EU Adopts Voluntary Sustainability Reporting Standard (VSME) to Support SMEs

The European Commission announced on 30 July 2025 its formal adoption of a voluntary sustainability reporting standard for non‑listed small and medium‑sized enterprises (SMEs), developed by EFRAG under the Scheme of the CSRD relief package. This new framework, known as the VSME standard, aims to streamline ESG disclosures for companies with fewer than 250 employees that fall outside the mandatory scope of the Corporate Sustainability Reporting Directive.

The VSME standard is structured into two modules. The Basic Module, consisting of 11 core disclosures, targets micro‑enterprises and smaller SMEs and includes essential metrics such as Scope 1 and 2 greenhouse gas emissions, workforce health and safety, and anti‑corruption practices.

The Comprehensive Module adds 9 further disclosures - like climate transition plans, severe human rights incidents, and governance diversity KPIs - typically requested by banks, investors, or large corporate partners. Its modular design and “if applicable” conditionality reduce complexity by avoiding materiality assessments.

The Commission encourages large companies and financial institutions to base their ESG data requests on this standard to avoid overburdening SMEs with disparate reporting demands.

As interim guidance ahead of the formal Omnibus I legislative package, the VSME is expected to serve as a future voluntary reporting framework for companies excluded from CSRD under proposed thresholds such as requiring over 1,000 employees - providing a value‑chain cap to standardize disclosures and support SMEs’ access to sustainable finance.

VSME creates a real on-ramp for SMEs to build ESG data infrastructure without carrying the full CSRD burden - and since a lot of value-chain data actually originates with them, the flow-on for large corporates' Scope 3 and CSDDD narratives is material. Our supply-chain-and-operations and ESG-strategy teams work with large corporates and their SME suppliers to build VSME-aligned reporting that strengthens both ends of the chain.