VSME: A simple alternative to ESRS

February 28, 2025
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3
minutes |
Elena Welsch

VSME significantly reduces the CSRD reporting burden for SMEs compared to the extensive ESRS requirements. With this simplified standard, you save valuable resources and still fulfill all regulatory obligations in compliance with the law.

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.
  • Implementation: Step-by-step implementation with Basic and Comprehensive Module possible. Planted supports you in each of these steps.

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.

Basic Module Comprehensive Module
B1 - Basic information C1 - Strategy & Sustainability
B2 - Relevant policies & practices C2 - Description of relevant policies & practices
Environment:
B3 - Energy and greenhouse gas emissions Supplement B3 with Scope 3 emissions
C3 - GHG reduction targets and climate transition
C4 - Climate risks
B4 - Pollution of air, water and soil
B5 - Biodiversity
B6 - Water consumption and withdrawal
B7 - Resource use, circular economy and waste management
Social:
B8 - Own workforce C5 - Supplementary information on the workforce
C6 - Human rights policies and practices
C7 - Serious human rights violations
B9 - Occupational health and safety
B10 - Remuneration, collective bargaining, training
Corporate policy:
B11 - Convictions and fines for corruption and bribery C8 - Revenue from critical sectors
C9 - Gender diversity at management level

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 .

VSME vs. ESRS: The most important differences in terms of data points, time required, area of application and implementation costs.

The most important differences between ESRS and VSME:

Aspect ESRS VSME
Area of application Mandatory for large companies (subject to CSRD) in the EU Generally voluntary
Scope Wide range of topics: Climate change, biodiversity, social issues, governance More focused, less detailed requirements (e.g. simplified greenhouse gas accounting; reduced reporting obligations on biodiversity)
Structure More comprehensive structure with Set 1 of the Full ESRS Basic and Comprehensive Modules
Materiality analysis Requires a comprehensive double materiality analysis Not required, but recommended ("if applicable" principle), e.g. with the upcoming Planted DWA light
Data points 466 mandatory data points, 191 voluntary data points Reduced number of data points (approx. 40 data points in the Basic and 35 in the Comprehensive module)
Resource expenditure High expenditure, often with the use of external consultants Developed for implementation with existing resources, lower costs
Flexibility Strict requirements for companies subject to reporting obligations Companies can decide whether and to what extent they report

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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:

Implement VSME in 5 steps

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.

Trickle-down effect

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.

FAQs

What does VSME mean?

VSME stands for "Voluntary Sustainability Reporting Standards for Small and Medium-sized Enterprises". This standard developed by EFRAG offers SMEs a simplified framework for their sustainability reporting.

What is LSME?

LSME (Listed SME Standard) is a sustainability standard specifically for listed small and medium-sized enterprises. In contrast to the voluntary VSME standard, the LSME standard is mandatory for listed SMEs if they fall under the CSRD Directive.

Where is the sustainability report published?

The sustainability report based on the VSME standard can be published on the company website, in the annual report or as a separate document. There are no legal requirements regarding the publication location for voluntary reports in accordance with VSME, but accessibility for relevant stakeholders such as customers, investors and business partners should be ensured.

Is the VSME standard mandatory for my company?

No, the VSME standard is a completely voluntary framework that was developed specifically for unlisted SMEs. It offers a structured alternative for companies that are not directly affected by the CSRD but still want to establish professional sustainability reporting.

What advantages does the VSME offer compared to full ESRS reporting?

The VSME standard requires significantly fewer data points (approx. 75 compared to over 650 for ESRS) and dispenses with the time-consuming double materiality analysis. This results in a cost saving of 60-70% compared to full ESRS reporting, making it ideal for companies with limited resources.

Can I switch from VSME to ESRS later if my company grows?

Yes, the VSME standard is deliberately designed as an introduction and contains many elements that are also found in the ESRS standard. The data recorded in the VSME forms a solid basis for a later switch to full ESRS reporting, should this become necessary due to company growth or changes in regulatory requirements.