VSME Standards: A simplified alternative to ESRS for SMEs

|  Update: April 1, 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 VSME (Voluntary Sustainability Standards for SMEs) EFRAG is new, voluntary standards on sustainability reporting for medium-sized enterprises (SMEs).

They serve as a leaner and less complex alternative to the ESRS, which are mandatory for larger companies. Especially now, after the publication of the Omnibus Regulation, VSME standards continue to gain importance as many companies are no longer subject to the CSRD obligation will fall.

The VSME are specifically tailored to the needs of SMEs and take Consideration of their limited resources compared to large corporations. It consists of a basic module containing fundamental information and key figures relevant to all companies. This is supplemented by the comprehensive module, which contains expanded information for companies with greater information needs, especially for 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 for all companies that are not directly involved in CSRD reporting obliged are useful:

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).

Here we speak of the so-called 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 meet ESG reporting requirements, it will request the relevant data from its suppliers (often SMEs or companies no longer subject to CSRD).

The Omnisbus proposal addresses this situation very specifically: Large companies should not be allowed to demand additional sustainability information from companies with fewer than 500 employees that goes beyond the VSME standards go out – unless there are compelling reasons that require additional reporting.

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 to recognized and consistent sustainability reporting to ensure.

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 evaluating the Sustainability performance of companies based on the ESG questionnaireA good ESG score can lead to better loan terms, while missing 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 sustainability directives are evolving. What is voluntary today could become mandatory tomorrow. SMEs that familiarize themselves with the VSME standards early on are better off 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 the acceptance of the standard, EFRAG will launch a number of initiatives in 2025. This will include, for example, Provision of support materials and guidelines.

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 address the most important sustainability issues (e.g.  CO₂ emissions, Identify key performance indicators (e.g., energy consumption, working conditions) while simultaneously considering the requirements of major customers. Early communication that reporting is based on VSME standards creates transparency and security.

2. Create a greenhouse gas balance

The Greenhouse gas balance or the Corporate Carbon Footprint about Scope 1, 2 and possibly also Scope 3 It includes essential key performance indicators in the VSME standard that cannot normally be created internally and should therefore be commissioned early on. 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.