VSME: EFRAG’s Voluntary Sustainability Standard for Europe’s SMEs

As sustainability regulations in Europe evolve, a major challenge remains: how to include small and medium-sized enterprises (SMEs) in the ESG transformation without overburdening them. The European Financial Reporting Advisory Group (EFRAG) has stepped forward with a solution tailored to the needs of smaller businesses: the Voluntary Sustainability Reporting Standard for SMEs (VSME). This new standard, launched in June 2024, is intended to simplify ESG disclosure for the millions of non-listed SMEs across the EU, who collectively represent 99% of European businesses and over 60% of employment [1].

This article explores the purpose, scope, and structure of the VSME standard, its alignment with broader EU regulatory goals, its benefits and limitations, and the strategic implications for SMEs and stakeholders.

Context: EU Sustainability Reporting Landscape

The Corporate Sustainability Reporting Directive (CSRD) mandates comprehensive sustainability disclosures for around 50,000 large and listed companies in the EU. These disclosures are structured around the European Sustainability Reporting Standards (ESRS), developed by EFRAG.

However, the CSRD does not apply to most SMEs. Recognizing their critical role in supply chains and the green transition, the European Commission invited EFRAG to develop a simplified, voluntary standard for non-listed SMEs. This is especially relevant as many SMEs face indirect pressure to provide ESG data from their larger, CSRD-covered clients and financial institutions [2].

In parallel, many large companies must assess and manage the sustainability performance of their supply chains, which often rely heavily on SMEs. This creates a clear demand for consistent and reliable ESG information from these smaller entities. Without a standard like VSME, SMEs risk being left out of business opportunities due to an inability to meet growing data requests from partners.

What Is the VSME Standard?

The VSME (Voluntary Sustainability Reporting Standard for SMEs) is a simplified ESG disclosure framework designed for non-listed SMEs. It consists of three modular layers:

Basic Module: A short, standardized template with 18 disclosures suitable for general use by micro and small enterprises.
Narrative Policies Module: Optional disclosures focused on environmental, social, and governance policies.
Business Partners Module: A more detailed module with indicators aligned to value chain requests from CSRD-compliant companies and banks.

This modular approach allows SMEs to scale their reporting based on stakeholder needs and internal capacity [1][2]. It reflects a pragmatic recognition that not all SMEs are at the same stage in their ESG journey, and flexibility is crucial to encourage adoption.

Table: Comparison of VSME Modules

Module	Audience	Number of Disclosures	Tujuan
Basic	General users	18	Entry-level reporting for transparency and comparability
Narrative Policies	Voluntary, strategic	9	Describe ESG-related policies and actions
Business Partners	Supply chain & financiers	36	Meet data needs of banks and large clients

Key Features and Principles

Voluntary Nature: The standard is not legally binding but serves as a market-driven tool to meet rising ESG expectations.
Digital-First Design: A free Excel-based digital template was released alongside the standard, improving accessibility and usability [3].
Proportionality and Simplicity: Reporting requirements are kept short and focused, with many disclosures allowing free-text responses.
Alignment with EU Objectives: The VSME mirrors the structure of the ESRS, fostering coherence across the reporting ecosystem [2].

EFRAG’s choice to offer a digital-first implementation is particularly relevant given SMEs’ limited administrative resources. By reducing the need for complex ESG software, the Excel-based format lowers the barrier to entry. Additionally, the similarity in structure with the ESRS can help SMEs transition more easily if they grow into companies subject to mandatory reporting.

Benefits for SMEs and Stakeholders

Improved Access to Finance: Banks and investors are increasingly demanding ESG data for risk assessment and green lending.
Stronger Supply Chain Integration: SMEs that provide sustainability data are better positioned to retain and attract contracts with larger, CSRD-compliant partners.
Pengembangan Kapasitas: The framework encourages SMEs to begin their ESG journey without the fear of overregulation.
Reputational Gain: Early adoption can demonstrate leadership and enhance trust among stakeholders.

These advantages are particularly relevant in sectors where ESG scrutiny is rising, such as manufacturing, retail, and agribusiness [4]. Moreover, some EU green funding schemes and tenders now require ESG documentation. By adopting the VSME standard, SMEs may increase their eligibility for such programs and gain a competitive edge.

The standard also supports SMEs in preparing for a future where ESG expectations may be formally extended. By starting early, SMEs can embed sustainability practices into their operations and build institutional knowledge that will be beneficial as ESG norms evolve.

Limitations and Challenges
Despite its streamlined format, the VSME standard does not eliminate all hurdles:

Voluntary Nature May Limit Uptake: Without legal backing, many SMEs may not prioritize adoption.
Capacity Constraints: Even simplified templates require time, knowledge, and internal coordination.
Lack of Assurance Framework: Currently, no guidance exists for verifying or assuring VSME reports.

Moreover, critics have warned that if large companies mandate VSME disclosures from their suppliers, the “voluntary” label could become de facto mandatory [5]. This would place unanticipated burdens on SMEs, especially those with limited resources or ESG experience.

There is also the risk of fragmentation, where different buyers may require different sustainability formats, even among SMEs using VSME. This reinforces the need for widespread awareness and consistent application of the standard to maximize its value.

Strategic Recommendations for SMEs

Start with the Basic Module: This offers a low-effort entry point and familiarizes internal teams with ESG concepts.
Engage Supply Chain Partners: Proactively ask large customers or banks which modules are most relevant to them.
Develop ESG Policies: Even simple policies on energy use, diversity, or ethics can be showcased via the Narrative module.
Digital Integration: Use the Excel-based tool to streamline internal data collection.
Monitor EU Developments: Future regulatory shifts may expand ESG expectations for SMEs.
Assign ESG Responsibility Internally: Designate a staff member or small team to coordinate responses and track ESG indicators.
Consider Peer Benchmarking: Compare VSME disclosures with other SMEs in your sector to identify best practices and gaps.

Pikiran Akhir

The VSME standard is a landmark step in democratizing sustainability reporting across Europe’s economy. While voluntary and simplified, its structure positions SMEs to respond to growing market and regulatory demands for ESG transparency. For businesses seeking a cost-effective, scalable way to begin their sustainability journey, the VSME represents a valuable bridge between informal ESG awareness and full-scale compliance.

Moreover, as ESG compliance increasingly becomes a condition for funding, procurement, and stakeholder trust, the VSME standard offers SMEs a tool to future-proof their business models. Integrating sustainability early can open new opportunities, improve resilience, and strengthen business continuity.

As the ESG landscape continues to evolve, including reforms under the EU Omnibus: Simplifying Sustainability Rules in Pursuit of Competitiveness, tools like the VSME will be essential in ensuring that no company, regardless of size, is left behind.

Referensi
[1] https://www.efrag.org/sites/default/files/sites/webpublishing/SiteAssets/VSME%20Standard.pdf
[2] https://www.efrag.org/en/projects/voluntary-reporting-standard-for-smes-vsme/concluded
[3] https://www.efrag.org/en/news-and-calendar/news/press-release-efrag-welcomes-european-commissions-recommendation-on-vsme
[4] https://www.esgtoday.com/eu-commission-adopts-sustainability-reporting-standard-for-small-companies/
[5] https://www.esgvoices.com/post/vsme-template-released-a-digital-milestone-for-small-businesses-in-esg-reporting

Tags: Uni Eropa EU Omnibus VSME