VSME: Understanding the European Sustainability Reporting Standard for SMEs

What is the VSME standard (Voluntary Sustainability Reporting Standard for SMEs)?

Definition of the VSME standard

The VSME (Voluntary Sustainability Reporting Standard for SMEs) is a voluntary sustainability reporting framework designed for companies with 1,000 employees or fewer that are not subject to the CSRD. Published by the EFRAG (European Financial Reporting Advisory Group) at the end of 2024, it allows SMEs to structure and disclose ESG data using a recognized European reference framework.

Unlike the CSRD, which requires hundreds of data points, the VSME relies on around forty datapoints in its Basic Module, across 11 disclosures (B1 to B11).

There is:

• No mandatory reporting format
• No mandatory audit
• No fixed reporting calendar

Companies can publish their report at any time using a reference year of their choice.

Objectives of sustainability reporting for SMEs

The VSME aims to deliver several concrete benefits for SMEs:

• Improve ESG transparency and encourage sustainable business practices
• Provide an accessible entry point for companies starting their ESG journey
• Offer a shared framework for communicating with clients, investors, and financial partners
• Give a stable reference for the value-chain requests of CSRD-regulated clients

It is suitable for companies that have never formalized an ESG strategy as well as those already collecting ESG data—through frameworks such as EcoVadis—but lacking a structured sustainability report.

Origin of the standard: EFRAG and the European Commission

The VSME was developed by EFRAG, the same organization responsible for creating the ESRS standards used in the CSRD.

The European Union began developing the standard in 2023. It was finalized by EFRAG and submitted to the European Commission on December 17, 2024, before being published by the Commission as a recommendation on July 30, 2025.

The Commission then enacted it as the Voluntary Standard (VS) through Delegated Regulation (EU) 2026/1560, adopted on July 3, 2026 and in force since September 24, 2026. The delegated regulation replaces the 2025 recommendation, which no longer has legal effect. Using the VS remains voluntary. Our article on what changes with the VS lists the content changes.

This legal basis firmly positions the VSME as the reference standard for voluntary SME sustainability reporting in Europe.

Relationship between VSME, CSRD and the European ESG strategy

The VSME aligns with the broader European Green Deal and ESG strategy. It addresses the same ESG themes as the CSRD—environment, social and governance—but in a simplified and proportionate format.

Following the adoption of Omnibus I by the EU Council on February 24, 2026, the number of companies directly subject to the CSRD dropped from approximately 49,000 to about 1,000: only companies with more than 1,000 employees and more than €450M net turnover remain in scope.

However, market pressure remains unchanged. Large companies still need ESG data from their suppliers and partners.

The VSME therefore acts as a pragmatic and lightweight response, enabling SMEs to communicate ESG information in a standardized way without the complexity of CSRD reporting.

Why the VSME standard was created

CSRD pressure on value chains

The CSRD requires large companies to report sustainability information across their entire value chain, including suppliers and partners.

In practice, this means SMEs are increasingly asked to provide ESG data.

Studies indicate that 78% of suppliers are already receiving sustainability requests from their clients.

The challenge: SMEs often lack structured tools to respond efficiently. Each large client may request data in a different format, increasing administrative complexity.

The VSME introduces a common language for ESG information, reducing this fragmentation.

The need for simplified ESG reporting for SMEs

Before the VSME, SMEs faced two main options:

• Complex reporting frameworks designed for large companies
• Non-standardized sustainability initiatives with limited credibility

The VSME fills this gap by offering a framework designed from the start for SME capacities.

Its Basic Module requires:

• 11 disclosures (B1 to B11)
• Around forty datapoints

It does not require mandatory double materiality analysis or external audits.

A first report can typically be produced within one to two weeks.

Harmonizing ESG data requests from large companies

Another core objective of the VSME is to standardize ESG information requests addressed to SMEs.

Instead of answering multiple questionnaires, SMEs can produce a single VSME report and share it with all stakeholders.

Benefits include:

• Reduced duplication of data collection
• Easier comparison of ESG information
• More efficient supply-chain reporting for large companies

Reducing administrative burden for SMEs

A key principle of the VSME is proportionality.

The framework does not require a formal ESG strategy to be completed.

Companies simply disclose the information they have available.

There is:

• No mandatory audit
• No imposed report format
• No scoring system

Reports may be produced as:

• Word documents
• PowerPoint presentations
• PDFs
• or structured files such as XBRL, suggested by EFRAG.

The focus is transparency and clarity.

Which companies are concerned by the VSME?

Companies with 1,000 employees or fewer not subject to the CSRD

The VS is open to any company outside the CSRD scope with 1,000 employees or fewer (average over the previous financial year). There is no revenue criterion. Listed SMEs, listed micro-companies and self-employed people are also in scope.

Although these companies have no legal reporting obligation, they increasingly face ESG expectations from clients, financial partners and investors.

For them, the VSME provides a structured yet voluntary approach to sustainability reporting.

Companies in the value chain of CSRD-regulated firms

Large companies subject to CSRD must report sustainability data about their value chains.

This includes suppliers—many of which are SMEs.

