VSME: EU Voluntary Sustainability Reporting for SMEs
As EU sustainability legislation has evolved, a voluntary reporting framework called VSME (Voluntary Sustainability Reporting Standard for Non-Listed SMEs) has emerged from the ongoing Omnibus negotiations.
The VSME makes sustainability reporting more accessible for smaller companies while also setting limits for larger businesses now required to report value chain data under the Corporate Sustainability Reporting Directive (CSRD).
This guide explains what VSME is, why it matters, and how EU businesses can use it effectively to simplify compliance and enhance market credibility.
Why the EU Introduced the VSME Standard for SMEs
The CSRD initially aimed to mandate sustainability reporting for around 50,000 companies across Europe, including SMEs. However, policymakers soon recognised that smaller businesses could face disproportionate administrative burdens, potentially hindering growth.
To address these concerns, the Omnibus Simplification Package was introduced. Among its reforms was the creation of the VSME framework, a lighter and more proportionate reporting standard.
VSME allows SMEs to report sustainability data in a simplified way and sets clear limits on the type of information that larger CSRD-reporting companies can request from their suppliers.
Understanding the VSME Framework: ESG Reporting Made Simple
Developed by the European Financial Reporting Advisory Group (EFRAG), the VSME builds on the same expertise behind the European Sustainability Reporting Standards (ESRS) that underpin CSRD.
VSME offers two levels of reporting:
- Basic: For smaller or less mature companies
- Comprehensive: For advanced organisations seeking more detailed disclosure
While fully voluntary, VSME is expected to become the reference framework for the sustainability data larger European companies request from their supply chain partners.
Benefits of VSME for EU SMEs and Supply Chains
The VSME standard helps standardise sustainability reporting for non-listed SMEs while maintaining proportionality across EU corporate sustainability requirements.
Key benefits include:
- Reduced Administrative Burden – VSME focuses on key quantitative ESG data, cutting time, cost, and reporting effort.
- Standardised Supplier Data – Creates a consistent structure for sustainability information, improving predictability and comparability.
- Enhanced Transparency – Voluntary reporting under VSME strengthens supplier visibility and builds trust with customers.
VSME: Target Audience and Use Cases
VSME is designed for two main groups:
- Non-Listed SMEs – Companies under EU size thresholds for employees, turnover, and balance sheet totals, particularly those no longer required to report under CSRD.
- Larger CSRD-Reporting Companies – While not reporting under VSME themselves, these organisations are affected because the framework sets the maximum sustainability data they can request from smaller suppliers.
Key ESG Metrics Included in VSME Reporting
VSME focuses on the most material ESG topics for SMEs. EFRAG has streamlined ESRS content to include core indicators such as:
- Workplace health and safety statistics
- Anti-corruption and bribery incidents
Both Basic and Comprehensive levels provide practical guidance and clearly defined data requirements to simplify reporting.
Step-by-Step Guide to Reporting Under VSME
SMEs can start reporting using VSME either as a standalone report or within existing sustainability or annual reports. Key steps include:
- Engage Key Personnel – Identify staff responsible for coordinating reporting efforts.
- Conduct a Gap Analysis – Review VSME requirements to identify gaps in current ESG data.
- Collect and Consolidate Data – Gather quantitative data and maintain a central repository for future reporting cycles.
VSME’s Impact on European Supply Chain Management
VSME helps reduce the burden of supplier questionnaires for large buyers. By limiting data collection to what is relevant for their CSRD disclosures, companies benefit from:
- More consistent and comparable information across industries
- Faster onboarding and payment cycles for SMEs
- Competitive advantage for suppliers aligning with a recognised EU standard
Early adoption can make SMEs more attractive partners for large European buyers.
VSME: Streamlining ESG Reporting for SMEs Across Europe
The VSME framework provides a proportionate and standardised approach to sustainability reporting. It reduces administrative burdens for SMEs while maintaining data quality and compatibility with CSRD requirements.
By adopting VSME, SMEs can simplify compliance, strengthen customer relationships, and enhance market credibility, all while supporting Europe’s broader sustainability goals.
