The VSME reporting standard – the Voluntary Sustainability Reporting Standard for SMEs – represents a significant shift in ESG disclosure. It is specifically tailored for non-listed, small and medium-sized businesses across Europe that are not subject to the Corporate Sustainability Reporting Directive (CSRD).
Designed by EFRAG and backed by the European Commission and aligning with the European Sustainability Reporting Standards (ESRS), VSME offers businesses a streamlined framework to voluntarily report on sustainability topics. The standard helps address widespread calls from banks, investors, and supply chain partners for more consistent ESG data.
The approach aims to reduce duplicative data requests, empower SMEs in sustainable supply chains, and create a foundation for negotiation and transparency with major clients. It reflects an overall shift towards inclusivity in sustainability reporting, making it scalable and realistic for companies that lack the resources of multinationals.
Structure and key features of VSME
At its core, VSME is modular and proportionate, enabling firms to start with its Basic Module – an entry-level set of 11 ESG disclosures covering general, environmental, social, and governance metrics. These form the foundation for data on company structure, energy use, waste, workforce well-being, and governance integrity.
SMEs prepared for greater transparency or facing external demands can add the Comprehensive Module, which builds upon these basics with nine additional disclosures, such as business model impacts, Scope 3 emissions, climate risk mitigation, and supply chain policies.
Key takeaways
- Tiered flexibility: SMEs can choose their level of reporting detail – from the basics for routine stakeholder needs to a comprehensive approach that addresses requirements for green finance, strategic partnerships, and advancing sustainability leadership.
- Relevance, not burden: VSME applies an “if applicable” principle, meaning disclosures are only required for relevant topics. There is no need for exhaustive double materiality analysis, reducing reporting workload and stress.
- Simplified language and requirements: Compared to mandatory schemes like CSRD and ESRS, VSME uses clear, non-technical language and practical guidance, making ESG reporting accessible even for businesses without dedicated sustainability staff.
- Business value and trust: Using VSME helps SMEs fulfil information requests from commercial partners, enhance reputation, meet bank and investor criteria, and reduce the need for multiple, overlapping ESG questionnaires.
- Built-in confidentiality and modularity: Firms can withhold commercially sensitive information, provided it is clearly stated, and can consolidate reporting within a single report for groups or subsidiaries.
Thinking ahead
While VSME is voluntary, its focus on flexibility, relevance, and accessibility prepares SMEs for future challenges. Additionally, it can deepen trust with customers, lenders, and partners, and aligns them with the broader European sustainability agenda.
- Supply chain pressures: Even SMEs not required to report may find that large CSRD-regulated clients expect VSME disclosures for supply chain transparency.
- Financing and partnering impacts: Banks and investors are increasingly using ESG criteria for corporate selection and lending. VSME alignment can help firms access opportunities and avoid being excluded from deals.
- Maintaining consistency: As with financial reports, VSME recommends annual reporting cycles with comparative metrics from the second year onward, to build a track record and demonstrate improvement.
- Potential mandatory scope: Although currently voluntary, market trends and EU policy could make VSME the de facto standard for SME sustainability reporting in the future.
Looking to the future
The VSME reporting standard is more than just a new framework. It marks the democratisation of ESG reporting, establishing a path for smaller firms to join the sustainability mainstream. For any SME looking to future-proof and grow, engaging with VSME early is a smart move.
