The EFRAG VSME standard represents a voluntary sustainability reporting standard specifically designed for non-listed SMEs across Europe. Developed through extensive public consultation, this voluntary reporting standard enables small and medium-sized enterprises to structure their sustainability reporting efficiently while meeting stakeholder expectations.

The VSME standard developed by EFRAG addresses a critical gap in the sustainability reporting landscape. While the Corporate Sustainability Reporting Directive (CSRD) mandates comprehensive disclosures for large companies, many non-listed SMEs face uncoordinated requests from banks, investors, and business partners for sustainability information.

Understanding the VSME Standard Framework

EFRAG delivered this voluntary standard after comprehensive technical advice and feedback from stakeholders across multiple sectors. The reporting standard for non-listed SMEs provides a standardised framework that reduces the administrative burden while ensuring meaningful disclosures.

The VSME aims to support non-listed SMEs in their sustainability journey through a modular structure. This approach allows companies to start with a basic module covering essential environmental metrics and expand to a comprehensive module as their sustainability performance matures.

Key Features of the Voluntary Sustainability Standard

The voluntary sustainability reporting standard includes several distinctive elements that make it practical for SMEs. First, it aligns with the European Sustainability Reporting Standards (ESRS) used by large undertakings, ensuring consistency across value chains. Second, the VSME digital template simplifies data collection and reporting processes.

EFRAG released the standard alongside educational videos and implementation guidance. These resources help companies understand which sustainability reporting standards apply to their specific situation and how to begin their sustainability journey effectively.

Modular Structure for Flexible Implementation

The basic module covers fundamental sustainability issues including GHG emissions, energy consumption, and workforce metrics. Companies can implement this level quickly, providing essential sustainability information to financial institutions and business partners.

The comprehensive module extends reporting to detailed environmental metrics, governance structures, and value chain assessments. This level positions companies for future regulatory requirements and enhances access to sustainable finance opportunities.

Strategic Benefits for Non-Listed SMEs

Adopting the VSME standard offers substantial benefits beyond compliance. Companies using this voluntary standard gain competitive advantages in procurement processes, as large companies increasingly require sustainability reporting from their suppliers.

The standardized framework reduces the burden of responding to uncoordinated requests from multiple stakeholders. Instead of preparing custom responses for each inquiry, SMEs can reference their VSME report, saving significant time and resources.

Market Access and Green Financing

Financial institutions increasingly evaluate sustainability performance when making lending decisions. The VSME recommendation provides the structured disclosures that banks need to assess ESG risks, improving access to favorable financing terms.

The European Commission recognizes that non-listed SMEs represent a substantial portion of the European economy. By supporting the sustainable economy transition through this voluntary sustainability standard, SMEs can position themselves as reliable partners for large undertakings subject to CSRD requirements.

Alignment with Corporate Sustainability Reporting Directive

The VSME standard uses the same sustainability reporting standards framework as ESRS, creating a natural progression path. Companies that master the VSME today will find transitioning to full CSRD compliance smoother if they grow beyond SME thresholds or decide to list publicly.

This alignment matters because many SMEs sit within the value chains of CSRD-obligated companies. Using compatible sustainability reporting standards facilitates data exchange and reduces friction in supply chain relationships.

Implementation Process for SMEs

Beginning with the VSME standard requires structured planning but need not be overwhelming. The process typically starts with a materiality assessment to identify which sustainability issues matter most to your stakeholders and business model.

EFRAG delivered comprehensive technical advice on conducting this assessment. The guidance helps companies distinguish between issues that require immediate attention in the basic module versus those suitable for the comprehensive module as reporting matures.

Data Collection and Digital Template

The VSME digital template streamlines data gathering by providing clear specifications for each disclosure requirement. The template and XBRL taxonomy enable automated data processing, reducing manual work and improving accuracy.

Companies should inventory existing data sources before starting. Often, information needed for the voluntary reporting standard already exists in various systems—energy bills, HR records, and supplier contracts. The challenge lies in organizing this sustainability information consistently.

Setting GHG Reduction Targets

Establishing GHG reduction targets forms a core element of credible sustainability reporting. The VSME standard requires companies to disclose their approach to measuring and reducing emissions, including targets and progress tracking.

Many SMEs find that systematic measurement reveals opportunities for cost savings through energy efficiency. The structured approach to tracking GHG emissions often pays for itself through operational improvements.

Support Resources and Public Consultation

EFRAG continues supporting implementation through educational videos, webinars, and updated guidance materials. These resources address common questions that emerge during the public consultation process and subsequent adoption phases.