Adopting the VSME allows these companies to:

• Provide structured ESG data
• Align with European standards
• Improve credibility with clients

The VS also limits what these clients can ask. For financial years starting on or after January 1, 2027, a CSRD-subject company cannot require from a value-chain company with 1,000 employees or fewer more information than Annex II of the VS lists. The supplier can refuse questions that go beyond this value chain cap, and the client must flag them. The cap only covers requests made for CSRD reporting. Requests under the EUDR or other laws, and assessments such as EcoVadis or CDP that a company takes on its own initiative, fall outside it.

Startups and growing companies

Startups and fast-growing companies benefit from integrating ESG reporting early.

Using the VSME early:

• Builds strong sustainability foundations
• Simplifies future transitions to frameworks such as CSRD, EcoVadis, ISO or B Corp
• Prevents costly compliance catch-up later.

Companies requested by financial partners to provide ESG data

Banks and investors increasingly integrate ESG criteria into financing decisions.

A structured ESG profile—demonstrated through a VSME report—can improve:

• Investor confidence
• Financing conditions
• Access to sustainable capital.

Structure of the VSME standard: modules and required information

The VSME framework is organized into two progressive modules.

The Basic module: essential ESG information

The Basic module represents the entry level of the framework.

It includes:

• 11 disclosures (B1 to B11)
• Around forty datapoints

Companies with 10 employees or fewer can leave out the more complex environmental data: B3 (energy and GHG emissions), B6 (water) and B7 (waste and circularity). Our guide to VS optional data for micro-companies details the rule.

No double materiality analysis is mandatory.

Key sections include:

Company information

Companies describe:

• their business model
• markets
• products and services
• key partners
• ESG certifications or labels.

Environmental indicators

Environmental reporting covers:

• Energy consumption and greenhouse gas emissions (Scope 1 and 2)
• Air, water and soil pollution
• Sites located in or near biodiversity-sensitive areas
• Water management
• Resource use and waste management.

The VSME recommends using GHG Protocol or ISO 14064-1 for emissions calculations.

Social indicators

The social section includes:

• Workforce composition
• Health and safety metrics
• Salary and collective bargaining coverage
• Training data
• Anti-corruption disclosures.

The Comprehensive module: advanced sustainability reporting

The Comprehensive module includes all Basic module disclosures plus nine additional disclosures (C1 to C9).

This module suits companies with a more advanced ESG maturity.

Typical completion time:

• 2 to 3 months

Sustainability governance and strategy

Companies must describe:

• governance structures
• responsibilities for ESG initiatives
• sustainability policies and strategies.

Although not mandatory, double materiality analysis is strongly recommended.

Detailed environmental data

Additional environmental disclosures include:

• GHG reduction targets
• Scope 3 emissions where relevant
• Climate transition plans
• Climate risk assessments.

Social and human rights information

Additional requirements cover:

• data on temporary and independent workers
• human rights policies
• grievance mechanisms
• incident reporting.

Risk and impact management

Companies also report on:

• confirmed human rights incidents
• corrective actions
• impacts within the value chain.

What are the differences between VSME, CSRD and ESRS?

These three acronyms often appear together but represent different elements.

CSRD: the regulatory framework

The CSRD (Corporate Sustainability Reporting Directive) is the European directive that mandates sustainability reporting for certain companies.

After the Omnibus reform, around 1,000 large companies remain within its scope.

The CSRD defines:

• which companies must report
• when reporting is required
• and the level of verification needed.

ESRS: the reporting standards

The ESRS (European Sustainability Reporting Standards) specify the content of CSRD reports.

They cover 12 thematic standards and previously included hundreds of data points.

The revised ESRS, adopted as Delegated Regulation (EU) 2026/1563, apply to financial years starting on or after January 1, 2027. According to the Commission, they cut mandatory datapoints by more than 60%.

VSME: a voluntary simplified standard

The VSME is a voluntary reporting framework designed for SMEs.

It addresses the same ESG themes but with significantly fewer requirements.

How to implement VSME reporting in an SME

Identify relevant ESG data

The first step is to map existing information sources:

• energy bills
• HR data
• supplier policies
• certifications.

Many required indicators already exist within the company but are not centralized.

Organize internal data collection

Companies should identify internal contributors:

• HR
• Finance
• Procurement
• Operations.

A simple process is usually sufficient to gather the necessary data.

Establish ESG performance indicators

The first report establishes a baseline.

Subsequent reports allow companies to:

• track progress
• refine sustainability goals
• demonstrate improvements.

Produce the sustainability report

The VSME allows flexible formats.

Typical timelines:

• Basic module: 1–2 months
• Comprehensive module: 2–3 months

What are the benefits of the VSME standard for SMEs?

Responding to client sustainability requests

41% of companies adopting the VSME report improved responses to sustainability requests from clients.

Benefits include:

• faster responses to ESG questionnaires
• improved supplier credibility
• stronger competitive positioning.

Facilitating access to sustainable finance

25% of companies using the VSME report improved access to financing.

Structured ESG reporting increases transparency for banks and investors.

Structuring internal ESG strategy

The VSME helps consolidate ESG indicators into a single report.

This creates a foundation for:

• defining ESG priorities
• building action plans
• tracking long-term progress.

Strengthening credibility and transparency

A VSME report sends a clear signal to stakeholders:

• clients
• employees
• investors
• regulators.

Transparency increasingly influences commercial partnerships and recruitment.

VSME: key takeaways