Sustainability Reporting Made Easy: The VSME Standard was specifically developed for small and medium-sized enterprises (SMEs) to enable simple and structured ESG reporting. With just 20 reporting points across two modules, it offers a clear alternative to the more complex ESRS standards. Here are the five steps to help you get started:
Benefits: Save time, access green financing, and optimize supply chain management. Start now to meet increasing stakeholder demands and future-proof your business. Notably, companies with strong ESG reporting are more likely to attract investment and improve their reputation, as reported by MSCI.
The VSME Standard was developed by EFRAG to provide SMEs with a practical solution for sustainability reporting. At just 66 pages, the standard focuses on the essential aspects of reporting and avoids the complexity of the more extensive ESRS. For a deeper understanding of European sustainability standards, see Demystifying ESRS: A Comprehensive Guide to European Sustainability Reporting Standards and CSRD Disclosure Requirements. The VSME Standard is also aligned with the EU’s push to make sustainability reporting more accessible for smaller businesses (European Commission: Non-financial reporting).
The VSME Standard is modular and consists of two main modules:
| Module | Description | Requirements |
|---|---|---|
| Core Module | Basic ESG reporting | 11 key topics |
| Extended Module | In-depth sustainability reporting | Additional reporting points |
This modular concept makes ESG reporting clearer and more user-friendly. The core module covers the most important sustainability aspects and is easy to understand. Companies wishing to expand their reporting can later switch to the extended module, mirroring the flexibility found in other leading frameworks such as SASB.
The modular structure of the VSME Standard brings a range of benefits, especially attractive for SMEs.
"VSME reduces reporting complexity for SMEs and opens up new opportunities for green financing." – Patrick de Cambourg, Chair of the EFRAG SRB
The benefits of applying the VSME Standard include:
The VSME Standard provides a clear and compact foundation for sustainability reporting. It enables companies to communicate their achievements efficiently without getting lost in the complexity of more comprehensive standards.
Double materiality is a key concept in ESG reporting that connects two perspectives: On one hand, it looks at the impact of sustainability issues on the company itself (financial materiality); on the other, it considers the company’s impact on the environment and society (impact materiality). For more on this concept, see Understanding Double Materiality in CSRD: A Key to Sustainable Success. This dual perspective is now a cornerstone of the EU’s CSRD and is echoed in global standards such as the IFRS S1 and S2.
| Perspective | Description | Example |
|---|---|---|
| Financial materiality | Impact on company value | Rising energy costs due to climate change |
| Impact materiality | Influence on environment and society | Company’s CO₂ emissions |
For SMEs, double materiality assessment is especially helpful as it allows targeted use of resources and focuses attention on the most important sustainability issues. According to a 2023 Deloitte survey, only 19% of companies currently incorporate this approach into their materiality analyses, but adoption is rapidly increasing as regulatory expectations rise.
Assessing ESG topics involves three clear steps:
The results of this assessment should be carefully documented, as they form the basis for further reporting. For instance, UnitedHealth Group invests in health and wellness programs, which not only reduces absenteeism but also boosts productivity (UnitedHealth Group Sustainability Report).
These documented results are the starting point for the next step: data collection.
ESG metrics can be divided into two categories:
| Core Module (mandatory) | Extended Module (optional) |
|---|---|
| Energy consumption & CO₂ emissions | Climate strategy & reduction targets |
| Air, water & soil pollution | Sustainability risks |
| Water consumption & management | Extended social aspects |
| Resource use & waste prevention | Governance aspects |
| Working conditions & employment structure | Gender diversity |
| Health & safety | Human rights processes |
Despite the growing importance of ESG, 47% of companies still use error-prone spreadsheets to manage their ESG data (Deloitte ESG Reporting Survey 2023). These metrics form the basis for structured data collection, which takes place in the next step.
Three core principles define effective ESG data collection:
As an example of the growing focus on sustainability, since May 2025, Microsoft has linked sustainability goals directly to executive bonuses (Microsoft Sustainability). With a centralized and automated approach, your company can create precise ESG reports and position itself for the future.
VSME reporting is based on a two-stage approach: The core module covers around 50 key ESG data points and serves as the foundation, while the extended module provides more detailed information.
| Report Component | Core Module | Extended Module |
|---|---|---|
| General information | Reporting basis, company data | Business model, sustainability initiatives |
| Environmental metrics | Energy, emissions, resources | Climate targets, risk assessment |
| Social aspects | Employee structure, occupational safety | Human rights, extended HR metrics |
| Governance | Compliance, anti-corruption | Gender diversity, sector analysis |
A great example of successfully applying this modular structure is Danone. The company combines business and sustainability data in an integrated annual report and has developed a monitoring system for sustainability metrics (Danone Sustainability). This approach demonstrates how companies can efficiently structure their reporting.
