Implementing a proactive approach to heighten eco-friendliness
The European Commission is set to endorse a new voluntary sustainability reporting standard for micro, small, and medium-sized enterprises (SMEs) in July 2025. Known as the Voluntary Sustainability Reporting Standard for Non-Listed SMEs (VSME), this standard is part of the EU's Omnibus package and aims to simplify reporting obligations for companies.
The VSME standard, published in December 2024, is a response to the growing need for SMEs to report on their environmental, social, and governance (ESG) practices. It offers a low-burden and simplified approach to sustainability reporting, designed to help SMEs with limited resources.
The standard includes a basic module for a simplified ESG report, suitable for micro and small enterprises without experience in the field. This module covers areas such as energy consumption, greenhouse gas emissions, air, water, and soil pollution, biodiversity, water, resource use, circular economy, and waste management in the environmental section. In the governance section, it provides details on convictions and sanctions for corruption and extortion. The basic module also includes a social section with general worker characteristics, health and safety at work, remuneration, collective bargaining, and training, and workers in the value chain.
For enterprises with more resources and/or greater experience, there is an advanced module. This module includes additional general worker characteristics, further information on the workforce, human rights policies and processes, and serious and negative human rights incidents in the social section. It also covers greenhouse gas reduction targets and climate transition risks in the environmental section, as well as revenue in certain sectors and exclusion from EU benchmark references and gender diversity index in governance bodies.
The digital version of the standard, published in May 2025, includes interactive elements, automatic calculations, consistency checks, and direct links to VSME text and guidelines. This version is designed to make reporting easier and more efficient for SMEs.
The VSME standard is promoted by Efrag and was requested by the European Commission as part of the 2023 "SME Relief Package". Its objectives include reducing the burden of numerous uncoordinated ESG requests from banks, partners, and investors. By providing a uniform format, the VSME standard aims to facilitate access to green financing and help SMEs participate in the transition towards a sustainable economy.
The VSME standard is expected to benefit SMEs in several ways. It simplifies and reduces the cost associated with preparing multiple reports for different stakeholders. It also helps SMEs identify potential sustainability issues, thereby protecting business value. Furthermore, SMEs can use a single report for financing and client relationships, reducing the need to prepare separate reports for each financier or client.
In conclusion, the Voluntary Sustainability Reporting Standard for Non-Listed SMEs (VSME) is a significant step towards simplifying ESG reporting for SMEs. By offering a low-burden and simplified approach, the VSME standard aims to ease SMEs' participation in the transition towards a sustainable economy and provide a uniform format to facilitate access to green financing.
Other enterprises might find the home-and-garden section of the VSME standard useful, as it addresses sustainability in areas like biodiversity, water use, and waste management. Additionally, the standard's social section, which covers worker characteristics, health and safety, and training, could be relevant for companies that are emphasizing sustainable living in their other lifestyle practices.
