Unpacking the Voluntary Sustainability Reporting Standard for SMEs (VSME)

The Voluntary Sustainability Reporting Standard for SMEs allows SMEs with fewer than 250 employees to report around ESG in a standardised and credible way. Blessie Rae Canete from Nexio Projects walks through the standard, how it differs from standards for larger companies, and how SMEs can get started.

The EU’s sustainability reporting framework has developed at speed over the last five years. The EU Green Deal (2019) committed member states to climate neutrality by 2050. In 2023, the Corporate Sustainability Reporting Directive (CSRD) introduced corporate sustainability reporting duties for around 50,000 large and listed companies.

To meet CSRD requirements, companies must use the new European Sustainability Reporting Standards (ESRS). These are extensive: they cover environmental, social and governance (ESG) topics in detail, and include more than 1,200 data points.

For larger companies, ESRS opens the door to integrated reporting and transparency. But for smaller non-listed businesses, this level of disclosure is not feasible. Yet many still face ESG questionnaires from their customers, lenders, or investors.

This is where the Voluntary Sustainability Reporting Standard for SMEs (VSME) comes in. Developed by EFRAG and officially recommended by the European Commission in July 2025, VSME allows SMEs with fewer than 250 employees to report in a standardised and credible way.

Introduction to the VSMEs

VSME gives SMEs the means to structure their sustainability reporting without being overburdened by the full ESRS.

The objectives of VSME are clear:

• Provide SMEs with an ESG framework that standardises responses for supply-chain and financing requests
• Cut admin load with a reduced set of around 92 data points
• Ensure reporting is scalable for future legislative developments
• Boost stakeholder engagement by demonstrating transparency and accountability

Importantly, VSME does not require external audit or assurance. However, organisations can voluntarily seek limited assurance to enhance trust in their disclosures.

VSME structure

The VSME structure is built around two modules:

Basic module: 51 data points, targeted at the smallest entities (micro-enterprises, <10 employees). It covers company basics, energy use, greenhouse gas emissions, workforce profile, remuneration, and basic governance.

Comprehensive module: 42 additional data points on top of the basic set. This includes climate transition plans, climate risk reporting, human rights policies, and governance diversity. Designed for SMEs up to 250 employees, it reflects the data most frequently requested by investors, banks, and customers.

How VSME compares to ESRS

The ESRS framework has four broad categories: Cross-cutting disclosures (general requirements, strategy, due diligence); Environment; Social; and Governance.

Within the broader ESRS framework:

• VSME covers cross-cutting disclosures, but only at a simplified level. For example, ESRS requires detailed strategy, policies, risk management, and performance indicators. VSME requires a narrative description and limited disclosure.
• All environmental topics in ESRS are represented in VSME (climate, pollution, biodiversity, water, circularity). However, the level of detail is dramatically reduced. Under ESRS E1, a company may need to disclose GHG emissions intensity, scope 1, 2 and 3 breakdowns, governance oversight, and expenditure plans. VSME requires just scope 1 and 2 emissions, and only scope 3 if relevant.
• Social disclosures diverge significantly. ESRS requires detailed reporting on impacts to workers in the supply chain (S2), communities (S3), and consumers (S4). By contrast, VSME social metrics only cover the company’s own workforce, such as health and safety or training provisions.
• Governance is simplified under VSME. ESRS demands full disclosure on business behaviour and corruption prevention. VSME requires companies to report any convictions, and to share brief information on policies.

In short, VSME provides a simplified ESRS. For SMEs, it offers a credible route to disclose only the most material, directly relevant data.

Important to keep in mind is that the VSMEs do not require a materiality assessment, rather disclosures should only be provided when it is applicable and relevant to the undertaking. However, a (double) materiality assessment is still a best practice tool for sustainability strategy and reporting.

What does a VSME journey look like?

Adopting VSME is not simply about filling in a template. It involves building a sustainability strategy that fits the organisation’s size, resources, and stakeholder expectations. The journey usually involves:

Understanding the VSME standard
Assess which data points and disclosures are required. A materiality assessment is recommended to identify which topics are most impactful for your activities.

Conducting a gap assessment
Compare existing company data with VSME requirements. Identify missing data points or unreliable processes.

Adding company-specific disclosures
Some customers or banks may request information beyond VSME – for example, additional disclosures on value chain workers. Hybrid strategies can combine VSME with other reporting elements.

Designing a reporting strategy
Tailor reporting to your situation. Are you aiming for minimum credible disclosure, or positioning for future CSRD reporting? Making a fit-for-purpose approach to your reporting strategy to integrate company ambitions, stakeholder requests and expectations, and reporting maturity is key.

Drafting the report
The final step is to produce a structured sustainability report aligned to VSME, enriched with the narrative, policies, data, and context that stakeholders need.