Once the report structure is set, clear quality standards should be defined to ensure consistency and traceability. Key criteria include relevance, reliability, comparability, clarity, and verifiability. For guidance on measuring and reporting, see Mastering Measuring and Reporting: A How-To Guide for Financed Emissions. These principles are also emphasized in the International Federation of Accountants (IFAC) guidance on sustainability assurance.
A cross-functional ESG team is essential for coordination. According to a 2022 KPMG survey, 96% of the 500 largest publicly listed companies now publish a sustainability report—a 10 percentage point increase since 2018. This highlights the growing importance of standardized reporting.
Confidential information can be protected if this is justifiably explained. The VSME report can be prepared either as a standalone document or as part of the annual report. From the second reporting year onwards, comparative data from the previous year must also be included. These requirements form the basis for the subsequent quality assurance process.
After data collection and report organization, quality assurance comes into focus.
Quality assurance of the VSME report begins with a thorough internal review. The focus is on criteria such as relevance, completeness, consistency, comparability, and verifiability of ESG information. According to EY, establishing a robust internal control system for ESG data is critical for audit readiness.
A structured audit process should include the following steps:
| Audit Phase | Main Activities | Documentation |
|---|---|---|
| Preparation | Conducting a risk analysis, defining audit scope | Process documentation, materiality analysis |
| Execution | Data validation, stakeholder interviews | Evidence of ESG metrics, audit logs |
| Follow-up | Management review, deriving actions | Audit report, improvement suggestions |
Involving management is essential to integrate ESG topics into business processes. A well-functioning internal control system can also reduce the costs of external audits.
After completing the internal audit, external validation follows.
External verification of the VSME report is becoming increasingly important. From 2028, the CSRD will require a transition from limited to reasonable assurance. Auditors acting as sustainability auditors must be registered and complete a 40-hour CSRD training (Accountancy Europe).
The ESRS standards include over 1,100 data points required for sustainability reporting. To ensure a smooth audit process, companies should take the following measures:
The external audit places particular emphasis on the double materiality analysis, completeness of ESRS data points, and compliance with reporting obligations under Article 8 of the EU Taxonomy Regulation.
Once the five steps of the VSME report have been implemented, it’s crucial to further develop ESG structures in the long term. Fewer short-term reporting obligations create the opportunity to integrate ESG topics more deeply into corporate strategy and make them more sustainable. Below are actions to help you improve your reporting and anchor it strategically.
| Focus Area | Actions | Expected Benefit |
|---|---|---|
| Strategic Integration | Develop measurable CO₂ reduction targets, incorporate circular economy | Higher resource efficiency, cost savings |
| Supply Chains | Make supply chains sustainable, introduce monitoring systems | Reduced risk, greater transparency |
| Data Management | Capture relevant ESG data early, prepare for new reporting formats | More efficient reports, improved data quality |
To efficiently manage the 190 disclosure requirements of the VSME Standard, the use of specialized tools is recommended. For consulting on sustainability and tools, visit Sustainability Consulting.
Companies that seriously integrate ESG aspects into their strategy benefit from stronger brand reputation, lower costs through more efficient resource use, and increased investor trust.
The VSME Standard: A Tailored Solution for SMEs
The VSME Standard was specifically developed to meet the needs of small and medium-sized enterprises (SMEs). Unlike the much more comprehensive ESRS standards, it is simpler and requires fewer resources—meaning SMEs can save both time and money.
Its flexible structure allows for a practical and customisable sustainability reporting process that reduces bureaucratic hurdles. With the VSME Standard, SMEs can cover up to 70% of ESG requirements without having to deal with overly complex rules. This not only simplifies the entry into sustainability reporting but also enhances competitiveness.
Applying Double Materiality in ESG Reporting
Double materiality in ESG reporting requires companies to consider two perspectives: the inside-out perspective, which focuses on the company’s impact on the environment and society, and the outside-in perspective, which assesses how sustainability issues financially affect the company.
First, companies should examine how their business activities affect the environment and society. This helps identify issues that matter to external stakeholders. The next step is to assess the financial risks and opportunities of these issues to understand their effect on business performance.
By combining both perspectives, companies can develop a clear and transparent ESG report. This not only meets the requirements of the EU’s Corporate Sustainability Reporting Directive (CSRD), but also strengthens stakeholder trust.
To ensure the quality of a VSME report, there are five key steps to follow:
By following these steps, you not only meet sustainability reporting requirements but also strengthen stakeholder trust and communicate your ESG performance effectively.