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The VSME: The Guide to Sustainability Reporting for SMEs
What is the VSME?
The VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) has been specifically developed for non-listed micro, small, and medium-sized enterprises (SMEs). This standard provides an accessible and comprehensible framework that enables SMEs to report their sustainability efforts in a clear and structured manner. The goal of the standard is to offer a solution for companies looking to contribute to a more sustainable future without getting lost in complex reporting requirements.
Why is the VSME important for SMEs?
An increasing number of large companies, banks, and investors are requesting environmental, social, and governance (ESG) information from SMEs in their value chains. Traditional sustainability reporting standards, such as those from the CSRD, are often too complex and unsuitable for smaller companies.
The VSME provides a standardized and straightforward system that allows SMEs to meet this growing demand. It replaces the multitude of questionnaires companies often receive today, making sustainability reporting more efficient and less burdensome for SMEs.
What is the difference between the VSME and the CSRD?
The CSRD (Corporate Sustainability Reporting Directive) is targeted at large enterprises and requires very extensive data collection. Moreover, the CSRD is mandatory. In contrast, the VSME is specifically designed for SMEs, follows an “if applicable” principle, and is entirely voluntary.
Background and Additional Information on the VSME
The VSME was developed by EFRAG (European Financial Reporting Advisory Group), the working group appointed by the European Union to draft new reporting regulations under the Green Deal. The VSME standard and a webinar explaining its process and objectives are available on EFRAG’s website.
Key Benefits of the VSME
- Simpler language: Understandable and accessible for smaller companies.
- Focus on relevant topics: No extensive materiality analysis is required.
- Modular structure: Start with a basic module of 11 disclosures and expand with 9 additional disclosures if desired.
VSME report contents
Basic Module (11 Disclosures):
General:
- B1: Basis for preparation
- B2: Practices, policies, and future initiatives for transitioning towards a more sustainable economy
Environmental:
- B3: Energy and carbon footprint
- B4: Pollution of air, water, and soil
- B5: Biodiversity
- B6: Water
- B7: Resource use, circular economy, and waste management
Social:
- B8: Workforce – General characteristics
- B9: Workforce – Health and safety
- B10: Workforce – Remuneration, collective bargaining, and training
Governance:
- B11: Convictions and fines for corruption and bribery
Comprehensive Module (9 Disclosures):
General Information:
- C1: Strategy: Business model and sustainability-related initiatives
- C2: Description of practices, policies, and future initiatives for transitioning towards a more sustainable economy
Environmental:
- C3: GHG reduction targets and climate transition
- C4: Climate risks
Social:
- C5: Additional (general) workforce characteristics
- C6: Additional own workforce information – Human rights policies and processes
- C7: Severe negative human rights incidents
Governance:
- C8: Revenues from certain sectors and exclusion from EU reference benchmarks
- C9: Gender diversity ratio in the governance body
Our Evaluation of the VSME
- Clear Topics: The VSME offers a concise set of topics. Areas like energy and water are tangible for many companies. While calculating a carbon footprint might be new for some businesses, it provides clarity. However, more complex topics such as biodiversity and circularity may be challenging to report on for companies that are new to sustainability.
- Readability: Although the VSME is simpler than the CSRD, its 66-page document can still be challenging. It contains significant jargon and frequent references to secondary sources, which may create barriers for companies lacking specialized knowledge. EFRAG plans to release online tools and templates by 2025 to support the reporting processing.
How to Get Started with the VSME
At Greener Company, we follow a four-step plan to help businesses to become green and future proof. This plan can also be followed to create a VSME proof sustainability report:
- Measure: Collect the necessary data as outlined in the VSME.
- Set Goals: Define achievable sustainability goals.
- Implement: Create a working group with employees from various departments (e.g., procurement, R&D, sales) to execute projects.
- Communicate: Draft a readable and structured report.
How We Can Help
At Greener Company, we believe sustainability should be simple. We offer clear step-by-step plans, templates, and guidance to help your business comply with the VSME.
Schedule your free meeting via this link to discover how we can support your company into a green and future-proof company.
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