRD scope.
- A practical approach starts with screening and prioritizing the relevant scopes, then applying the GHG Protocol formulas to calculate CO₂ equivalents.
Carbon accounting is rapidly gaining in importance. For large companies it is a mandatory part of CSRD reporting. For smaller companies it is increasingly a strategic success factor. Those who know their greenhouse gas emissions today can meet regulatory requirements, take advantage of market opportunities, reduce costs and increase their competitiveness.
Whether due to legal obligations or growing requirements from business partners along the supply chain: recording Scope 1, Scope 2 and, where applicable, Scope 3 emissions is becoming the new normal. But what does carbon accounting actually mean, and how can companies get started in a practical way?
What is a CO₂ balance sheet?
The CO₂ balance sheet (also called a carbon footprint) is the structured recording of all climate-relevant emissions of a company. Three categories are distinguished:
- Scope 1: Direct emissions (e.g. combustion of fossil fuels, company-owned vehicles, cooling systems)
- Scope 2: Indirect emissions from purchased energy (electricity and heat)
- Scope 3: Indirect emissions along the value chain (e.g. purchased materials, transportation, business travel, product use)
The depth of reporting varies depending on company size and reporting obligation. A carbon footprint also brings important benefits for SMEs, from energy savings to customer loyalty through climate transparency.
CSRD or VSME? Two paths to CO₂ balancing
The Corporate Sustainability Reporting Directive (CSRD) requires large EU companies to provide comprehensive sustainability reporting. Since the Omnibus package entered into force in March 2026, this obligation applies to companies with more than 1,000 employees AND more than €450m net turnover (both criteria must be met cumulatively). CO₂ accounting under ESRS E1 is a core part of this, covering all three scopes.
The revised thresholds mean significantly fewer companies are now required to report. Only companies meeting both criteria, more than 1,000 employees and more than €450m net turnover, fall under the CSRD obligation. The old "2 of 3 criteria" rule (250 employees / €40m turnover / €20m balance sheet) no longer applies.
CO₂ balancing for SMEs: the voluntary path with structure
There is no direct legal obligation for SMEs outside the CSRD scope. But there are growing indirect requirements, for example from business partners, financial institutions or funding bodies. This is why the VSME reporting standard was introduced.
The VSME is being broadened into the "VS (Voluntary Standard)", expected as a delegated act later in 2026. It is based on the VSME (EFRAG, December 2024) with small content adjustments. Importantly, the VS will not only cover SMEs but also non-SMEs with fewer than 1,000 employees (or under €450m turnover) that fall outside the CSRD scope. CSRD-obligated companies may not require value-chain partners with 1,000 employees or fewer to provide information beyond this voluntary standard.
Under the VSME/VS framework, the approach to CO₂ accounting is:
- Mandatory: Accounting for Scope 1 and Scope 2
- Optional: Scope 3, depending on relevance
- Standard-compliant: GHG Protocol or ISO 14064-1
- Practically realizable with the VSME sustainability report template
This gives even smaller companies a tool for reporting emissions in a transparent, comprehensible and structured way, without excessive effort.
How CO₂ balancing works in practice
Creating a carbon footprint requires a systematic approach. The core task is to measure or estimate emissions that arise in or are caused by the company. Greenhouse gas emissions are stated in CO₂ equivalents (CO₂e) so that methane (CH₄), nitrous oxide (N₂O) and other gases can be assessed in a standardized manner.
Below is a step-by-step explanation of how companies calculate their emissions across the three scopes.
Scope 1: Direct emissions from own sources
What is included?
Emissions from the combustion of fuels in boilers, ovens and vehicles, as well as volatile emissions from air conditioning systems and industrial processes.
How is it calculated?
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Record activity data. Note the quantity of fuel consumed, for example liters of diesel or heating oil (e.g. 2,000 liters of diesel per year).
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Apply emission factor. Diesel: approx. 2.68 kg CO₂/liter. Emission factors can be found via the IPCC emission factor database.
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Take global warming potential (GWP) into account. GWP indicates how much a greenhouse gas contributes to global warming compared to CO₂: CO₂ = 1, CH₄ = 25, N₂O = 298.
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Calculate emissions. Formula: CO₂e emissions (tons or kg) = consumption × emission factor × GWP. Example: 2,000 L × 2.68 kg CO₂/L × 1 = 5,360 kg = 5.36 t CO₂e.
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Special calculation for energy units. If fuel consumption is given in energy units: Emissions = (volume × calorific value) × emission factor × GWP. Calorific value = energy content per unit (e.g. 35.8 MJ/L diesel).
Tip: This data is often already available in fuel receipts, heating bills or internal records.
Scope 2: Indirect emissions from purchased energy
What is included?
