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On December 17, 2024, EFRAG unveiled the first version of the VSME standard, a sustainability reporting framework specially designed for VSEs and SMEs not subject to CSRD. Its ambition? To offer these companies a simplified tool for structuring their sustainable transition and communicating extra-financial information to stakeholders who request it.
Initially conceived as a lighter, voluntary version of the CSRD, the VSME could rapidly gain in importance. Ongoing discussions around the European Omnibus suggest that its scope will be extended, impacting a much larger number of companies.
What is the VSME standard?
The European Commission commissioned EFRAG to develop a voluntary sustainability reporting standard for micro-enterprises, VSEs and SMEs.
This standard, VSME, for Voluntary Sustainability reporting standard for SMEs, was published by EFRAG on December 17, 2024, following a public consultation period from January to May 2024.
To date, this document remains a technical opinion which has yet to be validated by the European Commission.
A standard in line with the European Green Pact and the CSRD
While the VSME standard is aimed at companies that are not subject to CSRD, it is nonetheless part of an overall European standardization project for sustainability reporting.
EFRAG has published a set of standards:
- standards ESRS 12 standards ( 2 transversal, 10 thematic) for companies subject to the CSRD.
- the LSME standard: this concerns listed SMEs, initially subject to the CSRD but whose status could change under the Omnibus Directive
- the standard VSME VSME: intended for SMEs and micro-businesses, it applies more generally to all companies not subject to CSRD.
What is the purpose of the VSME standard?
The main aim of the VSME standard is to make it easier for SMEs to meet the sustainability reporting requirements of their business relationships, by providing them with a more accessible, proportionate framework tailored to their size and resources.
It should therefore make it possible to:
- Provide a simplified reporting framework with indicators tailored to SMEs
- Reduce the administrative burden of disclosing non-financial information
- Harmonize sustainability reporting formats requested by investors and major companies in their value chain
- Facilitate their transition to more sustainable practices and increase their resilience to social and environmental challenges
Which companies are concerned by VSME?
The VSME was initially intended to apply only to VSEs, micro-businesses and unlisted SMEs, which are excluded from the scope of the CSRD.
According to European criteria, the companies concerned are categorized as follows:
However, the proposed Omnibus Directive currently under discussion in the European Parliament could considerably increase the importance of this reporting standard.
What impact will the European Omnibus have on VSME?
The proposed Omnibus Directive, currently under discussion in the European Parliament, could profoundly transform the extra-financial reporting landscape in Europe. Its main aim is to adjust certain provisions of the CSRD, CSDDD and Green Taxonomy to take account of the economic realities of European companies.
If the directive is adopted as it stands, only companies with over 1,000 employees, sales of at least €50 million or a balance sheet of €25 million would be subject to CSRD. This would exclude around 80% of the companies initially concerned by this reporting obligation.
However, these companies will continue to be subject to the demands of their stakeholders (investors, banks, major clients), who wish to continue receiving ESG information. This is where the VSME comes into its own, as it provides a structured, harmonized framework for meeting these expectations without imposing an excessive administrative burden.
By extending the scope of potential use of VSME, the Omnibus could therefore make this standard a market standard, particularly for ETIs and SMEs working with large companies subject to CSRD. The bill also calls on European legislators to transform this voluntary standard into a delegated act.
Last but not least, the draft reform includes a "value chain cap" to protect small companies from excessive demands from the major groups in their value chain. The aim is to prevent small companies from being subject to the same reporting requirements as large companies, due to a trickle-down effect, within the framework of the CSRD and CSDD. The VSME standard should therefore serve as a benchmark for defining the information that VSEs and SMEs may be required to provide.
The main principles of the VSME standard
The VSME standard establishes a clear framework for the preparation of sustainability reports. It is based on a number of key principles, listed below, which are designed both to ensure the quality of the information disclosed and to reduce the administrative burden on the companies concerned by this standard when drawing up their sustainability report.
Information quality
While the VSME does not require adouble-materiality analysis, it does retain the main principles. Companies must disclose how they have had, or are likely to have, positive or negative impacts on the environment and society in the short, medium and long term. They must also specify their risks and opportunities, or how these issues influence their financial situation, performance and cash flow.
As with CSRD, the information provided must be relevant, accurate, comparable, understandable and verifiable. Depending on their activities, companies may include additional indicators or analyses to reflect sustainability issues specific to their sector. This may include Scope 3 GHG emissions, which are not required to be reported under the VSME standard.
Comparability of information
From the second reporting year onwards, companies will have to provide comparative information to that published the previous year, except of course for new indicators introduced in the meantime.
The "if applicable" principle
Some indicators relate only to specific situations. The company is only required to provide this information if it is relevant to its business. When a company fails to provide a required piece of information, it is assumed by default that it is not applicable in its context.
Integration of subsidiaries
If a company is part of a group, it is recommended to include the consolidated data of its subsidiaries in its report. In this case, subsidiaries are exempt from reporting.
