Breaking Down the VSME: The Foundation for the New Voluntary Standards

Companies in the EU are under growing pressure to disclose their sustainability performance, due to evolving regulatory frameworks and increasing stakeholder demand for ESG data. The Voluntary Standard for Sustainability Reporting by SMEs (VSME), launched in December 2024 and recently put in the spotlight by the Omnibus Simplification Package, offers a simplified yet strategic approach to ESG reporting for organisations of all sizes that fall outside the scope of the CSRD.

In this article, we explore why the VSME Standard is worth considering for companies falling outside the CSRD scope and how companies can leverage it effectively, even amidst regulatory uncertainty.

What is the VSME Standard?

The VSME Standard is a voluntary ESG disclosure framework tailored to non-listed SMEs and micro-undertakings, providing a proportional alternative to the Corporate Sustainability Reporting Directive (CSRD). While these smaller companies are outside the regulatory scope of the CSRD, they are increasingly asked to provide ESG data by financial institutions and business partners. In a way, they are indirectly affected by the Directive.

Developed by EFRAG, the VSME is aligned with the European Sustainability Reporting Standards (ESRS) but significantly streamlined. The standard offers a foundational approach for companies aiming to build ESG readiness without the heavy burden of full-scale CSRD compliance.

The VSME standard, in the context of the Omnibus package, was selected by the European Commission to serve as the foundation for the Voluntary Standard for those companies outside the revised scope of the CSRD. According to the current proposal, any company with fewer than 1,000 employees would disclose under the voluntary standard.

Why Adopt the VSME Standard Now?

Even though CSRD requirements may not apply to all businesses, ESG transparency is quickly becoming a competitive necessity. There are several reasons why getting started with VSME now makes sense:

1. Adapt to Regulatory Uncertainty: With the Omnibus Regulation proposing new thresholds and a voluntary standard for out-of-scope companies, the VSME provides a strategic low-risk entry point. It provides a structured yet flexible framework aligned with broader EU standards like the ESRS, tailored to the practical needs of companies from small to mid-sized.
2. Gain Strategic Insight: VSME reporting enables companies to understand ESG risks and opportunities, enhancing operational efficiency and competitiveness.
3. Meet Market Demands: Investors, banks, and customers increasingly request ESG data. The VSME Standard provides an efficient format to respond confidently.
4. Early Mover Advantage: Show leadership in sustainability by adopting VSME before it becomes market standard.
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Structure of the VSME Standard

The VSME Standard covers similar sustainability issues to those of the ESRS designed for larger enterprises. However, the structure of the Standard is different. The VSME consists of two modules:

• Basic Module: Covers core ESG data across general, environmental, social, and governance themes. It includes 11 disclosure requirements.
• Comprehensive Module: Optional and complementary, it provides deeper insights tailored to specific stakeholder demands. It includes 9 disclosure requirements.
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The VSME Framework is built on the principle of proportionality, ensuring that reporting requirements are aligned with the size and capacity of smaller companies. While earlier drafts of the standard included a Materiality Analysis to determine relevant disclosures, this requirement was removed in the latest version to simplify the reporting process.

In its place, the standard introduces the “if applicable” principle. This means that certain disclosures are only required if they are relevant to the undertaking’s context—such as having specific policies or practices in place, or operating in sectors that expose the company to particular sustainability risks. If these conditions apply, the corresponding disclosures must be completed.

Read our VSME guide article for a deep dive into the different modules. 

How to Get Started with VSME: Two Practical Approaches

Greenomy supports companies with two practical approaches to implement the VSME Standard: the Essential Approach and the Advanced Approach. These reflect the real-world challenges SMEs and large companies face when deciding how deeply to engage with VSME reporting.

1. VSME Essential Approach

This route focuses on creating a basic VSME report that satisfies external data requests and allows for initial ESG communication. It is especially relevant for companies navigating regulatory uncertainty or unsure about their future CSRD status.

The Essential Approach addresses several key challenges. Companies often face uncertainty about whether CSRD or VSME applies to them, especially amid shifting regulatory developments. Internally, aligning stakeholders and building buy-in around a new reporting framework can be time-consuming and complex. Another challenge lies in applying the "if applicable" principle effectively—determining which disclosures are relevant to the business context. Finally, there is the practical matter of structuring the report clearly and making it suitable for external sharing.

The Essential Approach follows these steps:

• Training & Scoping: Understand the VSME structure and determine applicable disclosures.
• Gap Analysis: Map current data availability against VSME requirements and assess its quality.
• Report Creation: Draft a clear, concise VSME report aligned with stakeholder needs.
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2. VSME Advanced Approach

The Advanced Approach is suited for companies with more ESG maturity or strategic ambition. It involves building a robust ESG narrative by going beyond the minimum requirements.

This approach typically involves adding data points beyond the standard VSME framework. These may come from CSRD, sector-specific benchmarks, or specific investor and stakeholder requests. It also encourages companies to use their ESG disclosures to inform broader strategic decisions, defining targeted actions and key performance indicators. Finally, it involves leveraging insights from the collected data to establish, monitor, and refine sustainability goals over time.

Additional steps in the Advanced Approach:

• Extended Reporting: Include additional metrics to enrich your VSME report. They may come from the CSRD, stakeholder requests, sectoral benchmarks or different frameworks (GRI, ISSB, CDP, etc.).
• Strategic Alignment: Translate findings into strategic ESG actions.

Both approaches help companies build transparency and credibility while staying agile in the face of regulatory change. Whether you are responding to stakeholder demands or looking to shape long-term sustainability strategy, the VSME offers a flexible framework to support your journey.

FAQ about the VSME Standard

How is it suggested by the VSME to determine 'if applicable' without a materiality assessment?

The type of conditionality behind the "if applicable" principle varies significantly. Sometimes, a materiality assessment can help determine the applicability of a disclosure requirement (e.g. "If the undertaking has production processes in place which significantly consume water") but in most cases, the conditionality is relatively straightforward and does not require a materiality assessment (e.g. If the undertaking has obtained any sustainability-related certification or label).

For organisations underway in their Double Materiality Analysis, would you recommend they continue even if it is not required for the VSME?  What would be the added value?

The VSME framework mentions that "the inclusion of additional information not covered in this Standard is appropriate in order to disclose sustainability issues that are common in the undertaking’s sector". The results of the DMA are therefore very interesting to add to a VSME report, especially if they lead to the disclosure of additional data points. The DMA results can also be reused to answer some VSME data points.

Since the VSME regulation is voluntary, are the data and responses provided subject to third-party verification? How can the information disclosed be verified and deemed trustworthy by the public or other stakeholders?

Since VSME is not adopted as a Delegated Act by the European Commission, it remains outside CSRD's legal framework and serves purely as a voluntary tool. The VSME does not require assurance or verification as part of its implementation, and the data reported under VSME are not set to be subject to third-party verification. The matter of the credibility and verifiability of the data is an ongoing issue. 

The Voluntary standards based on VSME, proposed in the omnibus package, would be adopted as a delegated act. Nevertheless, the issue of assurance remains unclear.

Greenomy to Get Started with VSME Reporting

Whether you are seeking to meet stakeholder expectations, streamline internal ESG processes, or simply prepare for the future, the VSME Standard is a practical, scalable solution. It allows companies of all sizes to stay relevant in a shifting regulatory landscape while building long-term sustainability capacity.

Need guidance on your ESG strategy or wondering whether VSME is right for you? Book a call with our team today.