The VSME Standard: A Practical Sustainability Reporting Framework for SMEs

The VSME standard is emerging as a practical and proportionate route for companies out of scope of CSRD to report credible disclosure and this approach helps them meet stakeholder demands.

A clear “trickle-down effect” is emerging across supply chains. Companies in scope of CSRD increasingly need ESG data from suppliers, partners, and service providers. This is necessary to meet their own reporting obligations.

Customers, banks, investors, and procurement platforms are also continuing to ask organisations of all sizes to provide structured data on their environmental, social, and governance (ESG) performance.  This structured data supports procurement, funding, and broader stakeholder decision-making.

For non-listed micro, small, and medium-sized enterprises (SMEs), the question is no longer whether to report on sustainability. Now, it is how to do so in a way that is proportionate, credible and easy to scale up, without the burden of full regulatory reporting.

The Voluntary Sustainability Reporting Standard for non-listed SMEs (VSME) was designed to meet that need.

The VSME is more than a reporting tool. For many companies, it is a practical starting point for building internal ESG capability. It allows them to focus sustainability efforts on what is truly material to the business. Moreover, they can communicate progress with greater confidence to key stakeholders.

What is the VSME Standard?

The VSME was developed by EFRAG, under a mandate from the European Commission, and it is aligned with the European Sustainability Reporting Standards (ESRS) These standards underpin the CSRD (Corporate Sustainability Reporting Directive).  The VSME covers the same broad ESG topics, but at a level of detail and complexity that is more manageable than full CSRD reporting.

Its core objectives are to:

  • Help SMEs respond to sustainability data requests from large customers and other value chain partners more efficiently and consistently
  • Support improved access to finance by helping organisations demonstrate ESG performance more clearly to banks, lenders, and investors
  • Strengthen internal sustainability management by helping organisations better understand, track, and manage the sustainability issues they face
  • Reduce reporting burden by providing a more consistent framework for responding to multiple, overlapping ESG questionnaires and requests

What Does a Typical VSME–aligned Report Cover?

A typical VSME report covers several core disclosure areas including:

  • Company activities and governance including business model, strategy, and sustainability governance structures
  • Environmental disclosures such as energy use, greenhouse gas emissions, water consumption and resource consumption
  • Social disclosures including employees, health and safety, and working conditions
  • Key policies, targets, and sustainability initiatives covering commitments made and progress against them

Disclosures are made on an “if applicable” basis, allowing SMEs to report information that is relevant to their business and based on available data. This makes the VSME a flexible framework for organisations at the early stages of their sustainability reporting journey.

Why Consider a VSME Report?

A “value-chain cap” was recently introduced via the Omnibus Directive which limits the sustainability information that companies subject to the CSRD can request from SMEs. The VSME is the practical reference point for that limit, helping to reduce reporting friction.

A VSME report can offer several practical benefits for SMEs and other companies outside the scope of CSRD:

  • Builds internal ESG capability by helping organisations structure ESG data, identify gaps, and strengthen internal processes and governance.
  • Helps focus sustainability strategy and ESG data collection on what matters most by encouraging organisations to prioritise the issues that are most relevant and material to the business.
  • Supports future reporting readiness for companies facing growing sustainability reporting expectations.
  • Improves transparency and credibility by providing a structured way to communicate sustainability performance to customers, banks, investors, and other stakeholders.
  • Can strengthen competitive positioning by supporting procurement opportunities, building trust, and providing a stronger foundation for EcoVadis and CDP performance.
  • Offers a simpler and more proportionate reporting route than full ESRS reporting, making it a practical starting point for organisations beginning their sustainability reporting journey.

How Can Clearstream Help?

If your organisation is considering its first sustainability report, responding to increasing ESG data requests, or exploring whether the VSME is the right starting point, Goodbody Clearstream can help.

We support organisations with sustainability gap assessments, ESG data architecture and collection, VSME-aligned reporting, and sustainability strategy development.

Get in touch with [email protected] at Goodbody Clearstream to find out how we can help.