VSME (Voluntary Standard for non-listed SMEs) is a voluntary sustainability reporting standard for micro, small, and medium-sized enterprises that are not directly subject to reporting obligations under the CSRD (Corporate Sustainability Reporting Directive).
The standard has been developed by EFRAG (European Financial Reporting Advisory Group) for micro, small, and medium-sized enterprises not directly subject to CSRD reporting obligations. It provides a structured framework for sustainability reporting, with parallels to the legally mandated ESRS (European Sustainability Reporting Standards) framework, but in a significantly simplified and more flexible format.
The Omnibus Proposal: VSME to Play a Greater Role
On 26 February 2025, the European Commission presented the Omnibus proposal, aimed at reducing the reporting burden and enhancing competitiveness for businesses within the EU. The proposed changes mean that only companies with more than 1,000 employees and a turnover exceeding €50 million or a balance sheet total above €25 million will be required to report under CSRD. This implies that approximately 80% of currently obligated companies may be exempted.
As part of the proposal, it is highlighted that the VSME standard should become the preferred reporting approach for companies outside the CSRD scope that wish to report voluntarily. The European Commission intends to adopt a voluntary reporting standard based on EFRAG’s VSME standard. It will eventually be adopted as a delegated act, but pending this process, it will first be issued as a recommendation. The standard is intended to act as a shield (“value chain cap”) by limiting the information that companies and banks subject to CSRD can request from their value chain partners. This ensures that companies only need to report information requested within the framework’s boundaries. The Omnibus also includes a proposal to raise the thresholds for companies required to report under CSRD. It is therefore important to note that if the thresholds are significantly increased, changes may be made to VSME to align with the information needs of users of VSME reports.
Thus, the VSME standard becomes even more relevant for companies seeking an efficient, flexible, and simplified approach to sustainability reporting, while still meeting reporting requirements arising from being part of a value chain.
EFRAGs VSME-standard
The VSME standard has the following objectives:
- Provide a standardised and efficient approach to sustainability reporting. VVSME is built on the same principles, structure, and terminology as ESRS, the mandatory standard for companies covered by CSRD.
- Simplify sustainability reporting for companies facing increasing demands and expectations to deliver sustainability data to stakeholders in the value chain. The information covered in the report is expected to meet a substantial portion of requests from business partners. Consequently, reporting in accordance with VSME may help strengthen the competitiveness of companies not subject to mandatory reporting.
- Provide a framework to enhance sustainability efforts related to key challenges concerning Environment (E), Social (S), and Governance (business conduct) (G). This may contribute to increased competitiveness and resilience in the short, medium, and long term, and promote a more sustainable economy.
The VSME standard covers the same sustainability areas as ESRS, divided into Environment (E), Social (S), and Governance (business conduct) (G). The main difference between these standards lies in the scope of reporting and the complexity of information and data points. VSME is developed with a simplified, flexible, and modular approach, consisting of two modules:
- «Basic Module»: This module contains a core set of indicators and is designed to cover key sustainability aspects efficiently. It provides a minimum level of reporting that can be supplemented with more comprehensive information from the extended module if desired.
- «Comprehensive Module»: This module provides more detailed information and is particularly relevant for companies wishing to disclose more in-depth information to banks, investors, or larger customers. The module includes the basic module along with extended data points within environment.
In line with the standard’s core principles, it may be relevant to include additional information beyond what is covered in the VSME modules. What is relevant will depend on the company’s operations, industry conditions, and context, and may include sustainability topics from other reporting standards such as ESRS or GRI, information related to other applicable regulations such as the Transparency Act, and sector- or company-specific matters.
Double Materiality Is Not a Requirement
The VSME standard does not require a double materiality assessment. The standard’s principle of “if relevant” means that companies only need to report on topics relevant to their operations. If a specific disclosure is not relevant to the company, there is no reporting obligation for that requirement. To ensure that reporting is relevant and credible, we recommend conducting initial analyses as part of the VSME reporting process. Such analyses also contribute to better decision-making and strategic planning.
Why Voluntarily Report Under VSME?
Although the Omnibus proposal introduces simplified reporting requirements and a revised version of the VSME standard in the future, the need for ESG data will not disappear anytime soon. It is important to preserve the benefits of sustainability reporting. Companies that choose to report under VSME now may be better prepared to meet future regulatory requirements and market expectations. VSME reporting is therefore relevant for companies that:
- Are requested to provide data and information related to sustainability topics in tender and bidding processes.
- Are suppliers to larger entities requesting data and information on how the supplier addresses various sustainability topics.
- Seek financing from banks and investors who increasingly expect sustainability information before granting loans or investing.
- Wish to position themselves for the future and gain a competitive advantage in a market where regulations and expectations from customers, employees, authorities, and others can change rapidly.