Exploring VSME in a Post-EU Omnibus World

After the EU unveiled its Omnibus Directive to simplify the bloc’s sustainability-related rules and reporting obligations, the VSME has become more significant, but what is it and how can you benefit?

Check out our Q&A to discover all the answers:

What is the VSME?

VSME stands for the Voluntary Sustainability Reporting Standard for Non-Listed SMEs. It is for unlisted micro, small and medium-sized enterprises that face increasing environmental, social and governance (ESG) reporting requirements and are being challenged to meet business partner, financial institution and investor expectations. The VSME is a proportional alternative to the Corporate Sustainability Reporting Directive (CSRD).

Why is the VSME important?

The VSME is a voluntary standard for relevant SMEs not subject to the CSRD. It provides SMEs facing growing sustainability data requests from counterparts, such as banks, investors and the large companies they supply to, with a simple reporting tool. The VSME increases efficiency and aids the SME’s participation in the transition to a sustainable economy.

Currently, multiple, uncoordinated ESG data requests create significant preparation costs for non-listed SMEs. The VSME standardizes these requests, decreasing the number of uncoordinated requests. This should support better access to lenders, investors and clients.

The VSME also supports SMEs regarding future mandatory reporting, in line with the CSRD and EU Omnibus requirements.

What are the benefits of the VSME?

The benefits are diverse and include:

• Enhanced transparency: standardizing and structuring ESG information increases your organization’s credibility
• Cost-effective and wider access to financing: standardized reporting improves business relations with banks and investors
• Regulatory preparedness: you will be better prepared for possible future reporting obligations
• Competitive advantage: dedication to sustainability can differentiate you in the market

What is the structure of the VSME?

The VSME comprises two modules, to be implemented according to your needs and capabilities. SMEs are no longer asked to perform materiality analysis. The simplification was tested with SMEs and bank representatives, receiving strong support, as it is expected to reduce the reporting burden for SMEs and provide standardized disclosures for the user’s business partners.

Basic module

This is for the smallest enterprises, does not require a double materiality analysis and includes basic ESG information across four areas:

• General information
• Environmental metrics
• Social metrics
• Governance metrics

There are 11 ESG disclosures, all simplified, focusing purely on essential metrics. The basic module is a prerequisite for the comprehensive module.

Comprehensive module

This is for SMEs that must report in more detail and have business partners that expect more detailed ESG data. It adds to the basic module, with nine additional disclosures covering:

• Business model and strategy
• Practices and policies
• Scope 3 greenhouse gas (GHG) emissions
• Climate risks and GHG targets
• Human rights

What are the differences between the VSME and ESRS?

The VSME’s structure and scope follow the European Sustainability Reporting Standards (ESRS) approach. This allows you to develop competencies, collect relevant data and implement the correct reporting processes.

However, the VSME and ESRS differ in scope, mandatory scope and level of detail because of their differing objectives and target audience.

Mandatory scope and coverage

The ESRS is mandatory for large organizations and some medium-sized listed companies, as dictated by the CSRD. The VSME is voluntary and for non-listed micro and SMEs that wish to report on sustainability more simply.

Scope and detail

The ESRS encompasses numerous topics, such as climate change, social issues and governance. The VSME focuses on key ESG aspects, its basic module requires less data, and its comprehensive module is additional, meaning it is more accessible to SMEs.

Double materiality analysis

The ESRS involves a double materiality assessment. The VSME does not include such an assessment, but rather an “if applicable” approach, meaning your company can exclude certain disclosures if they are not material.

Structure and flexibility

The ESRS has a complex structure, with thematic and cross-cutting standards that usually require more resources and knowledge. The VSME only has basic and comprehensive modules, allowing you more flexibility.

Who created the VSME?

The European Financial Reporting Advisory Group (EFRAG) was tasked by the European Commission to develop a voluntary sustainability reporting standard for non-listed micro, small and medium enterprises (VSME). The VSME was published on December 17, 2024.

Who should consider the VSME?

If you are no longer subject to the CSRD, you have two crucial options:

1. If you have started your reporting process, you have no reporting obligation and we can advise you on how to finalize the report. This includes assessing all or part of it
2. If you have not yet started the reporting process, you have no reporting obligation and we can advise concerning the VSME, supporting a sustainability strategy, action plan and reporting

Why should you adopt the VSME?

Your organization should continue preparing for the EU’s corporate sustainability requirements to unlock value creation and sustainability transformation across your business.

You should always consider the long-term need to shift to more sustainable methods of economic growth. Robust sustainability disclosure regulations will help you unlock value creation through organizational shifts, such as enhanced sustainability performance management and governance, as well as investment prioritization within operations or supply chains.

VSME reporting also helps you improve internally. Many SMEs that participate discover:

• Data gaps in energy or water usage
• Missed opportunities to reduce waste
• Overlooked risks in workforce practice

Therefore, the VSME complements your existing quality, health, safety and environment (QHSE) reports, based on ISO 9001 (quality management), ISO 14001 (environmental management), ISO 45001 (occupational health and safety management) and ISO 50001 (energy management), etc.

Additionally, you do not need to be subject to any regulations to:

• Manage your sustainability and ESG strategy
• Manage your risks and opportunities (climate risks and value chain, etc.)
• Build on your achievements (QHSE, ESG actions, etc.) for a concrete and impactful ESG action plan
• Communicate your successes through simple reporting (VSME)

What materials can start me off?

We can support you through the initial stages with materials that include:

• The official VSME ESRS version – the final version has been released
• Various EFRAG deep-dive videos on the VSME
• EFRAG’s basic VSME reporting tools, including a VSME digital template
• SGS VSME training

Why choose SGS for your VSME?

Utilizing our 30-plus years as a sustainability leader and our new IMPACT NOW for sustainability portfolio, our experts are ready to partner with you, tailoring services to your exact VSME needs and guiding you toward achieving all the benefits. We will:

• Assure your VSME report, not only supporting data collection but, more importantly, providing control over the process and, ultimately, delivering trustworthy ESG information to your key stakeholders
• Guide you in providing the most accurate and relevant ESG information, as ESG is part of core financial stability and regulators are watching closely
• Enable you to stand out in a competitive marketplace
• Help you stay ahead of potential regulatory changes and develop ESG reporting capabilities before requirements become mandatory

The VSME can be your first move toward ESG reporting and extending your QHSE function.

Our ESG disclosures and sustainability report assurance (SRA) service is ready to help you demonstrate your ESG accountability, accurately and consistently, while our ESG KPI verification and assurance will validate your metrics and target, as well as provide a third-party statement confirming their accuracy and reliability.

No reason to delay, start VSME reporting today

Contact us to realize the benefits of the VSME with a trusted sustainability partner.