EFRAG's Voluntary SME Standard (VSME) offers companies from the SME sector a simplified alternative to the ESRS standards. In this article, you will find out what the VSME standard is, how you can benefit from simplified sustainability reporting with VSME, where the differences to ESRS lie and how best to get started with implementation.
In brief
- Implementation: Step-by-step implementation with Basic and Comprehensive Module possible. Planted supports you in each of these steps.
- VSME standard: A voluntary framework for sustainability reporting by small and medium-sized enterprises (SMEs).
- Relevance: The VSME report is gaining in importance as an alternative to the CSRD due to the Omnibus Regulation.
- Target group: Non-listed SMEs and companies formerly affected by CSRD that are looking for clear guidelines for their reporting.
What is the VSME standard and for which companies is it relevant?
The Voluntary Sustainability Standard for SMEs (VSME) was developed by the European Financial Reporting Advisory Group(EFRAG) on behalf of the European Commission to offer small and medium-sized enterprises a practicable and flexible option for sustainability reporting.
In contrast to the more comprehensive European Sustainability Reporting Standards(ESRS), the VSME is specifically tailored to the needs and resources of SMEs. This standard enables companies to present their sustainability performance transparently and to meet the increasing demands of investors, banks and business partners.
The VSME standard is primarily aimed at:
- Non-listed SMEs with fewer than 1,000 employees
- Companies that are not directly affected by the CSRD but are required to provide ESG data to business partners
- Formerly CSRD-liable companies seeking a structured alternative under the Omnibus Regulation
Main features of the VSME standard
- Simplicity: Easy-to-implement reporting requirements that can be managed with the existing resources of SMEs.
- Relevance: Focusing on the key sustainability issues that are actually significant for SMEs and their stakeholders.
- Flexibility: Modular structure that can be adapted to the size of the company and available resources.
- Cost efficiency: Significantly lower implementation costs compared to full ESRS requirements.
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Structure of the VSME standard
The VSME standard consists of two main modules that enable companies to report according to their needs and resources:
1. basic module: The Basic Module serves as an objective for micro-enterprises and as a minimum requirement for small and medium-sized enterprises. It comprises the basic sustainability information in the areas of environment, social affairs and corporate governance.
2. comprehensive module: The Comprehensive Module extends the Basic Module with additional data points that are frequently requested by banks, major clients and investors. It provides a more comprehensive representation of sustainability performance without the full scope of ESRS requirements.
VSME vs. ESRS - the most important differences
While ESRS are comprehensive and mandatory requirements for large, listed companies, the VSME standard offers a simplified and voluntary alternative for non-listed SMEs. It is important to understand that the VSME should not be misunderstood as a 'Voluntary ESRS', but as a stand-alone standard developed specifically for SMEs. This enables smaller companies to present their sustainability performance without excessive administrative effort .
The most important differences between ESRS and VSME:
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Significance of the VSME standard according to the Omnibus Regulation
The introduction of the Omnibus Regulation has changed the regulatory landscape for sustainability reporting. Many companies that were previously subject to the Corporate Sustainability Reporting Directive (CSRD) are now subject to new regulations.
The VSME standard is of particular importance in this context:
- It offers a structured voluntary alternative for companies that have been exempted from the CSRD
- It enables a step-by-step approach to more comprehensive ESG reporting requirements
- It creates competitive advantages through proactive sustainability management
- It prepares companies for future regulatory developments
Timetable and current status of the VSME standard
On December 17, 2024, EFRAG published the final draft of the voluntary standards for sustainability reporting by non-listed SMEs. The standard is therefore ready for use and can be used by companies for their reporting.
Implement VSME: How to implement the VSME standard in 5 steps
Implementing the VSME standard may seem complex at first glance, but it can be done efficiently with a structured approach. With the help of our 5-step plan, you can implement VSME in your company:
1. inventory and gap analysis
Start with a thorough analysis of your current sustainability activities and data collection processes:
- What sustainability data do you already record?
- What gaps exist in the VSME requirements?
- Which departments do you need to involve?
- Are there already reporting structures that you can use?
Our Planted tip: Create a simple matrix that compares existing data with the VSME requirements.
2. stakeholder involvement and responsibilities
Identify the relevant contact persons and responsible parties:
- Appoint a central ESG coordinator
- Form a cross-departmental sustainability team
- Clarify responsibilities for data delivery and validation
- Train your team on the VSME requirements
Our Planted tip: Involving the management at an early stage will ensure you have the necessary support for this important project.
3. set up data acquisition systems
Develop or implement systems for efficient data collection:
- Create standardized data entry templates
- Ideally, implement specialized ESG software
- Define clear recording periods and processes
- Ensure that data is valid and verifiable
Our Planted tip: Start with monthly recording rhythms to reduce the effort at the end of the year.
4. collect data and prepare report
Systematically collect the necessary data:
- Start with the requirements for the basic module
- Expand step by step with Comprehensive Module elements
- Validate the data for plausibility and consistency
- Create a structured VSME report
5. establish continuous improvement
Use the reporting process as a basis for continuous improvement:
- Critically evaluate the first reporting cycle
- Identify potential for improvement in the process
- Set concrete sustainability goals based on the results
- Expand the scope of the report step by step
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The advantages of the VSME standard for SMEs
The VSME standard offers SMEs a number of strategic and operational advantages:
Competitive advantages
The VSME standard significantly improves your access to financing, as banks and investors are increasingly taking ESG criteria into account in their decisions. At the same time, it strengthens the market position of SMEs by responding to the growing trend that customers prefer partners with a proven sustainability performance. Last but not least, proactive ESG reporting offers a significant competitive differentiator and can serve as a valuable unique selling point, especially in industries where sustainability is becoming increasingly important.
Operational advantages
The systematic collection of environmental data as part of the VSME standard often leads to the identification of significant potential savings in energy, water and other resources. In addition, the structured approach makes it possible to identify ESG risks within the company's own supply chain at an early stage, thereby avoiding potential business interruptions. Another important advantage is the increased attractiveness as an employer through transparent sustainability reporting, which is a decisive criterion when choosing an employer, especially for younger talent, and thus supports employee retention and recruitment.
Regulatory advantages
The VSME standard gradually prepares companies for more comprehensive future reporting obligations and thus creates a smooth transition to potentially mandatory standards. The structured approach significantly simplifies compliance with sustainability requirements imposed by customers, suppliers and authorities. Due to the trickle-down effect, smaller companies in the supply chain of large corporations subject to CSRD will also have to provide sustainability data. Last but not least, the systematic monitoring of environmental and social compliance aspects reduces the risk of violations of applicable regulations and the associated penalties or reputational damage, which creates legal certainty in the long term.
Conclusion: How companies benefit from VSME
The VSME standard offers SMEs a structured, resource-saving option for sustainability reporting. As a result of the Omnibus Regulation, it is becoming increasingly important as an alternative to CSRD and makes it easier for SMEs to get started with ESG reporting.
At the same time, ESG remains a decisive competitive factor. Investors, banks and customers increasingly expect transparency on sustainability issues. Companies that focus on ESG now will benefit in the long term through better access to financing, a stronger market position and a positive corporate image.
With its AI-powered ESG software, Planted supports companies in implementing the VSME standard. Our solution automates data collection, simplifies report creation and ensures compliance with all VSME requirements. Our experienced team of experts will guide you through every step of your reporting - from initial implementation to continuous optimization. Book a free demo now.