Report frequency and accessibility
Companies must publish their sustainability reports annually. If certain data have not changed from one year to the next, the company can simply indicate this and refer to the previous report.
The company may choose to make its report public, either as part of its management report if it publishes one, or as a separate document.
Incorporation of items by reference
To avoid publishing the same information twice, the company can refer in its sustainability report to other accessible company documents.
Protecting sensitive information
If certain information transmitted involves classified or sensitive data, the company may choose not to provide it, provided that this omission is indicated in a dedicated section of the report.
Consistency with financial statements
When the company publishes a financial report, the information in the sustainability report must be consistent with these and presented in such a way as to clearly show the links between the two.
A two-tier structure: basic standard and full standard
The VSME standard consists of 2 modules: a basic module and a complete module.
As modularity is one of the principles of the VSME, companies have two options when it comes to producing their sustainability report. They can either complete only the basic module, or choose to complete both modules.
The VSME basic module
The basic module is mainly intended for very small companies wishing to voluntarily start sustainability reporting.
It consists of 11 indicators structured around the ESG pillars: environment, social, business conduct.
EFRAG nevertheless specifies that companies completing only this module but wishing to provide additional information may select certain data requested in the full module to enrich their report.
General information
B1 - Preparation bases
The company must specify :
- chosen option (basic module or basic + complete module)
- if certain information cannot be disclosed because it is considered confidential or sensitive
- whether the sustainability report concerns the company alone or includes its subsidiaries
- the list of subsidiaries potentially concerned by this sustainability report
- certain essential information (legal form, NACE code, sales, balance sheet, number of employees, geographical location of various sites, etc.)
B2 - Future practices, policies and initiatives for the transition to a more sustainable economy
The company must indicate here whether it has put in place practices, policies or initiatives aimed at preparing its transition to a sustainable economy. This concerns all policies, practices and actions implemented in the social, environmental or governance fields, whether to reduce negative impacts or to reinforce positive ones.
It must also specify the objectives it has set itself for monitoring these actions.
Environmental data
B3 - Energy and greenhouse gas emissions
The company must indicate its energy consumption, specifying the proportion of electricity and the proportion of fossil fuels, as well as the proportion of this energy coming from renewable sources.
The company will also report its greenhouse gas emission levels for Scopes 1 and 2, following the GHG Protocol methodology.
B4 - Air, water and soil pollution
If the company is already required by national regulations or a management system (such as ISO 14001) to account for or report its pollutants to the relevant authorities, it must declare here the types and quantities of pollutants it releases into the air, water and soil as a result of its activities.
B5 - Biodiversity
Here, the company should indicate the number and surface area of the various sites it owns, leases or manages near areas considered sensitive for biodiversity.
It can also provide information on its land use: surface area, sealed surface area, surface area dedicated to nature, etc.
B6 - Water
In this indicator, the company must indicate the quantity of water withdrawn in the course of its activities. For water-intensive processes, the company will publish its water consumption in areas of high water stress (the difference between water withdrawn and water discharged).
B7 - Resource use, circular economy and waste management
Here, the company must specify whether it has implemented certain principles linked to the circular economy.
In terms of waste management, the company must indicate its annual waste production, specifying the proportion of hazardous waste and the proportion of non-hazardous waste. It must also provide information on the quantity of waste sent for recycling or reuse.
Finally, if it consumes significant quantities of raw materials in the course of its activities, it is required to declare the mass quantity of the relevant materials.
Social indicators
B8 - Workforce - General characteristics
Here, we indicate the number of full-time equivalent employees, the type of contract, their gender and the country in which they are employed.
If the company has more than 50 employees, it must also declare its turnover rate.
B9 - Workforce - Health and safety
This involves recording the number and rate of occupational accidents within the company, as well as the number of fatalities attributable to work-related accidents and illnesses .
B10 - Labor - Compensation, collective bargaining and training
Here, the company must specify whether employees are paid at or above the legal minimum wage in the country in which they work, the pay gap between men and women (this information may be omitted for companies with fewer than 150 employees), the proportion of employees covered by a collective bargaining agreement and, finally, the average number of hours of training per employee, broken down by gender.
Governance data
B11 - Convictions and fines for corruption and bribery
Here, the company should indicate the number of convictions and fines received over the analysis period for acts relating to corruption and bribery.
The complete VSME module
Companies wishing to complete this module must first complete the basic module.
This module is specifically aimed at companies that need to provide their stakeholders with non-financial information. It has been specifically designed to meet the needs of banks, investors and large corporations.
In Appendix C, the standard provides a table of correspondence with other EU regulations for financial market players using information produced using the VSME standard.
The complete module is made up of 9 indicators, also structured into 3 main sections: Environment, Social and Governance.
