What is the Voluntary Reporting Standard for SMEs (VSME)?

Introduction
EU small and medium-sized companies face increasing pressure for sustainability data, yet traditional ESG reporting is resource-heavy. The VSME Standard provides a practical, SME-friendly solution that simplifies reporting, boosts transparency, and improves financing access. 

We offer a practical VSME training course to help you understand the new Voluntary Reporting Standard for SMEs (VSME) and provide essential information for achieving VSME compliance.

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 is the practice where businesses disclose their environmental, social, and governance (ESG) impacts. This process is crucial as it enables companies to measure and understand their performance in relation to sustainability. 

By engaging in sustainability reporting, organisations can effectively communicate their commitment to sustainable practices, promote transparency, and enhance accountability. This communication is essential for various stakeholders, including investors, customers, employees, and communities, who are increasingly concerned about the ethical and sustainable operations of the businesses they engage with. 

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 SMEs (VSME) is a new and simplified framework for non-listed micro, small, and medium-sized companies.

Its purpose? Standardise and simplify sustainability reporting for the SME sector. 

By implementing the VSME, your company can significantly simplify sustainability data management and reduce the administrative burden. This framework also helps companies to improve their competitiveness and strengthen their reputation.

Who is the VSME for?
The VSME is designed by EFRAG for SMEs that face the issue of each stakeholder requiring a different set of sustainability related information. The standard will be particularly beneficial for SMEs that are not required to report on sustainability but still face demands for sustainability data from their:

- customers (especially large companies under the scope of CSRD), 
- business partners, 
- banks and investors (as they are required to report under the SFDR), 
- current and future employees, 
- and other stakeholders.

As the VSME concerns all SMEs falling outside the scope of the Corporate Sustainability Reporting Directive (CSRD), it means that the VSME can be applied by the vast majority of the circa 32 million EU SMEs operating in the industry and service sectors.

It can also be especially beneficial for companies already working on sustainability-related solutions and need the right set of sustainability data to showcase the positive impact they create either to access funding or acquire new customers. 

As the VSME standard is aligned with the reporting requirements for large corporations (CSRD) and banks and investors (SFDR), aligning sustainability data with the VSME integrates sustainability KPIs with a pan-European ESG reporting framework.
Why is the VSME important for small and medium-sized enterprises (SMEs)?
It’s widely understood that small and medium-sized companies have fewer resources to manage sustainability. Therefore, spending all the resources on collecting and reporting data won’t leave much room for working on sustainability initiatives. Consequently, it’s especially important for small to medium-sized companies to manage sustainability efficiently.

The VSME comes in as a pan-European ESG reporting framework to enable SMEs to meet the increasing need for sustainability data while limiting the amount of data they collect to the most relevant to their business.

What are the benefits of the VSME Standard for SMEs?
Small businesses can reap various benefits from sustainability reporting using the VSME standard, though these benefits may vary for each company. Based on our observations, the primary advantages of reporting with the VSME Standard are the following: some of which are noticeable in the short term, and some only after a significant time. 

Main benefits of the VSME
1. Streamlined and More Efficient Reporting Process
The VSME standards provide Basic and Comprehensive modules, allowing companies to tailor their reporting practices according to their size, industry, and specific needs. 

This approach enables smaller companies to focus reporting efforts only on the most crucial information, allowing them to pursue their strategic goals without the burden of complicated reporting procedures. 

2. Improved Access to Financing
ESG factors are becoming crucial for investment decisions as banks, investors, and other financial market participants are required by the SFDR (Sustainable Finance Reporting Directive) to disclose the ESG risks and impacts of their investment decisions. 

As a result, SMEs adopting the VSME Standard may unlock better financing terms and greater access to capital.

3. Competitive Advantage
SMEs that provide products or services to large companies risk being excluded from supply chains if they cannot provide the necessary ESG disclosures. This creates an ESG-related risk that can directly and negatively affect the company’s financial performance. 

Hence, companies capable of supplying ESG data possess a distinct competitive advantage when partnering with large global corporations that are mitigating ESG risks in their supply chains. 

4. Transparency, Trust, and Reputation
The VSME Standard helps SMEs clearly communicate their business practices, building trust with customers and partners. 

This transparency fosters better collaboration and stronger industry relationships.

As a result, SMEs can unlock new growth opportunities and stay competitive.

5. Regulatory Readiness and Compliance
Choosing the VSME Standard for sustainability reporting is a great way to make sure you're in line with current regulations while also taking steps toward CSRD readiness if and when it applies to your company. 

By taking this proactive step, you’re not just protecting your operations - you’re also setting the stage for long-term continuity and stability in our ever-changing regulatory environment.

Getting your business ready for the VSME
Small and medium-sized enterprises (SMEs) are the backbone of European competitiveness and social prosperity. SMEs make up 99 percent of all enterprises in the EU and employ about two-thirds of the workforce in member states, and thus play a pivotal role in driving employment and generating value across all economies in Europe. 

Start your VSME learning journey today with the CSRD Institute. 

Register your interest and be the first to know about our new VSME course when it launches!
Copyright © 2024

CSRD Institute

Legal

Social