VOLUNTARY SUSTAINABILITY REPORTING STANDARD FOR SMEs (VSME)

The VSME (Voluntary Sustainability Reporting Standard for non-listed SMEs) is the voluntary sustainability reporting standard developed in 2024 by EFRAG to support non-listed small and medium-sized enterprises (SMEs) in communicating their environmental, social and governance (ESG) information.

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The Standard aims to provide SMEs with a simple and standardised framework for sustainability reporting, reducing administrative burdens and promoting a harmonised approach to ESG data collection. In particular, the VSME aims to avoid the use of multiple, different and uncoordinated ESG questionnaires requested from companies by banks, investors and large companies within the value chain, providing a single and proportionate reference framework for communicating sustainability information.

MODULAR STRUCTURE OF THE VSME

The VSME adopts a modular approach, allowing companies to select the reporting level that best suits their size, organisational capacity and stakeholders’ information needs.

The VSME consists of two modules:

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Basic Module

The Basic Module represents the minimum reporting level required by the VSME and is the most suitable approach for micro-enterprises and SMEs approaching ESG reporting for the first time.

The module includes the fundamental sustainability disclosures (from B1 to B11), covering:

 

• general information about the company, including reporting criteria (B1) and practices and policies for the transition towards a more sustainable economy (B2); 

• environmental aspects, including energy and greenhouse gas emissions (B3), pollution (B4), biodiversity (B5), water (B6) and resource use, circular economy and waste management (B7); 

• social aspects, including workforce characteristics (B8), health and safety (B9) and information relating to remuneration, collective bargaining and training (B10); 

• governance aspects, with particular reference to any convictions and fines for active and passive corruption (B11). 

The Basic Module is a prerequisite for applying the Comprehensive Module.
 

Comprehensive Module

The Comprehensive Module complements the information provided in the Basic Module with additional qualitative and quantitative disclosures. These disclosures cover:

 

• the company’s business model and strategy in relation to sustainability (C1); 

• the description of practices, policies and initiatives implemented (see B2) for the transition towards a more sustainable economy (C2); 

• Scope 3 emissions, greenhouse gas emission reduction targets and aspects related to climate transition (C3) and climate-related risks (C4); 

• additional information on the workforce (C5), policies and potential violations relating to human rights (C6, C7); 

• governance information relating to revenues from specific activities (C8) and gender diversity in governance bodies (C9). 

 

DIFFERENCES COMPARED TO ESRS
The application of the VSME is voluntary. Unlike the ESRS, which are mandatory for companies subject to the CSRD, the VSME does not require a structured double materiality assessment process. Companies report the information required by the Standard based on the applicability principles defined within each disclosure: the requested information must be reported when it is relevant for the company.

However, the VSME maintains strong alignment with the ESRS, using their conceptual structure and main sustainability topics, while applying a level of complexity and detail proportionate to the size and capacities of SMEs.
 

EVOLUTION AND EUROPEAN VOLUNTARY PRINCIPLE

Following the amendments introduced by the Omnibus I package, the European Commission adopted, on 3 July 2026, a sustainability reporting standard for voluntary use based on the approach developed by EFRAG through the VSME and intended for companies not subject to CSRD reporting obligations.

The “voluntary standard” maintains a modular structure consisting of a Basic Module and a Comprehensive Module, introducing changes mainly aimed at ensuring greater consistency with the simplified ESRS. It pursues two main objectives:

• supporting companies wishing to voluntarily communicate ESG information by providing a proportionate, single and comparable framework; 

• limiting value chain cascading effects by establishing a common reference framework that sets a limit on the sustainability information that large companies subject to the CSRD may request from smaller companies with which they cooperate.

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The voluntary standard adopted by the Commission on 3 July 2026 is currently undergoing institutional scrutiny by the European Parliament and the Council of the European Union. In the absence of objections, the text will be published in the Official Journal of the European Union and will enter into force.

It is reasonable to consider that the voluntary principle may also become a reference framework for listed SMEs, for which a dedicated standard, the LSME (Listed Small and Medium-sized Enterprises), had initially been envisaged. According to the information available on the EFRAG website (update July 2026), the development of the LSME Standard is currently suspended.
 

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