Mar 5, 2025
We know that sustainability reporting lingo can feel overwhelming! Sustainability reporting comes with many abbreviations—CSRD, ESRS, VSME—making it difficult to keep track of what they all mean. If you need a quick reference, check out the abbreviation list at the end of this article.
What is the VSME standard?
The VSME standard (Voluntary Standard for non-listed, micro-, small, and medium-sized undertakings) is a voluntary framework designed to help small and medium-sized enterprises (SMEs) report sustainability information in a proportional and manageable way. It is important to note that VSME is not a simplified version of CSRD/ESRS but rather a standalone reporting standard tailored for companies that voluntarily choose to report sustainability data under this framework.
The VSME standard is conceptually similar to the European Sustainability Reporting Standards (ESRS) but uses simplified language and a modular approach, creating a cohesive and user-friendly framework. Developed by EFRAG to meet the needs of SMEs, one of its key simplifications is the reduction of narrative disclosure requirements. Unlike ESRS, which is based on the double materiality principle, VSME follows an "if applicable" principle, meaning companies only report on areas directly relevant to their operations.
What is the "if applicable" principle in the VSME standard?
The "if applicable" principle means that a disclosure requirement under the VSME standard is only relevant if it applies to a company’s operations, industry, or business context. Companies are responsible for assessing applicability based on their business model, size, and sector. If a disclosure is not reported under this principle, it is assumed that the information is not relevant to the company. The standard provides clear examples of when the "if applicable" principle applies, such as reporting on pollution, biodiversity, water usage, or climate risks.
Why was the VSME standard created?
According to EFRAG’s Cost-Benefit Analysis, the VSME standard offers several advantages for companies that voluntarily report sustainability information:
Lower reporting costs once implementation is complete.
Improved access to financing from banks and investors.
Harmonization of ESG reporting by aligning different questionnaires into a single, consistent standard that complements ESRS.
Key objectives of the VSME standard:
Support SMEs in meeting larger companies’ sustainability data requirements.
Enhance access to financing by aligning with bank and investor requirements.
Improve sustainability management within SMEs.
Contribute to a more sustainable and inclusive economy.
Impact of the Omnibus proposal (February 26):
Some companies subject to CSRD but that might be excluded with the Omnibus-proposal can opt to use the VSME standard instead. This provides a simpler framework while ensuring standardized sustainability reporting. However, companies should carefully evaluate their options before deciding. It is recommended to consult with auditors, legal experts, and leadership teams to determine whether ESRS or another standard is more suitable.
How does the VSME standard differ from ESRS for large companies?
Key differences:
ESRS is mandatory under CSRD for large companies, while VSME is voluntary.
ESRS requires double materiality analysis, whereas VSME follows the "if applicable" principle and only includes relevant sustainability aspects.
ESRS is a comprehensive reporting framework, while VSME is a simplified guidance tool for voluntary reporting.
To illustrate the relationship between ESRS and VSME, consider ESRS as a detailed sustainability report, while VSME is a concise summary of key sustainability data. Both rely on similar underlying data, but differ in scope and regulatory requirements.
How is the VSME standard structured?
Like ESRS, the VSME standard is divided into environmental (E), social (S), and governance (G) categories.
The framework consists of two modules:
Base module (mandatory for all VSME reporters)
Comprehensive module (for SMEs needing more detailed reporting for investors, banks, or clients)
Base module includes:
General information (reporting basis, policies, and sustainability transition initiatives)
Environmental indicators (energy, pollution, biodiversity, water, waste management)
Social indicators (workforce characteristics, health & safety, compensation, collective agreements, training)
Governance indicators (anti-corruption and bribery compliance)
Comprehensive module adds:
Strategic insights (business model and sustainability initiatives)
Expanded environmental data (GHG reduction targets, climate risks)
Detailed social data (labor rights, human rights issues)
Extended governance data (revenue by sector, board gender diversity)
Reporting principles for VSME:
Information must be relevant, reliable, comparable, understandable, and verifiable.
Comparative data should be included from the second reporting year onward.
Reports should be consistent with financial reporting where applicable.
Consolidated reporting is recommended for companies with subsidiaries.
Sensitive information can be omitted, but the omission must be disclosed.
Unlike ESRS, VSME reports can be standalone or integrated into financial statements.
Practical implementation of VSME
How can companies begin implementing VSME?
SustainLab recommends the following steps:
Assess existing sustainability data and decide whether to use the base or comprehensive module.
Structure data collection according to the standard’s framework.
Start with fundamental data collection, then move to analysis and automation.
Train key users, assign clear responsibilities, and establish KPIs.
Use a flexible platform (like SustainLab) for data management and reporting.
Business benefits of voluntary VSME reporting:
Improved financing opportunities
Increased efficiency through streamlined ESG reporting
Enhanced risk management
Greater competitiveness in procurement processes
How long does VSME implementation take?
VSME requires significantly less time than ESRS due to its simplified data requirements and the absence of double materiality analysis. Read more about our VSME offer here and contact us to help you proceed.
Conclusion: why consider VSME?
VSME is a scalable and flexible reporting standard for SMEs looking to enhance their sustainability practices without the complexity of ESRS. By adopting a structured approach to ESG data collection, companies can future-proof their sustainability strategy while preparing for potential regulatory changes.
Want to learn more? Book a meeting with SustainLab to explore how our data-driven approach can help streamline your sustainability reporting.
Sustainability reporting abbreviations breakdown:
CSRD (Corporate Sustainability Reporting Directive): The EU directive regulating how companies should report sustainability information in annual reports.
ESRS (European Sustainability Reporting Standards): Standards that define the detailed content of sustainability reports under CSRD. Legally binding in Sweden.
VSME (Voluntary Standard for non-listed, micro-, small, and medium-sized undertakings): A voluntary reporting standard tailored for smaller companies that want to report sustainability data proportionally.
EFRAG (European Financial Reporting Advisory Group): The European advisory group that develops ESRS standards.
GHG (Greenhouse Gas) Protocol: A standardized framework for measuring and reporting greenhouse gas emissions.
ESG (Environmental, Social, Governance): The three main areas of sustainability: environment, social responsibility, and corporate governance.
NFRD (Non-Financial Reporting Directive): The previous reporting directive that CSRD replaces.
These standards and frameworks work together to create a structured approach to sustainability reporting, where each abbreviation represents a key component in the broader system for transparent and comparable sustainability disclosure.
