VSME: A Voluntary Sustainability Reporting Standard for SMEs

Introduction

Sustainability reporting is no longer just for large corporations. Small and medium-sized enterprises (SMEs) are increasingly expected to disclose their environmental, social, and governance (ESG) practices to investors, banks, customers, and supply chain partners. To help SMEs navigate this challenge, the European Financial Reporting Advisory Group (EFRAG) introduced the Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) in December 2024.

The VSME provides a structured yet flexible framework that allows SMEs to report their sustainability efforts in a way that is proportional to their size and resources. This blog post will explore the importance of the VSME, its key requirements, and practical steps for getting started.

What are the objectives?

The Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) is designed to help smaller businesses thrive in today’s sustainability-focused marketplace. Specifically, it aims to:

Provide essential data: Equip enterprises with the sustainability information large companies increasingly require from their suppliers.
Improve access to finance: Offer the details banks and investors look for, making it easier for businesses to secure funding.
Enhance sustainability management: Help enterprises tackle environmental and social challenges—such as pollution and workforce health—thereby boosting their competitive edge and resilience over the short, medium, and long term.
Foster a sustainable, inclusive economy: Contribute to broader economic growth by encouraging responsible business practices that benefit both people and the planet.

By meeting these objectives, the VSME helps businesses of all sizes succeed in a landscape where transparency and accountability are becoming the new normal.

Who is the VSME for?

The VSME is designed for non-listed SMEs that want to voluntarily disclose their sustainability practices. It is especially relevant for:

SMEs in supply chains of large companies required to report on sustainability.
Businesses seeking ESG-focused investors or loans.
Companies looking to integrate sustainability into their business strategy.

The VSME is not legally required but serves as a valuable tool for SMEs looking to stay ahead of market expectations.

Category	Balance Sheet Total	Net Turnover	Average Number of Employees
Micro Undertaking	≤ €450,000	≤ €900,000	≤ 10
Small Undertaking	≤ €5 million	≤ €10 million	≤ 50
Medium Undertaking	≤ €25 million	≤ €50 million	≤ 250

📌 Note: An undertaking qualifies for a category if it does not exceed at least two out of the three thresholds listed.

Key Requirements of the VSME

The VSME standard offers a two-module approach, allowing SMEs to choose their level of reporting:

1. Basic Module - 11 disclosures

Ideal for micro-enterprises and small SMEs with limited resources.
Focuses on general information and fundamental ESG indicators, such as:
- Environmental: Energy and water consumption, waste management
- Social: Workforce - Health and Safety
- Governance: Business ethics

2. Comprehensive Module - 20 disclosures

For SMEs requiring more in-depth ESG reporting.
Covers all Basic Module indicators plus additional disclosures such as:
- Business Model and Sustainability-Related Initiatives
- GHG Reduction Targets and Climate Transition
- Human Rights policies and processes
- Gender Diversity Ratio in the Governance Body

These modules ensure that SMEs of different sizes and capabilities can report at a level that fits their business needs.

Practical Tips: How to Get Started with the VSME

Adopting the VSME can seem overwhelming, but SMEs can follow these practical steps to make the process smoother:

1. Assess Your Readiness

Identify which ESG factors are most relevant to your business.
Choose between the Basic or Comprehensive Module based on your resources.

2. Collect and Organise Data

Gather existing information on sustainability efforts (e.g., energy bills, workforce data).
Use simple tracking tools to monitor key ESG indicators.

3. Engage with Stakeholders

Communicate with investors, suppliers, and customers to understand what ESG data they need.
Align reporting with industry expectations and regulations.

4. Use Available Resources

Leverage EFRAG’s guidance documents to simplify reporting.
Consider digital tools that assist with ESG data collection.

5. Start Small and Improve Over Time

Begin with the Basic Module and expand as you gain experience.
Focus on consistent and transparent reporting, even if data is limited at first.

By taking these steps, SMEs can gradually integrate sustainability reporting into their business without excessive complexity.

Conclusion

The VSME is a powerful tool that allows SMEs to voluntarily report on sustainability in a structured, manageable way. By adopting this framework, businesses can enhance transparency, improve financing opportunities, and strengthen their market position.

For SMEs, starting with sustainability reporting does not have to be complex. The Basic Module offers a simple entry point, while the Comprehensive Module provides greater depth for those ready to expand.

As sustainability expectations continue to rise, SMEs that embrace ESG reporting today will be better positioned for long-term success in a responsible and transparent business environment.

References

EFRAG (2024) – Voluntary Sustainability Reporting Standard for SMEs (VSME)
European Commission (2021) – Corporate Sustainability Reporting Directive (CSRD)
EFRAG (2024) – Guidance for Non-Listed SMEs on ESG Reporting