The European Financial Reporting Advisory Group (EFRAG) has introduced the new Voluntary Sustainability Reporting Standard for SMEs (VSME). This framework offers a simplified way for smaller businesses to demonstrate their sustainability performance, and prepare for a future where ESG reporting is the norm.
Understanding the new VSME framework
The release of the Voluntary Sustainability Reporting Standard for SMEs (VSME) marks a significant milestone in the European Union’s commitment to sustainability and responsible business practices. Developed by EFRAG under the Corporate Sustainability Reporting Directive (CSRD), this new voluntary standard gives small and medium-sized enterprises a structured but accessible way to disclose their environmental, social, and governance (ESG) performance.
Unlike the full CSRD framework, which can be complex and data-heavy, the VSME aims to help SMEs start their sustainability journey. It’s designed for voluntary adoption, offering a proportionate and practical approach for smaller organisations that may not have dedicated reporting teams.
Why the VSME matters for SMEs
Even though the standard is voluntary, it carries strategic importance. Large companies subject to CSRD reporting are already asking suppliers for ESG information. SMEs that can respond confidently will not only build trust but also improve their chances of winning tenders, attracting investors, and accessing sustainable finance instruments.
By starting early, SMEs can also reduce long-term compliance costs and establish systems for collecting and managing sustainability data.
How SMEs can get started
Implementing ESG reporting doesn’t have to be complex. Businesses can begin with a basic self-assessment using accessible tools such as the ESG Risk Assessment App developed through the ESG for Enterprise project. This helps identify key areas of strength and risk, aligning company practices with the core pillars of the VSME: environment, social responsibility, and governance.
Once baseline data are collected, SMEs can gradually enhance their sustainability strategy — for example, setting goals on carbon reduction, employee well-being, or ethical supply chains.
The role of VET providers
Vocational Education and Training (VET) providers can play a key role in supporting SMEs during this transition. By developing tailored ESG training and awareness programmes, VET institutions can equip managers and employees with the competencies needed to report and act effectively. The ESG Knowledge Framework from the project can help shape these learning paths.
Looking ahead
The VSME is not a bureaucratic exercise.. it’s an opportunity for SMEs to build resilience, credibility, and competitiveness. Early adopters will be better prepared for the evolving sustainability landscape and future reporting obligations.
EU funding disclaimer:
This publication was produced with the financial support of the European Union. Its contents are the sole responsibility of the ESG for Enterprise project and do not necessarily reflect the views of the European Union.