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 specifically designed for non-listed small and medium-sized enterprises. 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 60 ESG indicators in its Basic module, roughly ten times fewer.

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
• Help anticipate future regulatory sustainability requirements

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 officially adopted as a recommendation on July 30, 2025.

This endorsement 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.

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.

It requires roughly:

• 20 indicators
• Around 60 data points

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?

Non-listed SMEs not subject to the CSRD

The primary target audience is non-listed SMEs outside the CSRD 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

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 indicators
• Approximately 60 data points

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
• Biodiversity impacts
• 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 requirements, bringing the total to about 80 indicators.

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.

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