VSME Standard: The new Basis for Voluntary Sustainability Reporting

The publication of the EU Commission's Omnibus Package will fundamentally change the landscape of sustainability reporting. While fewer companies might be required to report in full under the Corporate Sustainability Reporting Directive ( This also applies to larger companies with fewer than 1,000 employees, which since the Omnibus Package may no longer fall under CSRD.

The EU Commission's Omnibus Package

The Omnibus Package proposed by the EU Commission may entail significant changes for sustainability reporting. One key adjustment: companies with up to 1,000 employees and < 50 M€ turnover (or <25 M€ balance sheet) may no longer fall within the scope of the CSRD.

For these companies, the question now arises as to how they can still present their sustainability performance transparently – especially to banks, investors and business partners. The VSME standard offers a practical solution for this and serves as a "basic model" for structured but compact reporting.

The EU Commission intends to achieve:

1. Promote voluntary reporting: Companies that do not fall within the scope of the CSRD can use the VSME standard to provide a clear and practicable basis for documenting their contribution to sustainability.
2. Credibility and future-proofing: The VSME standard has been developed by EFRAG and is therefore recognized as a reporting framework. Companies that work with the VSME today can easily switch to the ESRS in the event of future growth.
3. Avoiding the "trickle-down effect": Companies that are not affected by the CSRD should not be burdened by excessive reporting requirements from their business partners.
4. Protection of smaller companies: The VSME standard acts as a "protective shield" or "value-chain cap" by defining which sustainability information can be provided voluntarily by SMEs and small mid-caps.

The EU Commission plans to adopt the VSME standard as a delegated act to enshrine this approach in law. Until then, a recommendation for voluntary sustainability reporting based on the VSME standard developed by EFRAG is expected.

What is the VSME standard?

The VSME standard was developed by the European Financial Reporting Advisory Group (EFRAG) to provide non-reporting companies with a basis for voluntary sustainability reporting. As a simplified version of the comprehensive European Sustainability Reporting Standards (ESRS), it enables structured but less complex reporting.

Main objectives of the VSME standard

The standard pursues several key objectives that are specifically tailored to the needs and challenges of SMEs:

1. Providing sustainability information that:
   
   • meet the requirements of large companies in supply chains,
   • Support banks and investors in assessing companies.
2. Improve the management of environmental and social issues to promote sustainable growth and resilience.
3. Promote a more sustainable and inclusive economy.

The VSME standard is entirely voluntary and has been developed to make reporting proportional and actionable.

Key features of the VSME standard

• Reduced scope: Compared to the ESRS, the requirements of the VSME standard are easier to implement.
• Focus on essentials: Only the most important sustainability aspects are recorded.
• Compatibility with ESRS: The VSME reporting structure facilitates the subsequent transition to the ESRS.

• Modules: Two modules — Basic and Comprehensive — offer flexibility, depending on reporting needs.

How VSME and ESRS are related

The VSME standard is not a completely separate construct, but a simplified derivation of the ESRS. This connection is important to understand:

• Common core principles: VSME is based on the same sustainability principles as the ESRS.
• Reduced level of detail: While the ESRS requires very extensive disclosures, the VSME standard focuses on the essentials.
• Compatible data structure: The data collected according to VSME can generally be transferred to a complete ESRS report.

Who is the VSME standard intended for?

The standard is aimed at all companies that are not subject to the CSRD reporting obligation (through the omnibus Package, this may apply to all companies with fewer than 1,000 employees).

Although these companies are not legally obliged to disclose their sustainability performance, they are increasingly confronted with demands from investors, banks, customers, business partners and other stakeholders to create transparency about their social and environmental impact.

These companies can voluntarily apply the VSME standard to transparently communicate their sustainability performance.

Structure of the VSME Standard

The standard consists of two modules that can be used flexibly to create reports according to specific requirements:

1. Basic VSME Module

The basic module is the entry point to sustainability reporting and represents the minimum requirements. It comprises eleven disclosures (B1-B11) on the following ESG topics:

• General information (B1-B2):
  
  • Selection of report type (e.g. individual or consolidated)
  • Information on existing practices, policies, and initiatives for a sustainable economy
• Environmental metrics (B3-B7):
  
  • Energy consumption and greenhouse gas emissions (Scope 1 and Scope 2)
  • Emissions to air, water, and soil
  • Information on biodiversity and water management
  • Resource use and waste management
• Social metrics (B8-B10):
  
  • Key figures on workforce structure, health, and safety
  • Equality and training measures
• Governance metrics (B11):
  
  • Corruption and bribery

The basic module provides a clear structure for collecting and presenting basic sustainability information. It is particularly suitable for SMEs, but can also be used by larger companies.

2. Comprehensive VSME Module

The comprehensive module supplements the basic module with additional reporting requirements that are relevant for stakeholders such as banks and investors. It includes:

• Strategy and business model: Description of the link between business activities and sustainability, including strategic goals.
• Extended environmental metrics: Reporting on Scope 3 emissions, climate risks, reduction targets and action plans.
• Social and governance aspects: Disclosures on human rights policies, serious incidents, gender diversity and revenues from sensitive industries (e.g. fossil fuels).

Important: Companies can only use the comprehensive module if they have already fully applied the basic module.

Advantages of the VSME Standard for Companies of all Sizes

• Practicality for small teams: The standard takes limited resources into account and enables efficient reporting with less effort.
• Flexibility with structure: Companies receive clear guidelines, but can adapt them individually.
• Easier access to finance: The VSME standard helps companies to provide sustainability data for banks and investors.
• Improved supply chain transparency: Companies involved in supply chains of companies subject to CSRD can use the VSME Standard to efficiently fulfill reporting requirements.
• Strengthen competitiveness: Companies that use the VSME standard signal proactive commitment and can positively differentiate themselves from the competition.

Practical Implementation of the VSME Standard

Sustainability managers can implement the VSME standard by taking the following steps:

1. Perform a gap analysis: Identify gaps in your existing sustainability data.
2. Materiality analysis: Focus on the most relevant sustainability aspects for your company. You do not need to perform a double materiality analysis, as required by the CSRD, for VSME reporting — but EFRAG recommends doing so for the comprehensive module.
3. Optimize data collection: Set up compact processes to meet VSME requirements. An ESG software can help you to efficiently collect the missing data.
4. Build a reporting structure: Create a reporting scheme that complies with VSME requirements and reflects your corporate identity.

With Sunhat's ESG software, you can efficiently collect your sustainability data in one place and use Sunhat's VSME module for your ESG reporting.

Conclusion: Using VSME as a Strategic Opportunity

The VSME standard offers companies below the CSRD obligation a strategic tool for professional sustainability communication. The Omnibus Package in particular makes it more relevant for companies with fewer than 1,000 employees. By choosing between the Basic and Comprehensive module, companies can adapt their reporting to internal resources and external expectations.

As a sustainability manager, you can use the VSME standard to create a solid foundation for your sustainability communication, report efficiently and prepare for the transition to more comprehensive standards. The standard closes the gap between lack of reporting and full CSRD compliance — a strategic opportunity for forward-looking companies in the sustainable competitive environment.