A groundbreaking step towards the sustainable transition of small and medium-sized enterprises (SMEs) has been taken with the introduction of the Voluntary Sustainability Reporting Standard for SMEs (VSME). Designed specifically for non-listed SMEs, this initiative offers a simple yet standardized framework for reporting sustainability-related information. Developed by the European Financial Reporting Advisory Group (EFRAG), the VSME standard reflects growing stakeholder demand for actionable, comparable sustainability data. It underscores the critical role SMEs play in advancing a sustainable economy.

Objectives of the VSME

  • The primary goal of the VSME is to meet the growing demand for sustainability data while supporting SMEs in their business growth and resilience. It enables SMEs to provide information that satisfies the data needs of large companies that require sustainability insights from their suppliers. Similarly, it helps SMEs demonstrate their commitment to sustainable practices to banks and investors, thereby improving their access to financing.
  • The key objective is to help SMEs improve the management of sustainability issues they face, such as addressing environmental concerns like pollution or ensuring workforce health and safety. By identifying and mitigating these challenges, SMEs can enhance their operational resilience and competitive position in the short, medium, and long term.
  • The VSME supports the broader goal of contributing to a sustainable and inclusive economy. By adopting the standard, SMEs can align with global sustainability objectives and strengthen their role in creating a more equitable and environmentally responsible business landscape.
  • The VSME represents a significant step in enabling SMEs to participate in the sustainability transition, empowering them to align with stakeholder expectations and position themselves as valuable contributors to a sustainable future.

Who Can Use the VSME?

The standard applies to non-listed micro-, small-, and medium-sized enterprises, as defined under Article 3 of Directive 2013/34/EU. These businesses are categorized by financial and staffing thresholds:

  • Micro enterprises:
    • Balance sheet total = �450,000
    • Net turnover = �900,000
    • Average employees = 10
  • Small enterprises:
    • Balance sheet total = �5 million
    • Net turnover = �10 million
    • Average employees = 50
  • Medium enterprises:
    • Balance sheet total = �25 million
    • Net turnover = �50 million
    • Average employees = 250

While SMEs remain outside the scope of the CSRD, adopting the VSME helps them align with evolving sustainability standards and prepares them to meet stakeholder expectations.

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Key Features of the VSME

The VSME encompasses general requirements, disclosures, policies, actions, targets, and metrics in environmental, social, and business conduct areas. It aims to standardize ESG Reporting (Environmental, Social, and Governance) data requests, easing the reporting burden on SMEs and facilitating their role in sustainable finance. The VSME is designed to be practical and adaptable, offering two distinct modules to guide SMEs in preparing their sustainability reports. This structure ensures the standard is scalable, catering to businesses of varying sizes and resource capacities. VSME simplifies SME sustainability reporting and boosts transparency.

Introductory Module

Includes essential disclosures (B1-B2) and basic metrics (B3-B11). This module is the target approach for micro-undertakings and constitutes a minimum requirement for other undertakings. The module also defines narrative disclosures about Policies, Actions and Targets (PAT). The basic module has the following disclosures.

  • General Information:
    • B1 � Basis for preparation
    • B2 � Practices, policies, and future initiatives
  • Environment Metrics:
    • B3 � Energy and greenhouse gas emissions
    • B4 � Pollution of air, water, and soil
    • B5 � Biodiversity
    • B6 � Water�
    • B7 � Resource use, circular economy, and waste management
  • Social Metrics:
    • B8 � Workforce � General characteristics
    • B9 � Workforce � Health and safety
    • B10 � Workforce � Remuneration, collective bargaining, and training
  • Governance Metrics:
    • B11 � Convictions and fines for corruption and bribery

Comprehensive Module

Provides additional disclosures and data points beyond the Basic Module. Applying to the Basic Module is a prerequisite for applying to the Comprehensive Module. This module sets data points in addition to disclosures in the basic module B1-B11, which are likely to be requested by banks, investors and corporate clients of the undertaking on top of the Basic Module. Initially designed as the VSME's version of the Double Materiality Assessment, the Materiality Analysis has been removed from the standard. As a result, undertakings are not required to disclose which sustainability matters are relevant to their business and organization. The comprehensive module has the following disclosures.