- Power consumption
- Purchased district heating, cooling or steam
Two calculation methods:
| Method | Basis | When to use |
|---|---|---|
| Location-based | Average emission value of the electricity grid | Standard approach, sufficient for most small businesses |
| Market-based | Actual supplier data incl. guarantees of origin (e.g. green electricity contracts) | When renewable electricity contracts are relevant |
Formula: CO₂e emissions = activity data × emission factor
Example:
- Electricity consumption: 12,000 kWh per year
- Emission factor Germany 2022 (location-based): 430 g CO₂/kWh
- Result: 12,000 × 0.430 kg = 5,160 kg CO₂e = 5.16 t CO₂e
Both methods can be shown in parallel. The location-based calculation is usually sufficient for small businesses.
Scope 3: Other indirect emissions along the value chain
The GHG Protocol distinguishes between 15 categories of Scope 3 emissions, divided into upstream and downstream emissions. These include:
- Purchased materials and services
- Transportation and logistics by third parties
- Business trips and commuter traffic
- Use and disposal of products sold
- Capital goods, leasing and investments
Not all categories are relevant for every company. The first step is to prioritize the topics.
Step 1: Screening and prioritization. Check which of the 15 Scope 3 categories are relevant, such as "Purchased goods", "Transport", "Business trips", "Waste" or "Product use". The rule is: not everything has to be recorded, but what is essential should be.
Prioritization criteria include:
- Contribution to total emissions (order of magnitude)
- Influenceability by the company
- Relevance for stakeholders (customers, investors)
- Risk contribution (e.g. price volatility, reputational risks)
- High proportion of sales or costs
Step 2: Select calculation methods. There are different methods for each Scope 3 category, from rough to precise. A pragmatic mix is often the best approach. The formulas below are taken as examples from Category 1: Purchased goods and services. All formulas can be found in the Scope 3 Calculation Guide.
| Method | Basis | Accuracy |
|---|---|---|
| Supplier-specific | Direct emissions data from supplier | High accuracy, but complex. Formula: sum of (quantity of purchased goods × supplier-specific emission factor) |
| Hybrid | Combination of primary data and industry-specific factors | Medium accuracy. See Scope 3 Calculation Guide |
| Average-data | Average values based on quantity data | Moderate. Formula: sum of (mass or units × emission factor per mass unit) |
| Spend-based | Emissions estimate based on expenditure | Lower accuracy, easy to apply. Formula: sum of (spend value × emission factor) |
Example (spend-based method): A company purchases €10,000 of office supplies per year. The emission factor is 0.4 kg CO₂e/€. Result: €10,000 × 0.4 = 4,000 kg CO₂e = 4 t CO₂e.
Combining methods is allowed. Companies can use more precise methods for large emission sources and approximate methods for smaller ones. For example: primary data for main suppliers, average values for secondary purchases.
Even if Scope 3 is voluntary, carrying out at least a screening estimate helps you respond better to customer requirements, define initial climate targets and identify cost-saving potential through supplier selection.
Where to go from here
The carbon footprint is the first step towards a climate-conscious future. For companies wanting a structured approach to CO₂ accounting, the right tools make a real difference.
The VSME sustainability report template offers an easy-to-understand structure for recording Scope 1 and Scope 2 emissions as well as optional Scope 3 data, aligned with the voluntary VSME/VS standard and the GHG Protocol. Getting started is simple, clear and practical, even without in-depth prior knowledge.
For companies that fall under the CSRD, the double materiality assessment provides a well-founded basis for systematically identifying relevant Scope 3 categories. If you want to go deeper on Scope 3, the dedicated GHG Protocol Scope 3 workshop walks you through the full methodology.
Frequently asked questions about CO₂ balancing for VSME and CSRD
Do SMEs have to calculate their CO₂ emissions?
There is no direct legal obligation for SMEs outside the CSRD scope. However, business partners, banks and funding bodies are increasingly asking for emissions data. The VSME/VS standard provides a practical, voluntary framework for structured reporting of Scope 1 and Scope 2 emissions (Scope 3 optional).
What is the difference between Scope 1, Scope 2 and Scope 3?
Scope 1 covers direct emissions from your own operations (e.g. company vehicles, heating). Scope 2 covers indirect emissions from purchased electricity or heat. Scope 3 covers all other indirect emissions along your value chain, from purchased materials to the use and disposal of your products.
Which companies must report CO₂ under CSRD after the Omnibus changes?
Since the Omnibus package entered into force in March 2026, full CO₂ accounting under ESRS E1 is required only for companies with more than 1,000 employees AND more than €450m net turnover. Both criteria must be met. The previous "2 of 3 criteria" threshold (250 employees / €40m turnover / €20m balance sheet) no longer applies.
What is the easiest way for a small company to start with Scope 3?
Begin with a screening estimate to identify which of the 15 GHG Protocol categories are most relevant for your business. Use the spend-based method for smaller emission sources (spend value × emission factor) and collect primary data for the categories with the highest impact. The GHG Protocol Scope 3 workshop can guide you through the process step by step.
