VSME explained: the voluntary sustainability standard for SMEs

What is the VSME?

The Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) was developed by the European Financial Reporting Advisory Group (EFRAG) and published in 2024. It provides a simplified, voluntary framework for sustainability reporting by small and medium-sized enterprises that fall outside the mandatory scope of the CSRD. The VSME is content-compatible with the European Sustainability Reporting Standards (ESRS), but requires significantly fewer data points and no full double materiality assessment.

Who is the VSME designed for?

The VSME targets non-listed SMEs that are not directly subject to the CSRD but are increasingly receiving requests for ESG performance data. This so-called trickle-down effect arises because large CSRD-reporting companies need sustainability data from their suppliers to complete their own reports.

• Banks and financial institutions that use ESG ratings for lending decisions under the EU Taxonomy or SFDR
• Large business customers collecting supplier data as part of their own CSRD reporting
• Investors and private equity firms with ESG due diligence requirements

Structure: Basic Module and Comprehensive Module

The VSME is divided into two progressive modules. Companies can choose between them depending on the complexity of their activities and the expectations of their stakeholders.

• Basic Module: General company information, core environmental metrics (energy, greenhouse gas emissions, water, waste) and key social indicators – suitable as a minimum disclosure
• Comprehensive Module: All Basic Module content plus deeper disclosures on environmental impacts, biodiversity, working conditions, human rights and governance – for companies with a more complex stakeholder environment

What does the VSME cover?

In terms of content the VSME aligns with the ESG dimensions without requiring their full depth. It encompasses general company information, environmental data (including energy and greenhouse gas emissions, water, waste and biodiversity), social topics (working conditions, health and safety, diversity) and governance disclosures on corporate management, risk management and business ethics. The number of data points is considerably smaller than in a full ESRS report.

VSME compared with CSRD and ESRS

The VSME is explicitly designed as a proportionate standard that does not replicate the full CSRD burden for SMEs, while remaining content-compatible with the ESRS.

• No obligation: VSME is voluntary; the CSRD is mandatory for in-scope companies
• Fewer data points: the VSME covers a fraction of the ESRS data points and does not require a full double materiality assessment
• Compatibility: VSME data can be converted to ESRS-compliant formats with little additional effort – an advantage for a later entry into CSRD reporting

Benefits of the VSME for SMEs

VSME-aligned reporting offers SMEs several strategic advantages that go beyond pure compliance.

• A structured answer to many ESG questionnaires from customers, banks and investors – without starting from scratch each time
• Preparation for potential future reporting obligations if the company grows or the regulatory landscape changes
• Credibility and transparency toward stakeholders through a recognized European standard