VSME Standards: A simplified alternative to ESRS for SMEs

|  Update: 05. August 2025

🕓 Reading time 10 minutes

Table of contents

1. What are EFRAG's VSME standards?/ Structure + tabular overview

2. Why do companies need to report even without a reporting obligation the VSME standards?

3. What are the differences between VSME and ESRS?

4. Timeline and current status of the VSME standards/ Link to the standard

5. Conclusion: How should medium-sized companies prepare?

1. What are EFRAG’s VSME standards?

Classification and structure

The EFRAG's VSME (Voluntary Sustainability Standards for SMEs) are new, voluntary standards for sustainability reporting for small and medium-sized enterprises (SMEs).

They serve as a leaner and less complex alternative to the ESRS, which are mandatory for larger companies. Especially now, following the publication of the Omnibus Regulation, the VSME standards are becoming even more important, as many companies will no longer be subject to CSRD requirements.

The VSME are specially tailored to the needs of SMEs and take into account their limited resources compared to large corporations. They consist of a basic module containing fundamental information and key figures that are relevant for all companies. This is supplemented by a comprehensive module containing additional information for companies with greater information requirements, particularly investors and banks.

Content overview

The following table provides an overview of the standard and is divided into the areas General, Environment (E), Social (S) and Corporate Governance (G). Within each area, the core content is listed, each subdivided into information from the Basic module and the comprehensive module (clearly marked). The "Scope / Information" column explains whether the information is quantitative (key figures), qualitative (text-based), or a combination of both. It also indicates how many key figures or text fields are typically expected.

2. Why do companies need the VSME standards even without reporting obligations?

The Omnibus Regulation provides for the future limitation of the reporting obligation to companies with more than 1,000 employees. This means that approximately 80 percent of the companies originally affected will be exempt from the CSRD obligation.

Nevertheless, the application of the VSME standards remains useful for all companies that are not directly subject to CSRD reporting:

1. Customer requirements along the supply chain

Customer requirements remain: Large companies that are still required to report will continue to request sustainability information from their suppliers (often SMEs).

This is referred to as the trickle-down effect. It describes how sustainability requirements are passed down from large companies along the entire supply chain. In concrete terms, this means that if a large company has to comply with ESG reporting requirements, it will request the relevant data from its suppliers (often SMEs or companies that are no longer subject to CSRD requirements).

The Omnibus Proposal specifically addresses this situation: large companies should not be allowed to require companies with fewer than 500 employees to provide additional sustainability information that goes beyond the VSME standards, unless there are valid reasons that make supplementary reporting necessary.

The advantage of the VSME standards is that they offer small and medium-sized enterprises an efficient way to structure their (significantly limited) sustainability data and ensure recognized and consistent sustainability reporting.

2. Protection against arbitrary requirements

By implementing the VSME standards, SMEs can prevent large customers from with inconsistent or excessive requests on sustainability reporting overwhelm. Without clear guidelines, large companies demand individual, often very extensive sustainability information. The VSME standards are intended to provide a structured, transparent, and recognized basis for this in the future, protecting against "arbitrary" decisions on the part of large customers.

3. Bank requirements and ESG scores for loans

Banks and financial institutions are increasingly assessing companies' sustainability performance using ESG questionnaires. A good ESG score can lead to better credit terms, while a lack of ESG data can make financing more difficult.

A VSME report helps companies respond specifically to banks' ESG questionnaires by providing relevant environmental, social, and governance data in a structured manner. The report also shows that the company proactive and sustainable is.

4. Preparation for further market developments

EU directives on sustainability are evolving. What is voluntary today may become mandatory tomorrow. SMEs that familiarize themselves with VSME standards early on are better prepared for future regulations and can thus secure a competitive advantage.

3. What are the differences between VSME and ESRS?

The VSME standards differ in several key respects from the ESRS, which are mandatory for larger companies:

4. Timeline and current status of VSME standards

EFRAG published the voluntary standards for sustainability reporting by non-listed SMEs (VSMEs) on December 17, 2024. This publication marks an important milestone in the effort to enable standardized and simplified reporting for small and medium-sized enterprises.

The consultation period for the draft VSME standard ran from January 22, 2024, to May 21, 2024. During this period, EFRAG received extensive feedback from a wide range of stakeholders, including SMEs, SME associations, banks, auditors, and national standard-setters. Based on the feedback, additional simplifications were made before the standard was approved by the EFRAG SR TEG on October 22, 2024, and by the EFRAG SRB on November 13, 2024.

To promote acceptance of the standard, EFRAG will launch a series of initiatives in 2025. These will include, for example, the provision of support materials and guidance.

5. Conclusion: How should medium-sized companies prepare?

Even though the Omnibus Regulation is intended to exempt many companies from the obligation to report on sustainability, the VSME standards remain a central basis for voluntary and practical reporting.

Companies should prepare their reporting according to the agreed VSME standards in order to remain informative for major customers, banks and investors and to protect themselves from potentially excessive demands from their major customers.

Setting up internal data collection processes early on is worthwhile – in order to be competitive and future-proof:

1. Clarify materiality and consider supplier requirements

Companies should identify the most important sustainability issues (e.g. co₂ emissions, energy consumption, working conditions) while also taking into account the requirements of major customers. Early communication that reporting will be in accordance with VSME standards creates transparency and certainty.

2. Create a greenhouse gas balance

The greenhouse gas balance or corporate carbon footprint for Scope 1, 2 and, if applicable, Scope 3 includes essential key figures in the VSME standard that cannot normally be generated internally and should therefore be commissioned at an early stage. They form the basis for valid sustainability reporting.

3. Develop a long-term strategy

Although the VSME standards are voluntary, a long-term strategy for continuous improvement of reporting is worthwhile to ensure future-proofing. By preparing their greenhouse gas balance early and collecting additional key performance indicators in a structured manner, companies can ensure that they efficiently and fully meet the requirements of the VSME standard.