General information
C1 - Strategy: Business model and sustainability initiatives
Here, the company must disclose the key elements of its business model and strategy, including its main products/services, markets, business relationships and strategic aspects related to sustainable development.
C2 - Description of future practices, policies and initiatives for the transition to a more sustainable economy
The company should briefly describe the sustainable transition practices, policies or initiatives it has declared in indicator B2 of the basic module. It is also invited to specify the level of internal responsibility involved for each action taken.
Environmental data
C3 - Elements to be taken into account when reporting GHG emissions in B3 (basic module)
As its name suggests, this indicator supplements indicator B3 of the VSME core module. Companies are asked to provide information on their GHG emissions reduction targets, including scopes 1 and 2, as well as scope 3 if applicable. They must specify the target year, the target value, the reference year and the units used. They should also indicate the scopes covered by these targets and the main actions planned to achieve them.
Companies operating in sectors with a high climate impact will also have to indicate whether they have adopted a transition plan to mitigate climate change and, if so, explain how it contributes to reducing emissions. If no plan is in place, they should indicate if and when they intend to adopt one.
C4 - Climate risks
This indicator is the one that most closely resembles the CSRD's double-materiality analysis, even if it is greatly simplified in terms of the methodology applied and the expected results.
If any have been identified, the company should describe the climate-related risks and those associated with its environmental transition, as well as their potential impact on its assets, activities and value chain. It should specify the time horizon for climate-related risks and the transitional adaptation measures it has put in place. It can also assess the negative effects of identified risks on its financial performance, and classify them as high, medium or low.
Social indicators
C5 - Other (general) workforce characteristics
If the company employs more than 50 people, it will have to provide the ratio of women to men at management level, and indicate the number of self-employed workers who work exclusively for the company, and of temporary workers made available by companies primarily engaged in "employment activities" (temps).
C6 - Additional information on the workforce - Human rights policies and procedures
The company must indicate whether it has a code of conduct or human rights policy for its staff. If so, it should specify whether this policy covers the following issues: child labor, forced labor, human trafficking, discrimination, accident prevention or others.
It must also indicate whether a complaints handling mechanism is in place within the structure.
C7 - Serious negative human rights incidents
The company is asked to indicate whether it has recorded any incidents of child labor, forced labor, human trafficking or discrimination in its workforce during the reference period . If incidents have been identified, the company should describe the measures taken to remedy them.
The company is also asked to indicate whether it is aware of any incidents involving workers in its value chain, communities affected by its activities, consumers or end-users, and if so, to provide details of these incidents.
Governance data
C8 - Income from certain sectors and exclusion from EU benchmarks
If the company operates in the controversial weapons, tobacco, fossil fuels or chemicals (pesticides and other agrochemicals) sectors, it must declare the revenues linked to these activities.
It must also indicate whether its activities are excluded from the European Union's "Paris Agreement" benchmarks.
C9 - Diversity ratio in the governance body
If the company has a governance body, it must indicate its gender diversity ratio.
Why should companies adopt the VSME standard?
Although still voluntary, the VSME standard represents a strategic opportunity for European companies not subject to CSRD.
Anticipating market expectations
Investors, banks and large corporations are increasingly demanding transparency on ESG criteria. Adopting the VSME enables SMEs and SMIs to structure their extra-financial communication and comply with the expectations of their commercial partners.
Facilitating access to financing
Financial institutions are gradually integrating ESG criteria into their credit and investment decisions. A company that follows the VSME will find it easier to justify its commitment to sustainability and access more advantageous financing.
Preparing for a possible future obligation
Although VSME is voluntary today, regulations are evolving rapidly. By familiarizing themselves with these standards now, companies can get a head start and avoid having to adapt abruptly if they become mandatory in the future.
Optimize risk management and improve resilience
Non-financial reporting is more than just an administrative constraint. It enables companies to identify their vulnerabilities, anticipate climate, social and governance risks, and thus adopt resilient, more robust and sustainable strategies.
Commercial differentiation
A clear, structured commitment to sustainable development is a competitive advantage. It can strengthen brand image, attract new talent, and help us stand out from the crowd when dealing with customers or bidding for contracts.
Conclusion
The VSME standard is part of a drive to simplify and harmonize sustainability reporting for VSEs, SMEs and micro-businesses. With the changes brought about by the European Omnibus, it could even rapidly become an essential standard for European SMIs.
By adopting VSME today, you can anticipate market expectations, boost your competitiveness and position yourself as a player committed to sustainable development.
Sources :
- "Voluntary reporting standard for SMEs (VSME)".EFRAG page
- "VSME: understanding voluntary standards for SMEs"CSR Portal (French government), 28/02/2025
- "EFRAG Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME)", EFRAG, 17/12/2024
- "Commission Delegated Regulation (EU) 2020/1818 of 17 July 2020 supplementing Regulation (EU) 2016/1011 of the European Parliament and of the Council as regards minimum standards for EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks"European Commission, 17/07/2020
