What is the Voluntary Reporting Standard for SMEs (VSME)?
What is the Voluntary Sustainability Reporting Standard for SMEs (VSME)?
EU small and medium-sized companies face increasing pressure for sustainability data, yet traditional ESG reporting can often be resource-heavy. The VSME Standard provides a practical, SME-friendly solution that simplifies reporting, boosts transparency, and can improve access to finance.
What is sustainability reporting?
As an SME, you may be familiar with sustainability reporting but here’s a brief overview of its meaning and significance.
Sustainability reporting relates to the practice of businesses disclosing their environmental, social, and governance (also known as ESG) impacts. It's essentially a way for companies to measure, understand, and communicate their commitment to sustainable practices, transparency, and accountability to various stakeholders, including investors, customers, employees, and communities.
Through these reports, companies not only showcase their efforts toward sustainability but also build trust and foster stronger relationships with their stakeholders.
What is the VSME?
The Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) is a framework designed to assist non-listed Micro-, Small-, and Medium-Sized Enterprises in reporting on their sustainability performance.
Developed by the European Financial Reporting Advisory Group (EFRAG), on behalf of the European Commission, the VSME Standard aims to provide SMEs with a clear, proportionate, and streamlined method for incorporating Environmental, Social, and Governance considerations into their business operations.
Purpose of the VSME Standard
The VSME Standard is specifically designed for SMEs that are not subject to mandatory sustainability reporting requirements, such as the CSRD.
It is designed to provide a simplified framework for SMEs to disclose their ESG data, helping them identify areas for improvement in the management of sustainability issues, while also enhancing transparency for external stakeholders such as their customers, suppliers, and investors.
In doing so, it aims to satisfy the data needs of larger businesses that must request sustainability information from their suppliers, while also assisting SMEs in meeting the data needs of banks and investors.
Structure of the VSME Standard
The standard itself consists of two modules, a Basic Module and a Comprehensive Module, which offers flexibility and scalability in sustainability reporting.
The Basic Module sets the minimum VSME sustainability reporting requirements, whereas the Comprehensive Module sets the additional data disclosures that are likely to be required by banks, investors, and commercial partners.
This modular approach allows SMEs to choose a reporting level that aligns with their capabilities, resources, and the demands of their stakeholders.
What are the benefits of the VSME Standard for SMEs?
The Voluntary Sustainability Reporting Standard for SMEs (VSME) is a crucial tool for small and medium-sized enterprises (SMEs) seeking to enhance their sustainability practices and align with evolving market expectations.
Small businesses have the opportunity to gain numerous advantages from implementing sustainability reporting using the VSME Standard, including:
Small businesses have the opportunity to gain numerous advantages from implementing sustainability reporting using the VSME Standard, including:
- Improved Sustainability Management
The Standard helps SMEs identify areas for improvement in the management of sustainability issues, from energy use to waste management and workforce safety. By assessing their ESG performance, SMEs can adopt better management practices, enhancing their resilience and competitiveness. - Meet Data Requests From Larger Businesses
The Standard aims to satisfy the data needs of larger businesses that must request sustainability information from their suppliers. These larger businesses often require this sustainability information in order to fulfil their own reporting obligations. If these data requests cannot be met, SMEs potentially risk falling out of the supply chains of larger companies. - Gain Access to Financing
The Standard also assists SMEs in meeting the data needs of banks and investors, ultimately improving their access to finance and investment. - Contribution Towards a Sustainable Economy
The Standard encourages SMEs to integrate sustainability into their operations, contributing to a more sustainable and inclusive economy. This can help SMEs fully commit to the low-carbon transition, contributing towards European climate goals. - Provide Transparency
Ultimately, the VSME Standard enables SMEs to provide stakeholders with a transparent view of their business operations, enhancing clarity for external stakeholders like customers, suppliers, and investors, which can improve brand image and build trust. It also benefits internal stakeholders by allowing them to better manage sustainability issues such as pollution or health and safety, supporting competitive growth and resilience over time.
Getting your business ready for the VSME
The VSME offers SMEs a practical and strategic approach to sustainability reporting, providing benefits such as improved access to financing to enhanced brand reputation and compliance readiness.
By adopting the VSME, SMEs can navigate sustainability reporting challenges, meet market demands, and position themselves for long-term success in a rapidly evolving business landscape.
As sustainability gains importance for consumers and investors, leveraging the VSME helps SMEs remain competitive and showcase their commitment to responsible business practices.
Need a more in-depth training in the VSME Standard? Find out more and register for our comprehensive Reporting with the VSME Standard here.
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