Sustainability reporting has long stopped being a topic reserved for listed corporations and multinationals. With EFRAG’s release of the new Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) in December 2024, the European reporting landscape has shifted clearly towards inclusion. For the first time, small and medium-sized enterprises (SMEs) — which make up 99% of all companies in the EU — get a proportionate, purpose-built framework to report voluntarily on sustainability.

What does this mean concretely for Europe’s 25 million SMEs — and why is VSME considered the most pragmatic framework currently available?

What is the VSME standard and why was it introduced?

The VSME standard, developed by the European Financial Reporting Advisory Group (EFRAG), is a voluntary framework for non-listed micro, small and medium-sized companies that don’t fall under the EU’s Corporate Sustainability Reporting Directive (CSRD). It’s not a legal obligation but a practical tool to meet the growing transparency demands of large corporate customers, financial institutions and regulators.

The standard pursues these goals:

  • Enable SMEs to answer ESG data requests from banks and major customers efficiently.
  • Improve access to green finance through standardised disclosures.
  • Strengthen internal sustainability management and risk detection.
  • Prepare SMEs for future regulatory developments — such as CSRD-style requirements that get passed down through supply chains.

Importantly, the standard reflects the limited administrative capacity of SMEs and offers a simplified two-tier structure — a basic module and a more advanced comprehensive module.

Who is the standard for?

The VSME standard is aimed at:

  • Micro companies: ≤ €450,000 balance sheet, ≤ €900,000 turnover, ≤ 10 employees.
  • Small companies: ≤ €5m balance sheet, ≤ €10m turnover, ≤ 50 employees.
  • Medium companies: ≤ €25m balance sheet, ≤ €50m turnover, ≤ 250 employees.

Unlike CSRD, which obliges listed and large companies to extensive reporting, VSME addresses non-listed SMEs — including sole proprietors, partnerships and family businesses — that are under pressure from CSRD-bound customers to deliver ESG data along the supply chain.

Structure and scope: two modular options

1. Basic module (B1–B11)
The entry point and minimum recommendation. Contents:

  • General company info, sector, locations and sustainability targets.
  • Core environmental metrics: energy use, GHG emissions, pollutants, water, biodiversity, waste.
  • Social metrics: workforce size, diversity, occupational safety, training, pay equality.
  • Governance metrics: convictions or fines related to corruption or bribery.

2. Comprehensive module (C1–C9)
Optional and more detailed — fits the expectations of financial stakeholders and adds:

  • Business strategy and integration of sustainability.
  • Climate transition plans, Scope 3 emissions and climate-risk assessment.
  • Human-rights policies, supply-chain oversight, gender diversity and sector exclusions.

Companies can choose to report only the basic module, or both.

Why this matters even when voluntary — especially for SMEs

Even though it isn’t mandatory, VSME reporting is de facto already becoming a requirement for SMEs in the supply chains of larger, CSRD-bound customers. Those customers don’t just have to report their own ESG data, but also their suppliers’ (Scope 3 emissions, value-chain risks, etc.).

Using VSME concretely means:

  • Avoiding customer churn — many large buyers need ESG-compliant partners.
  • Reducing the admin overhead of ad-hoc ESG requests.
  • Boosting investment attractiveness — especially for green finance or public tenders.
  • Aligning early with ESRS and CSRD logic, strategically.

Which metrics SMEs should prepare

The standard sets out clear expectations for the sustainability information SMEs should collect. Examples from the basic module:

Energy & GHG: total energy use by source (MWh); Scope 1 & 2 emissions in tCO₂e.

Pollutants: type and quantity of pollutants in air, water and soil, where relevant.

Biodiversity: number and area of sites in or near biodiversity-sensitive zones.

Water: water-withdrawal volumes, especially in water-scarce regions.

Workforce: gender ratio, occupational-safety incidents, turnover, training hours.

Governance: number and value of fines for corruption or bribery.

For SMEs with more capacity or investor interest, the comprehensive module additionally covers Scope 3 emissions, GHG reduction targets, climate risks and revenues from emission-intensive sectors.

Outlook: should SMEs act now?

Yes — because voluntary doesn’t mean optional when the market is driven by compliance-by-association. Even if your company isn’t in scope: your customers may be, and banks and investors will increasingly expect VSME-level insights.

EFRAG has communicated this explicitly: the standard is designed to anticipate exactly this growing wave of ESG data requests. It’s also built future-proof — compatible with the Taxonomy regulation, ESRS and CSRD Article 29.

Bottom line: why VSME is the most pragmatic ESG framework today

The VSME standard strikes a rare balance between regulatory connectivity and practical feasibility. Unlike heavier frameworks built for large corporates, VSME speaks directly to the reality of small companies:

  • It offers structure without bureaucracy.
  • It fits the existing EU sustainability architecture and prepares SMEs for downstream CSRD requirements.
  • It enables incremental learning and reporting — companies can start with the basics and grow over time.
  • It safeguards market relevance, because it connects to banks, public procurement and customer expectations.

For any SME at the start of its sustainability journey, VSME is the most accessible, credible and future-proof entry point available today.