The VSME recommendation emphasizes that implementation should be proportionate to company size and resources. Small and medium enterprises can phase their adoption, starting with material topics and expanding coverage over time.

Stakeholder Engagement

Effective use of the voluntary sustainability reporting standard requires understanding what information your stakeholders actually need. Banks may prioritize climate risks and financial metrics, while customers in certain sectors focus on supply chain transparency and labor practices.

The standardised framework helps by defining common disclosures that satisfy most stakeholder needs. Rather than guessing what to report, companies can follow the structure knowing it reflects broad consensus on material sustainability information.

EU Policymakers and Future Development

The European Commission continues refining sustainability reporting requirements through delegated acts and regulatory updates. The VSME standard positions companies to adapt as policies evolve, providing a foundation for compliance regardless of future changes.

EFRAG released statements indicating ongoing work to enhance the standard based on user feedback. This iterative approach ensures the voluntary standard remains practical and relevant as sustainability practices mature across different sectors.

Industry-Specific Considerations

While the VSME standard applies across sectors, implementation details vary by industry. Manufacturing companies focus heavily on environmental metrics like emissions and waste, while service businesses emphasize workforce and governance topics.

The comprehensive module includes sector-specific guidance helping companies tailor their disclosures appropriately. This flexibility within a standardized framework balances comparability with relevance to actual business operations.

Integration with Existing Management Systems

Many SMEs already have quality management, environmental management, or occupational health systems in place. The VSME standard can integrate with these existing structures rather than creating parallel processes.

Companies should map current management system outputs to VSME disclosure requirements. This mapping often reveals that substantial portions of required sustainability information already exist—they simply need organizing according to the reporting standard for non-listed SMEs framework.

Measuring Sustainability Performance

The VSME standard emphasizes measurable indicators that track sustainability performance over time. This approach enables companies to demonstrate improvement, benchmark against peers, and identify areas needing attention.

Regular measurement also supports strategic decision-making. When sustainability performance connects to business metrics, leaders can evaluate trade-offs and investments more objectively, moving beyond subjective assessments to data-driven sustainability management.

Benchmarking and Continuous Improvement

As more non-listed SMEs adopt this voluntary sustainability standard, industry benchmarks will emerge showing typical performance levels. Companies can use these benchmarks to set realistic GHG reduction targets and identify best practices worth adopting.

The standardized framework makes comparisons meaningful because companies report on consistent metrics. This comparability benefits the sustainable economy by making it easier to identify leaders and laggards, creating market pressure for improvement.

Frequently Asked Questions

What Makes the VSME Standard Different from Other Reporting Frameworks?

The VSME standard developed specifically for non-listed SMEs VSME needs, balancing comprehensiveness with practicality. Unlike frameworks designed for large undertakings, it acknowledges resource constraints while maintaining credibility with stakeholders.

The basic module and comprehensive module structure provides flexibility that general frameworks lack. Companies can scale their reporting as capabilities develop rather than facing all-or-nothing implementation decisions.

How Does the Digital Template Support Implementation?

The digital template and XBRL taxonomy enable automated data processing and validation. This technology reduces errors and saves time compared to manual report preparation, making sustainability reporting more efficient for resource-constrained SMEs.

The template also facilitates data sharing with banks and other financial institutions that increasingly require standardized sustainability information. Rather than filling out multiple custom forms, companies can export data in formats stakeholders expect.

Will the VSME Standard Become Mandatory?

Currently, the VSME remains a voluntary standard, though the European Commission may incorporate elements into future delegated acts. Even if adoption stays voluntary, market pressure from customers, banks, and investors effectively makes some form of sustainability reporting necessary for competitive SMEs.

Companies adopting the VSME standard position themselves ahead of potential regulatory changes. If requirements tighten, early adopters face minimal disruption having already established robust sustainability reporting processes.

Next Steps for SMEs

Starting with the VSME standard requires commitment but delivers substantial value. Companies should begin by reviewing the complete standard documentation available through EFRAG and assessing which module fits their current capabilities.

The voluntary sustainability reporting standard represents more than a compliance tool—it's a strategic asset for forward-thinking SMEs. By adopting structured sustainability reporting, companies strengthen stakeholder relationships, improve operational efficiency, and position themselves competitively in markets increasingly focused on environmental metrics and sustainable practices.

Sources

• EFRAG. (2024). Voluntary Standard for the Sustainability Reporting by SMEs
• European Commission. (2024). Corporate Sustainability Reporting Directive
• EFRAG. (2024). European Financial Reporting Advisory Group