As European companies face growing expectations around ESG transparency, many small and mid-sized enterprises are looking for practical frameworks to disclose sustainability performance.
According to Greenomy, the Voluntary Standard for Sustainability Reporting by SMEs (VSME), introduced in December 2024 and brought back into focus by the Omnibus Simplification Package, provides a proportional reporting option for firms not subject to the Corporate Sustainability Reporting Directive (CSRD).
The VSME Standard was developed to support non-listed SMEs and micro-enterprises that are not legally required to comply with the CSRD but are increasingly expected to share ESG data with stakeholders such as financial institutions and corporate clients. Created by EFRAG, the VSME aligns with the European Sustainability Reporting Standards (ESRS) while reducing the complexity, offering a more accessible entry point for smaller firms looking to build ESG maturity.
The European Commission has proposed that companies with fewer than 1,000 employees could adopt this standard voluntarily. It is expected to be used as the foundation for a new delegated act under the revised CSRD framework, allowing smaller companies to demonstrate ESG responsibility without facing the regulatory burden of larger firms.
Adopting the VSME framework now provides strategic benefits for businesses. First, it offers a way to navigate current regulatory uncertainty, particularly as the Omnibus Regulation proposes new thresholds and voluntary disclosures. Second, it helps companies identify sustainability risks and opportunities, improving decision-making and competitiveness. Third, it enables businesses to meet growing ESG data requests from customers, investors, and lenders. And finally, early adopters can show market leadership before the standard becomes mainstream.
The VSME Standard comprises two main modules. The Basic Module includes 11 disclosure requirements across general, environmental, social, and governance areas. The Comprehensive Module is optional and adds nine more disclosures tailored to specific stakeholder expectations. Importantly, the Standard simplifies the process by removing the need for a formal materiality assessment, instead introducing the “if applicable” principle. This means disclosures only need to be provided if the conditions are relevant to the business—for example, if the company has sustainability certifications or operates in a sector with high environmental risks.
Greenomy, a platform supporting ESG and regulatory reporting, offers two approaches to implement the VSME: the Essential Approach and the Advanced Approach. The Essential Approach is ideal for companies uncertain about their CSRD applicability. It focuses on foundational ESG reporting, starting with training, scoping, gap analysis, and basic report creation that satisfies external data requests.
For businesses with more advanced ESG maturity or strategic objectives, the Advanced Approach encourages deeper integration of sustainability into the corporate strategy. This includes incorporating additional data points beyond the VSME framework, aligning disclosures with broader frameworks like GRI, ISSB, and CDP, and defining long-term sustainability goals based on gathered insights.
While the VSME does not require third-party assurance—unlike CSRD disclosures—its credibility remains a subject of discussion. The proposed delegated act based on the VSME may bring more clarity to verification requirements in the future, but for now, it serves as a valuable, voluntary tool for building ESG transparency.
Businesses already conducting a Double Materiality Assessment (DMA) are encouraged to continue, even though it’s not mandatory under the VSME. Insights from the DMA can enrich the VSME report, especially if they identify sector-specific ESG issues that merit disclosure beyond the basic requirements.
The VSME offers a flexible framework that helps SMEs respond to growing sustainability demands while maintaining proportionality. Whether companies choose a simple or more advanced route, engaging with the VSME now positions them well for the future of ESG reporting in Europe.
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