  • General Information:
    • C1 � Strategy: Business model and sustainability-related initiatives
    • C2 � Practices, policies, and future initiatives
  • Environment Metrics:
    • C3 � GHG reduction targets and climate transition
    • C4 � Climate risks
  • Social Metrics:
    • C5 � Additional (general) workforce characteristics
    • C6 � Additional own workforce information � Human rights policies and processes
    • C7 � Severe adverse human rights incidents
  • Governance Metrics:
    • C8 � Revenues from specific sectors and exclusion from EU reference benchmarks
    • C9 � Gender diversity ratio in the governance body

Customization of VSME Modules

Non-listed SMEs can tailor their sustainability reporting under the VSME standard by selecting modules that align with their strategic priorities. They can choose between two reporting options:

  • Option A: A streamlined approach based solely on the Basic Module, covering fundamental topics, policies, actions, and targets.
  • Option B: Designed for enhanced transparency in business relationships, this option includes both the Basic Module and the Comprehensive Module for a more in-depth disclosure.

Furthermore, non-listed SMEs must indicate whether their sustainability report is consolidated including subsidiary data or individual covering only the parent entity. SMEs may seek assurance to enhance the credibility of their sustainability disclosures, especially when engaging with stakeholders such as banks, investors, or large corporate clients.

Appendix B: List of Possible Sustainability Issues

Appendix B is an integral part of this VSME Standard and comprehensively lists possible sustainability issues. Each issue is categorized under Topics, further divided into Sub-topics, and, where applicable, into more granular Sub-sub-topics.

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Appendix C: Background Information for Financial Market Participants that are Users of the Information Produced Using this Standard (Reconciliation with Other EU Regulations)

This appendix must be reported for companies who report on VSME standards. It provides information on the Sustainable Finance Datapoints in different modules of this Standard. It demonstrates how they align with relevant EU regulations such as the Sustainable Finance Disclosure Regulation (SFDR), EBA Pillar 3 disclosures, and the Benchmark Regulation. Appendix C illustrates how these data points meet the requirements of different user types, such as banks, investors, and significant undertakings. Each data point is identified by its DR number and Title, which references disclosures in the Basic Module and Comprehensive Module of VSME Standard.

Benefits of the VSME

The voluntary Standard for SMEs brings several benefits to these companies:

  • Simplified Reporting: The VSME provides a streamlined framework that allows SMEs to report on their sustainability performance without excessive complexity. It reduces the reporting burden on these companies, enabling them to focus on their core business activities.
  • Standardized Reporting: The VSME ensures that SMEs follow a standardized approach to sustainability reporting. This standardization enhances comparability between companies and facilitates benchmarking, enabling stakeholders to assess the sustainability performance of SMEs more effectively.
  • Enhanced Stakeholder Engagement: By adopting the VSME, SMEs can effectively engage with their stakeholders, including banks, investors, and larger companies. The Standard provides a common language and format for reporting, making it easier for stakeholders to understand and evaluate the sustainability performance of SMEs.�
  • Access to Finance: The VSME aims to enhance SMEs' access to finance by providing standardized sustainability information. Banks and investors increasingly consider sustainability performance when making financing decisions. By reporting according to the VSME, SMEs can demonstrate their commitment to sustainable practices, increasing their chances of securing funding.

The Path Forward

The Voluntary Sustainability Reporting Standard for SMEs is a timely and much-needed solution, bridging the gap between large companies and smaller businesses in the sustainability reporting landscape. By adopting this Standard, SMEs can meet stakeholder demands and position themselves as vital contributors to a sustainable economy. The sustainability journey begins with practical tools like the VSME, empowering SMEs to thrive in a future shaped by environmental and social responsibility.

Adopting VSME is a vital step for SMEs aiming to strengthen their sustainability efforts. For comprehensive support in SME sustainability reporting, ecoPRISM offers tailored ESG solutions that simplify data management, reporting, and compliance. Empower your business to meet sustainability goals effectively with ecoPRISM .